The insured has an HO3 and during Storm Ida has a pipe rupture under the house that caused water to back up into the basement; the sump pump failed causing water damage to the finished basement. In addition, the accumulation of water under the house caused a sinkhole and the foundation shifted making the house unlivable. Hanover has denied coverage for the loss but they did pay for the repair of the pipe that ruptured under Service Line coverage. The company has determined that flooding was the proximate cause of the damage diverting water and putting pressure on the sewer line, listing flood as the exclusion. We don't think the claim should be denied based on flooding. FEMA defines flood as affecting 2 acres or 2 or more homes. While 7″ of rain put pressure on the pipe, had the pipe not burst, there would have been no claim.
New York Subscriber
The problem with the FEMA definition of flood is just that; it's the FEMA definition of flood, and not the definition of flood in the HO 00 03. When a term is not defined in a policy courts turn to a standard desk reference dictionary since that is what the general public has access to. While we in the insurance industry are well familiar with the NFIP definition of flood, consumers aren't. Merriam Webster online defines flood as: a rising and overflowing of a body of water especially onto normally dry land, also: a condition of overflowing or an overwhelming quantity or volume. Whether what affected the insured at the time of loss meets these definitions is something I can't determine.
Earth movement including sinkhole by any cause is excluded, and only fire, explosion or theft are covered as ensuing losses to earth movement. The water, including water backup exclusion, is the same, excluded regardless of cause, with only those three causes of loss covered as ensuing losses. Earth movement, water and water backup are all excluded regardless of any other cause occurring concurrently.
Without the limited water backup or sinkhole collapse endorsements, I can't find coverage for the rest of the loss.
Part 2:
Thank you for your explanation. I had not thought about the fact I was using a FEMA definition and not the standard definition. The insured does have water backup coverage and yet the company didn't offer coverage for the damage done as a result of the water backup. In your opinion, should they have? Would concurrent causation have knocked out the water backup coverage?
It's easy to forget that not everyone uses the same definition, and insurance professionals know the FEMA definition by heart. Coverage for water backup is going to depend on the wording of the endorsement. The ISO HO 04 95 05 11 and the 01 14 edition both provide coverage for water that originates from within the dwelling and backs up through sewers or drains, or overflows or is discharged from a sump, sump pump or related equipment. The exclusion for water below the surface of the ground that "exerts pressure on, or seeps, leaks or flows through a building, sidewalk, driveway, patio, foundation, swimming pool or other structure;" still applies. So it's going to depend on your policy language and the details of exactly what happened.