Coverage Excluded

For the most part, however, courts have found no coverage for such losses. In Jackson v. American Mutual Fire Insurance Co., 410 F.2d 395 (4th Cir. 1969), a federal court of appeals found that the insured could not recover for damages resulting from a back up of municipal sewage into her home after a heavy rainfall. In Hirschfield v. Continental Casualty Company, 405 S.E.2d 737 (Ga. App. 1991), however, a Georgia court of appeals found no coverage even though the insured was covered for back up of sewers and drains. In an interesting turn of events, rainwater flowed from the area of a grate covering an opening to an underground storm drain adjacent to the home, across the surface, and eventually entered a vent into the insureds' basement. The judge ruled that the water, derived from falling rain, was surface water under the widely held definition, and therefore explicitly excluded under the terms of the policy.

A growing number of adjusters and claims people are adopting a position like that expressed in Hallsted v. Blue Mountain Convalescent Center, Inc., 595 P.2d 574 (Wash. App. 1979). In this case, a sewer under the street in front of the insured's home became clogged, resulting in a sewage back up which ultimately flowed out of the toilet in the insured's bathroom. The court found that this loss was not covered. In its attempt to reconcile the sewer back up exclusion with the accidental discharge peril, the court focused on the phrase “within a plumbing system” in the language of the covered peril. It found no conflict or ambiguity in what the homeowners policy covered as discharge from within a plumbing system and what it excluded as sewer back up: “If the cause of the discharge is in the [insured's] system, e.g., a clogged sink drain which causes water in the plumbing system to overflow, the [sewer back up exclusion] does not apply. If the cause of the discharge is outside that system, e.g., a clogged sewer pipe which forces water from outside [the insured's] system to overflow, then the [exclusion] is applicable even though the water flowed through [the insured's] plumbing system.”

A Colorado appellate court adopted the reasoning of the Hallsted decision in Haines v. United Security Insurance Co., 602 P.2d 901 (Colo. App. 1979). In Haines, the insureds could not recover for losses sustained when heavy rainfall entered a sewer line and created excessive pressure in the line, causing raw sewage to be discharged into their basement.

Addressed in the case of Old Dominion Insurance Company v. Elysee, Inc., 601 So. 2d 1245 (Fla. App. 1992) is the distinction between the plumbing system and a sewer or drain. Citing Hallsted (see previous discussion), a Florida appellate court stated that a “sewer or drain begins at the property line,” and added that the terms were not ambiguous. In this case, Elysee Inc. was a store located within a mall. A drain line clogged outside the store; when sinks and toilets were used in the mall, water was forced up through the store's toilets.

The distinction drawn in the Hallsted decision—between a flow of sewer water into the insured's own plumbing system (excluded) and an accumulation and subsequent overflow of water behind a blockage in the insured's system itself (covered)—is in keeping with the origin of the sewer back up exclusion. The exclusion was introduced into homeowners forms after the post-World War II housing boom proved to be too much for many sewer districts around the country, resulting in frequent backing up of overburdened and sometimes hastily built systems. The rash of resulting water damage losses convinced insurers that the exposure was not an acceptable one in the context of standard homeowners coverage.

Water Distinguished from Sewage

In an interesting development, some cases have distinguished, or attempted to distinguish, damage done by water from damage done by sewage. In Rodin v. State Farm Fire & Casualty Co., 844 S.W.2d 537 (Mo. App. 1993) the insureds argued that damage done to their dwelling was caused by sewage, not by water. Tree roots in the metropolitan sewer district's system caused sewage to back up into the homes of the Rodins and their neighbors. The insured described the eight inches of effluent that entered his basement as an odorous, viscous, black liquid with solid matter floating in it. He added that the liquid definitely was not water. However, in finding for the insurance company, the court stated that the plaintiffs' argument that the policy excluded only water damage overlooked the totality of the exclusion. What was excluded from coverage, said the judge, was the loss that would not have occurred in the absence of the water backing up through sewers or drains, regardless of other causes acting “concurrently . . . with the excluded event to produce the loss.” Therefore, whether the loss was caused by pure water or by the pollutants contained in the sewage acting concurrently with water, it was excluded from coverage by clear, unambiguous policy language.

