Cases Involving Backup and Overflow

In order to provide some further clarification, we've compiled a few cases related to some of the most common water issues.

Water Backup

In the unpublished opinion Cameron v. Scottsdale Ins. Co., 726 Fed. Appx. 757 (11th Cir. 2018), the Eleventh Circuit held that a policy's water exclusion did not exclude coverage for a loss caused by the deterioration of a pipe within the plumbing system, which had caused water and water-borne material emanating from a rental dwelling's premises' plumbing system to back up into the dwelling premises owned by the Camerons. The cause of the plumbing problem was an age-related "acute pipe failure" of one of the building's sanitary lines, which carried wastewater out of the building. The pipe failure was discovered when a tenant reported an overflow of water from a kitchen sink drain. Scottsdale investigated the loss but denied the claim citing the policy's water exclusion endorsement, which excluded coverage for damages caused by "[w]ater that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment." The Camerons claimed the water damage was covered by the portion of the policy that covered "[a]ccidental discharge or leakage of water . . . as the direct result of the breaking apart or cracking of a plumbing . . . system . . . that is located on the described premises." The U.S. District Court for the Southern District of Florida reasoned that there was a backup and overflow from a drain, the plain terms of the water exclusion applied, and the policy language cited by the Camerons did not limit the applicable language of the water exclusion. Thus, the judges granted Scottsdale's motion for summary judgment.

Upon the Camerons' appeal, the Eleventh Circuit relied on Cheetham v. Southern Oak Ins. Co., 114 So. 3d 257 (Fla. Dist. Ct. App. 2013) in ruling that the water exclusion did not apply. In Cheetham, discussed below, the water damage exclusion only applied "to damage caused by water originating from somewhere other than the residence premises' plumbing system." The Eleventh Circuit decided that the Camerons' policy was "virtually identical to the coverage provision in Cheetham," and that there was no material difference between the water damage exclusion in Cheetham and the water damage exclusion in the Camerons' policy. Since the claimed loss in Cameron was caused "by the deterioration of a pipe within the plumbing system, which caused water or water-borne material emanating from the residence premises' plumbing system to back up into the residence premises," the loss was covered under the policy.

In Cameron, there was a plumbing system and water that backed up into the residence. A pipe had failed and caused water to overflow out of a kitchen sink. While the insurer denied the claim based on a water exclusion for "for damages caused by "[w]ater that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment.", the insureds felt that there should be coverage under that the portion of the policy that covered "[a]ccidental discharge or leakage of water . . . as the direct result of the breaking apart or cracking of a plumbing . . . system . . . that is located on the described premises." The trial court agreed with the insurer, but the appellate court did not. A sewer, drain, pump or related equipment doesn't necessarily include the plumbing as described in the policy exclusion. As discussed in the article on definitions, many policies use the terms plumbing, sewers and drains separately, and this affects how coverage is applied. In this case, the water backed up within the interior plumbing of the dwelling, not the sewer, drain, or sump. The court ruled that the loss was not excluded.

Purdy Lane, Inc. v. Scottsdale Ins. Co., 2021 U.S. Dist. LEXIS 27417 (S.D. Fla. 2021) is a case where the issue of coverage centered around a damaged sewer pipe that led to water or sewer backup from the driveway to the property into the structure. The insured filed a claim with his insurer, who denied the claim due to the water backup exclusion found in the policy. The insured filed suit, claiming that water was never introduced to the building from an outside source and that the collapse of the sewer line prevented water from traveling at all. The insured's position was that the loss should be covered as a "direct physical loss" because the toilet's plumbing and sewer lines are a "plumbing system"; the insured also argued that the decayed sewer lines fell under the "additional coverage – collapse" as well as "water damage, other liquids, powder or molten material damage" coverages.

The insurer moved for summary judgment based on the fact that the loss was a result of a backup of water and/or sewage. The policy language excludes coverage for water overflow from a sewer or drain. The insurer explained that the "special cause of loss" water damage coverage provision applies only to damages that result from an off-premises sewer pipe leak, which is not the case here. Ultimately the parties agreed that the source of the insured's damage was a water and/or sewer backup starting from underneath the driveway to the property.

The court found the claim of collapse unpersuasive because the coverage requires abrupt collapse of the building which did not occur. The insured also argued that the water backup exclusion does not apply because the water did not originate from the premises.

The court's approach to the case was that clear and unambiguous terms should be given their plain, ordinary, and generally accepted meaning, and that insurance policies should be read as a whole with every provision given its full meaning and effect. Upon review of the facts, the court concluded that the water exclusion did apply to this loss. The court stated that attempts to characterize the loss as due to the failure of a "plumbing system" did not change the fact that the loss originated from a sewer backup. The court found the insured's arguments for coverage unpersuasive. The court granted the insurer's motion for summary judgment.

Cases involving water backup often contain a sewer backup component as well. In this case, the insured tried to make the case that the plumbing within the building was separate from the general plumbing system that fed into the sewer lines. That doesn't make sense; where else would the discharge from the toilets go? The court agreed with the insurer that the loss was a water backup which was excluded.

