Sewer Pipe

A sewer pipe or storm drain that is off the "residence premises" would therefore be any pipe that is outside of the plumbing systems of the structure itself. Since grounds are part of the "residence premises", the pipe that runs under the yard out to the sewer main in the street would be on the "residence premises". Once that pipe reaches the sewer main in the street though, that would be considered a pipe off the residence premises.

Storm Sewer

A storm sewer is designed to drain excess rain and groundwater from paved streets, sidewalks, and roofs. Street gutters lead the water into the storm sewer. There are storm drains that mix runoff with sewage and these are known as combined sewers. The storm drains on private property collect the water from the gutters of the house and channel it to the main storm drain. A sump pump may pump water from the house into the yard or it may pump it out to the street. What is going to be critical for coverage is where the water backs up; does it back up within the city storm drain or sewer system, or within the dwelling system?

The policy specifically excludes water which backs up through sewers or drains, or overflows or is otherwise discharged from a sump, sump pump or related equipment. Water below the surface of the ground that exerts pressure on or seeps or leaks or flows through a building, sidewalk, driveway, patio, foundation, pool or other structure is excluded.

Case Studies

Let's work through a few situations; an area receives heavy rains that accumulate in the storm drains. Those storm drains cannot handle the influx of water so the water from the dwelling that entered the storm drain via the sump pump or gutters backs up into the sump pump or utility tub and floods the basement causing damage. First, is this a true backup or an overflow? While the water did reverse direction and enter the dwelling, it did so because the storm drain could not handle the volume of water it received. Therefore it could be seen as an overflow or discharge and covered under the dwelling coverage. The water exceeded the boundaries of the container and had no place else to go.

But what about the personal property, which is covered on a named perils basis? Accidental discharge or overflow of water or steam is a covered cause of loss, however, it applies to accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance. Not included is loss on premises caused by accidental discharge that occurs off premises; that is going to be the overflow/backup of the storm drain.

The HO 04 95 Limited Water Back-up and Sump Discharge or Overflow Coverage endorsement provide coverage caused by water or waterborne material that originates from within the dwelling where the insured resides and that backs up through sewers or drains. It does not specify that the sewer or drain must be on or off-premises, so coverage applies from sewers or drains at either location, under the yard or out in the street as long as the water originated from the dwelling.

Tree Roots

For example, tree roots grow into the insured's sewer line from the house to the street; the roots block the flow of water causing it to back up into the toilet in the basement, damaging the drywall and some personal property. These damages are covered up to the limit shown in the endorsement since the water originated from within the dwelling and backed up through the sewer or drain.

Overflow

Coverage is also provided for overflows or discharges from sumps, sump pumps or related equipment, even if mechanical breakdown or power failure is the cause of the loss. Where the water comes from is not an issue in this part of the coverage. However, coverage does not apply to direct physical loss to the pump or related equipment caused by the breakdown or power failure.

Sump Pump Burns Out

For example, the sump pump burns out during a storm and the basement floods. This endorsement will provide coverage for that overflow of water caused by the burned-out sump pump, but will not pay for the sump pump itself. Latent defect, inherent vice or properties that cause the equipment to damage or destroy itself are still excluded.

Water Exclusion

Of paramount importance is the water exclusion; while the endorsement provides coverage for overflow or discharge from sewers and drains, the exclusion for backup from sewers or drains, or overflow of sumps, sump pumps and related equipment from flood, surface water, tidal water, waves, and storm surge still stands. Likewise, water below the surface of the ground, including water that exerts pressure on or seeps, leaks or flows through a building, sidewalk, driveway, patio, foundation, pool or other structure is still excluded, as is waterborne material carried by such water.

Say a large storm hangs over an area for a number of days dropping several inches of rain that saturates already wet ground, leading to massive flooding of homes and businesses. The water below the surface of the ground that seeps into and floods the basement is still excluded, because it was water below the surface of the ground before entering the basement. But what if the water instead fills the sump pump pit, which then overflows? Does the endorsement provide coverage for that? The details are going to make the difference here; if the carrier can prove that the water in the pit came from water below the ground, then the exclusion will stand. However, if it cannot be determined where the water in the sump pit came from, then the coverage from the endorsement will stand.

In Penn-America Ins. Co. v. Mike's Tailoring, 125 Cal. App. 4th 884 a sewer line under the insured's property clogged because of a broken sewer pipe and sent raw sewage into the insured's basement. The insured filed a claim with his carrier which denied the claim citing an exclusion for backup of sewers and drains. The policy provided coverage for water damage from broken pipes. The trial court found for the insured because water damage from broken pipes was a specified cause of loss and that the water backup exclusion did not apply because it encompassed damage only by water, not pollutants present in the water.

The court reversed the declaratory judgment stating that a lay person would assume that a backup of water from a sewer would contain both water and contaminants, and that whether the loss was caused by just water or water and contaminants that the backup was excluded by clear, unambiguous language. The court also held that there was no coverage under the efficient proximate cause doctrine since there was only one cause of loss, the clogged sewer line.

Exclusions modify coverage, and while exclusions are to be read narrowly in this case it is clear that the cause of loss was a sewer backup which the court correctly identified as excluded from coverage. While this case involves commercial coverage, the principle is the same.