Likewise, in Newberg v. Commercial Union Ins. Co., 619 N.W.2d 757 (Minn. App. 2000), the court ruled that “'water which backs up through sewers or drains' includes various compositions of 'raw sewage.'” In this case, raw sewage that was discharged through the insured's basement drains caused damage. Their insurer stated that the loss was not covered due to the water damage exclusion of the policy. Insureds argued that the damage was not caused by water, but by the back up of raw sewage. The court, however, concluded that losses could be caused indirectly by water backing up, which would also included situations where water carries other substances. Further, the court pointed out that “water that backs up 'through sewers or drains' includes sewer water or water containing various levels of raw sewage.” The meaning of water within this exclusion, the court said, cannot be limited to water containing substances other than sewage or to pure water.

Other courts have distinguished sewage from water, finding for coverage. In Sterling v. City of West Palm Beach , 595 So. 2d 295 (Fla. App. 1992), the insured argued that the raw, untreated sewage that caused the damage was not water under any definition. The court determined that there was no mention in the policy of any exclusions for damage caused by raw sewage, and that, if any ambiguity existed, the policy must be construed to afford coverage. In Florida Farm Bureau Insurance Company v. Birge , 659 So. 2d 310 (Fla. App. 1994), damage caused by raw sewage to the interior of a dwelling was found to be covered. A power outage caused a sewer malfunction, and the insureds opened the door to their home to be met by raw sewage flowing out the doorway. In finding for the insureds, the judge agreed with the trial court that the policy was ambiguous.

Of particular interest in the Birge case, however, is the dissenting opinion. Farm Bureau denied coverage based on two provisions in the policy—one excluding damage resulting from water and the other excluding damage from pollutants and contaminants. The dissenting judge concluded the trial court erred since it had not expressly concluded the policy was ambiguous. As long as water contributed to the damage, the entire damage was excluded. Further, although pollutants and contaminants were not defined terms, they were not ambiguous, and Farm Bureau should have been entitled to a motion for directed verdict on the basis that the pollution exclusion clause alone precluded coverage. The judge noted that the policy in question in Sterling had no such exclusion.

The need to distinguish between water and sewage may not arise with the use of the 2000 HO 00 03 10 00 form. The 2000 version includes the phrase “water and water-borne material.” Not only is water damage caused by water backed up through sewers or drains excluded, but also damage caused by materials supported or carried by water, such as sewage.

Coverage for Back Up of Sewers and Drains

In many states, homeowners insureds may buy back the coverage taken away by the sewer back up exclusion. Some states require insurers writing homeowners insurance to offer coverage by endorsement for damage resulting from sewer and drain back up, although individual insureds may choose not to purchase the coverage. Whatever one considers the scope of that exclusion to be—even if raw sewage is held to be an excluded contaminant, as in the dissenting opinion in Birge—the reasonable expectation would be that by purchasing the coverage all such losses are covered.

Generally, the various endorsements provide coverage for direct loss caused by water which backs up through sewers or drains or which overflows from a sump, even if the overflow results from mechanical breakdown of the sump pump. The 2000 ISO endorsement also includes the phrase “water-borne materials,” and adds discharge as well as overflow. Sump pumps and related equipment also join sumps. Revisions to some endorsements now exclude negligence of an insured. So a question could possibly arise—such as whether there is coverage when a toddler causes a blockage by flushing a paper cup down the toilet. Is the insured's negligent supervision of the toddler the type of negligence at which the exception is aimed?

Coverage is limited in many states to $5000. In other states, such as Maryland, the entire amount of the applicable policy limits applies. Although a $100 deductible may be purchased in Virginia, the norm is $250. The deductible is not applied to coverage D, loss of use. The following chart provides brief information on the endorsements by state.