Sewer Backup

In Campbell v. Allstate Ins. Co., 2006 Pa. Dist. & Cnty. Dec. LEXIS 198, the insured's property sustained damage when water from the toilet flowed onto the bathroom floor of his home. The insured went to the yard to check the sewer on the premises, took off a grate cover, and used a clothesline pole to feel around the system. A large stick popped out of the sewer pipe. The insured also found a plastic bottle in the system, which he removed. When the insured returned to the toilet, it flushed normally. The pipe in question was two to three feet from his sunroom and ten to twelve feet from the end of the dwelling.

The insured filed a claim for the damage which the insurer denied based on the policy exclusion for backup of sewers or drains; the insured had a sewer on his property. The policy excluded water or other substances that backs up through sewers or drains. The insured filed suit claiming bad faith and breach of contract. The court granted the insurer's motion for summary judgment and the insured appealed, claiming that the terms sewer or drain were broad and vague. The court found again for the insurer, stating that the insured admitted there was a drain on the property, the drain was the cause of loss, and there was a clear exclusion for such loss on the policy.

This case provides an excellent example of a sewer backup. The sewer was clogged, and that caused water to cease flowing, to reverse direction, and travel back through the pipe, and to eventually flow out of the toilet and spill out onto the bathroom floor. The key elements are here – a sewer, water reversing direction, and water flowing out of the toilet. Neither court found that the terms sewer or drain were broad or vague; since the water backed up from the sewer, the exclusion applied.

In Durrett v. Nationwide Prop. & Cas. Ins. Co., 2015 U.S. Dist Lexis 44966 (W.D. Tex. 2015), the insured's experienced water and sewage backing up into the dwelling and causing damage. Part of the plumbing system included a storage tank with a grinder pump that sits adjacent to the home. A check valve existed within the discharge line, and at times materials in the tank are pumped through a disconnect coupling and through underground piping roughly 100 feet to the boundary line of the property. The insured filed a claim with Nationwide; the policy had the standard exclusion for water or water-borne material that backs up through sewers or drains from outside the dwelling's plumbing system. The policy also contained an endorsement for "Broad Water Back up of Sewers or Drain Coverage," which allowed 5% of the Coverage A amount. Nationwide issued payment based on that endorsement, but denied the rest of the claim under the belief that the backup came from outside the dwelling's plumbing system, which was excluded. The insureds felt that the backup was from within the dwelling's plumbing system and should have been covered, so they filed suit.

An investigation showed that the swing check valve at the grinder pump had failed allowing sewage to drain back into the home. Based on this showing, the adjuster advised that the source of the backup was outside the home and coverage was excluded. The insured disagreed based on information from ServPro, who had cleaned up the discharge. An additional investigation showed that, had the quick-disconnect coupling not failed and the check valve at the street not failed to open, the backup would not have occurred. The quick-disconnect coupling was on the premises and the check valve was outside the premises. Nationwide determined that the backup that damaged the property occurred outside the dwelling's plumbing system and limited coverage to the endorsement for water backup.

Penn-America Ins. Co. v. Mike's Tailoring, 125 Cal. App. 4th 884 (Cal. Ct. App. 2005) is a case where the trial court found for the insured but the appellate court found for the insurer. In this case, a sewer line under the insured's property became clogged because of a broken sewer pipe, and the clog caused raw sewage to flow into the insured's basement. The insured filed a claim which the insurer denied based on a water backup exclusion in the policy. The insured filed suit, and the trial court found for the insured as the policy specifically covered water damage from broken pipes. The court did not feel that the water backup exclusion applied, reasoning that it encompassed only damage caused by water and not sewage or other pollutants carried by water. The insurer appealed.

The appellate court reversed the trial court's decision and held that the water backup exclusion did apply. The appellate court reasoned that a lay person reading the policy would assume that a backup of water from a sewer would contain both water and sewage and that such would be excluded by the policy language. Further, the court held that whether a loss involved water or both water and sewage, that the policy language was clear and unambiguous. Also, the efficient proximate cause theory could not be applied as there was only one cause of loss, the clogged sewer line. The declaratory judgment issued by the trial court was reversed.

Insurance policies are contracts of adhesion, which means that if the policy language is ambiguous that the insured will get the benefit of the doubt. When the policy language is clear however, then the policy language stands. In the Penn-America case, it's basic logic that if a sewer backs up, then it is likely that more than just plain water will enter the dwelling.

Plumbing and backup

In Cheetham v. Southern Oak Ins. Co., 114 So. 3d 257 (Fla. Dist. Ct. App. 2013), an underground pipe on the residence premises broke and collapsed due to age and wear. When the pipe collapsed, debris entered the pipe, forming a blockage that caused water to back up into the premises through the drains. The insureds filed a claim with their homeowners insurer, but the insurer denied the claim due to a water damage exclusion. The insureds filed suit, and the court found for the insurer. The insureds appealed; upon review of the policy language, the court determined that the water damage exclusion related to damage caused by water originating from somewhere other than the insured's plumbing system. Since the loss was caused by the deterioration of a pipe within the plumbing system of the dwelling, and the deteriorated pipe caused the water to back up in the premises, the loss should be covered. The court reversed and remanded the case.

