After weeks of record-breaking temperatures and oppressivehumidity, much of the country is looking to cool off. Swimmingpools are perfect for beating the heat, but they can also presentsome insurance complications.

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Such was the case for an FC&S subscriber's client,who was insured by a homeowners' policy form HO-3. The client'sabove-ground swimming pool collapsed because of deterioration.Water escaped and seeped into the basement of the residence throughthe walls and back door, causing damage to the building.

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Q. Does the water-damage exclusion onthe HO-3 void coverage for this type ofloss?
A. Under previous iterationsof the HO-3, an argument could be made for coverage for damage tothe building from this cause. The water-damage exclusion on olderversions of the form voided coverage for damage from naturaloccurrences of water, such as floods, surface water and backed-upsewers.

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Even though the pool water traveled over the surface of theground to reach the home and damage it, surface water generally isheld to be water “which is diffused over the surface of the ground,derived from falling rains or melting snows, and continues to besuch until it reaches some well-defined channel in which it isaccustomed to flow and does flow with other waters.” 

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This definition was used in Georgetown Square v. UnitedStates Fidelity and Guaranty Co., 523 N.W.2d 380 (1994).However, the 2011 version of the form added the following wording:“This Exclusion A.3. [Water] applies regardless of whether any ofthe above, in A.3.a. through A.3.d., is caused by an act of natureor is otherwise caused.” 

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By adding “or is otherwise caused” to this exclusion, the typeof loss described would no longer be covered. The form also nowstates that the water exclusion applies to the escape, discharge oroverflow—for any reason—of water or waterborne material from a dam,levee, seawall, or any other boundary or containment system, whichwould include an above-ground pool.

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Q. While that addresses damage causedby the escape of water, what about the wateritself?
A. A country club with abusiness owners policy (BOP) experienced a loss when a pipe leadingfrom the swimming pools broke and water was lost out of thepools.The insurer denied the claim, citing the provision that“covered property does not include… land (including land on whichthe property is located), water, growing crops orlawns.” 

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Q. Does the water lost by the insuredfall under this limitation?
A. Ifone reads the word “water” in this limitation in context, then itis listed along with other things that occur in nature—land,growing crops, and lawns. The water lost from the pools is notnaturally occurring water, such as a stream or a pond on theinsured's premises.

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The water that the country club lost because of the plumbingfailure could be considered the club's personal property. It hadalready passed through the water meter, and the club was billed forit. It should be a covered loss under the BOP. 

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Read more about other types of swimming-pool claims and howadjusters handled them by visiting FC&S staff blog posts at theCoverage Café on www.PropertyCasualty360.com

 

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