Utility Line

Coverage for the utility line that runs from the dwelling to the street can be added by adding the Utility Line Expense Coverage HO 06 69. This form provides coverage for a scheduled limit for damage to pipes, wires, conduits, cables or related equipment that is located on the "residence premises", outside the building and below the surface of the ground, and directly or indirectly connects the building on the residence premises to the source of municipal or commercial utility services including water, sewer, gas, steam, electric, communication or other services. Not included is any portion of liquid fuel tanks or systems, septic tanks or systems, or water wells or systems.

There are eleven named perils as follows: (1) Wear and tear, marring or deterioration; (2) Rust or corrosion; (3) Leakage; (4) Constriction or blockage; (5) Bulging, rupture, bursting or explosion; (6) Implosion or collapse; (7) Disconnection, separation or detachment; (8) Failure of pressure or vacuum equipment; (9) Mechanical failure; (10) Electrical failure, including arcing; or (11) Trees, shrubs or plants.

Back to our earlier example with the tree roots causing the backup. The HO 04 95 Limited Water Back-up and Sump Discharge or Overflow Coverage endorsement provides coverage for damage to the interior of the dwelling, but will not pay to dig up the lines and repair the pipe. In order for that to be covered, then this endorsement must be added to the policy. The endorsement also provides coverage for additional living expenses and fair rental value.

In Hirschfield v. Cont'l Casualty Co., 199 Ga. App. 654 what exactly is surface water is the question. In this case a storm drain had become clogged and was unable to take rainwater away, so the level of water rose around the grate to where the rainwater flowed across the surface and into the basement of the insured. The insured filed a claim with his insurer which denied the claim because surface water was excluded. The insured sued and the court found for the insurer. Upon appeal, the court again found for the insurer noting that the water that entered the insured's basement was surface water under the widely accepted definition. Whether the water diverted from the storm drain to the surface, or accumulated near the storm grate because the drain was blocked makes no difference as the water flowed from the storm grate across a surface area and into the insured's basement.

Surface Water

Surface water is generally defined as water that meanders across the ground outside of any boundaries of lakes, streams, ponds, etc. Any water flowing across the ground in no given channel is surface water. Surface water causes a lot of confusion. The source of the water isn't important, what's important is the behavior of the water before it causes damages. The water must flow across the surface of the ground; if it does not do that, then it is not surface water. Rain and melting snow are common causes of surface water.

Commercial Coverages

Under the commercial property and businessowners forms, water backup is excluded, as is groundwater seepage coming through a building, however caused. The businessowners form covers water that escapes from frozen pipes as long as the insured has done their best to maintain heat in the building, or otherwise drained or turned off the supply of water.

The CP 10 38 10 12 Discharge From Sewer, Drain or Sump (Not Flood-related) endorsement provides coverage for scheduled buildings for a scheduled discharge limit for both property damage and business interruption for damage caused by discharge of water or waterborne material from a sewer, drain, or sump located on the described premises as long as the discharge is not caused by flood or flood-related conditions. The standard exclusion for flood, surface water, waves, tidal water, tides, and overflow of any body of water, including storm surge applies.

If a limit is listed for business interruption, then coverage for business interruption and extra income apply according to the terms of the policy as long as the loss is caused by damage listed in this endorsement. If the insured fails to perform routine maintenance or repairs necessary to keep a sewer, drain or sump free of any obstructions and in proper working order, then coverage does not apply. Sudden mechanical breakdown of a sump pump or related equipment is covered as long as the breakdown was not due to lack of proper maintenance by the insured, or power failure unless the policy is endorsed to provide coverage for power failure.

Where the water exclusion conflicts with coverage provided under this endorsement, the water exclusion then does not apply. This endorsement can be added to the following forms:

BUILDING AND PERSONAL PROPERTY COVERAGE FORM

BUSINESS INCOME (AND EXTRA EXPENSE) COVERAGE FORM

BUSINESS INCOME (WITHOUT EXTRA EXPENSE) COVERAGE FORM

CONDOMINIUM ASSOCIATION COVERAGE FORM

CONDOMINIUM COMMERCIAL UNIT-OWNERS COVERAGE FORM

EXTRA EXPENSE COVERAGE FORM

TOBACCO SALES WAREHOUSES COVERAGE FORM

For example, an insured with a commercial property policy had a lower level walk-out with a concrete patio. A large rain occurred and water was unable to go down the drain, causing damage to the patio doors. The insured looked to the policy for coverage, which denied coverage on the basis of surface water. In this situation, when the rain hit the ground and pooled, it became surface water; therefore the carrier's denial was accurate. Even if endorsement CP 10 38 were on the policy, there would be no coverage for this damage. The water would not be considered backup from the drain since it did not go down the drain and come back up. It was simply rainwater that did not drain.

The CP 04 17 10 12 Utility Services – Direct Damage commercial property endorsement can be used to provide coverage for direct damage to covered property (except electronic data) caused by an interruption of water services due to a covered cause of loss that damages pumping stations and water mains. For example, if a tornado damages a pumping station such that it stops the water supply, this endorsement would provide coverage to the insured business if the lack of water service causes direct damage to covered property.

Endorsement CP 15 45 10 12 Utility Services – Time Element can be used to add coverage for business income and/or extra expense if there is a suspension of water supply to either pumping stations and water mains; or a utility's wastewater removal and sewage system. This would include the utility's sewer mains, pumping stations and similar equipment that is used to move wastewater to a holding, treatment or disposal facility, and it also includes those facilities. The coverage will not apply however if the water is stormwater, or the system is designed for draining stormwater; nor will it apply if the interruption in services is from water or sewage discharge due to heavy rainfall or flooding.