Water back-up is one of the more confusing coverages in homeowners’
policy. It involves more than back-up, as overflow is mentioned in some
of the coverages. But what is a back-up, and how is it different from an
overflow or a discharge? All these things come in to play when there is
a water loss, and what causes the back-up or overflow may make a
difference in whether or not there is coverage.
First let’s look at definitions. A back-up is an accumulation caused
by a stoppage in the flow; something prevents the water from continuing
down its path, so it is forced to reverse direction and go back the
other way. A collapsed drain pipe can cause a back-up; water can no
longer proceed down its normal course and is forced to change direction.
A blockage can cause a back-up; the blockage prevents the water from
going forward, and the water has to reverse itself.
An overflow is when the water exceeds its boundaries; the space is
filled to capacity and water then spreads beyond its limits. A tub left
running creates an overflow. The tub can no longer hold the water
running into it, so the water overflows onto the floor and surrounding
area.
A discharge is a flowing or issuing out; water coming from a pipe. A
leaking pipe discharges water from the hole in the pipe; it is not a
back-up or an overflow, it is simply water issuing from a pipe at the
wrong spot.
Discharge or Overflow?
The ISO HO 00 03 provides coverage for water damage that is the
result of a discharge or overflow of a plumbing, heating, air
conditioning, or household appliance if it is on the residence premises.
This covers pipes that leak behind walls, floors, or ceilings; washing
machines and dishwashers that overflow, toilets that overflow, or storm
drains off premises that overflow due to high rains or floods. It is
important to note that a sump, sump pump or related equipment, or a roof
drain, gutter or downspout or similar equipment is not considered a
plumbing system or household appliance. A discharge or overflow caused
by a storm drain, water, steam, or sewer pipe is covered as well if it
is off the premises.
The coverage is for repair of the damaged property—the walls, floors,
tiling, and carpet, areas that got saturated and need to be repaired or
replaced. Even the tear out of a wall, for example, to get to a leaking
pipe is covered. What is not covered is the leaking pipe itself; a pipe
leak is often caused by simple wear and tear or age of the system, and
that is a maintenance item. However, even if the insured is hanging a
picture and pokes a hole in a brand new home and new pipes, the damage
to the pipe is not covered. The exclusion for damage to the item causing
the loss is all encompassing, and has no exceptions.
The policy specifically excludes water that overflows from sumps,
sump pumps, or related equipment or water that backs-up through sewers
or drains. However this is where a lot of losses occur; sump pumps may
fail or be unable to handle the flow of water during a severe storm or
flood, and sewers or drains may back-up due to a stoppage in the flow.
Overflows are excluded for sumps because that is a common cause of loss;
the sump cannot handle the volume of water it receives. For example, if
the drain backs up and overflows because of heavy rainstorms, that is
not covered under the policy.
To provide coverage for this occurrence there is the Water Back-up
and Sump Discharge or Overflow endorsement, HO 04 95. This provides
$5,000 of coverage for back up through a sewer or drain or overflow or
discharge of a sump, sump pump or related equipment, even if the
equipment suffers a mechanical breakdown. For example, the sump pump
motor burns out and the basement floods; there is $5,000 of coverage for
that damage. The coverage is for water or waterborne material, so
coverage is provided for damage caused by items floating in the water.
This coverage does not, however, increase the limits of liability for
coverages A, B, C, or D in the homeowners’ policy. This takes the
problem of defining back-up or overflow out of the equation of certain
losses, since the endorsement provides the coverage that is excluded in
the main policy itself.
Water, whether it be from pipes, sewers, sumps, or floods, is one of
the bigger issues in homeowners policies. There is a lot of confusion
surrounding what is and is not covered. Once you consider the definition
of the terms, you are on your way to understanding the coverage. As
always, policy language rules the day.
Christine G. Barlow, CPCU is an associate editor with FC&S,
the premier resource for insurance coverage analysis. She has an
extensive background in insurance underwriting. She may be reached at cbarlow@nuco.com. Additional information about FC&S Online is available at www.NationalUnderwriter.com.