The court's review of the policy language is important – the policy had the standard exception to the Coverage A and B exclusion for wear and tear and deterioration, with the exception for discharge or overflow of water from within a sewer pipe off the "residence premises" or a plumbing system on the "residence premises". The water exclusion was also reviewed, which stated that water that backs up through sewers or drains is excluded. The trial determined that the pipe on the residence premises broke and/or collapsed due to age and deterioration; since it was underground, debris entered causing water to back up into the premises through the drains.

The court reviewed two issues – whether the policy was ambiguous, and whether the exclusion applied when a pipe within the plumbing system breaks and causes water to back up within the residence. In reviewing the first part of the policy language, the court determined that while deterioration was excluded, the exception allowed for coverage for an accidental discharge from within a plumbing system. In reviewing the language of the water exclusion, the court found that the exclusion applied to water originating from somewhere other than the residence's plumbing system. Since the claim involved a deteriorated pipe within the plumbing system, the loss should be covered under the policy.

Note that the court determined that a pipe under the ground was part of the plumbing, and not the sewer system, even though that pipe carried waste water away from the premises. Not only was it important what type of structure was damaged and what the water did, but also where the water originated was also a factor. Since the water originated within the dwelling, it was determined that it was not sewer water that backed up and caused damage.

In Pichel v. Dryden Mut. Ins. Co., 117 A.D.3d 1267 (N.Y. App. Div. 2014), the insured owned a four-building apartment complex. Two of the buildings sustained water damage when wastewater entered the first floor apartments through toilets, bathtubs, and condensation drains. The insured filed a claim with its insurer, which was denied due to an exclusion for "water which backs up through sewers or drains". The insured disagreed and stated that the cause of loss was accidental overflow or discharge of a plumbing system; the insurer maintained its position and the denial stood. The insured then filed suit. The court granted the insured's motion for partial summary judgment and denied the insurer's motion for dismissal; the insurer appealed.

In reviewing the claim, the appellate court first rejected the insurer's stance that the lower court erred in denying its cross motion for summary judgment. The insurer relied on the exclusion for water that backs up through sewers or drains. There was also a secondary exclusion "for loss caused by repeated or continuous leakage or discharge of liquids or steam from within a plumbing or other system, but that exclusion did have an ensuing loss exception which provides for "loss caused by the accidental leakage, overflow or discharge of liquids or steam from a plumbing…system". The insurer maintained that the exclusion was applicable to the situation at hand.

The insured contended, and the appellate court agreed, that the two exclusionary provisions were ambiguous and should be reconciled so that the exclusion provision applies to a backup that originates off an insured's property and that the ensuing loss exception provision would apply to an occurrence originating within the insured's property. For example, the water backup exclusion would apply to a backup from a municipal sewer or drain, and the coverage provision would apply to an issue within the plumbing system within the insured's building.

Due to other case-specific factors, the court ruled that the insured's motion for partial summary judgment should have been denied; the partial summary judgment in favor of the insured was reversed, but the denial of the insurer's motion for dismissal was affirmed. However, for the purpose of this article, the issue we are looking at in this case is the determination of coverage and the issue of whether the cause of loss was a result of a sewer backup or the result of an issue with the plumbing system. The court found the policy language unclear, and again the ambiguity is found in favor of the insured. In this situation the water that caused the damage wasn't from an off-premises sewer, it was from the on premises toilets, tubs and drains. In the court's eyes this would trigger the ensuing loss exception in the policy for "loss caused by the accidental leakage, overflow, or discharge of liquids or steam from a plumbing …system".

Overflow

In Cardio Diagnostic Imaging, Inc. v. Farmers Ins. Exchange, 212 Cal. App. 4th 69 (Cal. Ct. App. 2012), water overflowed from a toilet in a suite on the third floor of an office building; the water flooded offices on the first floor, damaging medical equipment that belonged to Cardio Diagnostic Imaging. The insured filed a claim which was denied by the insurer due to an exclusion for "water that backs up or overflows from a sewer, drain or sump". The insured filed suit, claiming that the exclusion meant that the water must come out of the sewer for the exclusion to be applied to the loss. The blockage that caused the overflow was 20 to 40 feet down the sewer line, and that blockage caused the water in the toilet to overflow. The insured argued that water must come out of the sewer or drain, and the exclusion did not apply to water that cannot proceed forward down an interior drain. The lower court granted summary judgment for the insurer, and the insured appealed. On appeal, the insured argued that the water exclusion was ambiguous because there wasn't a clear distinction between a water backup and water that overflowed. The appellate court disagreed. The judges held that the policy language was not ambiguous. The insured's interpretation treated the exclusion as though it did not cover damage from "water that backs up and overflows from" a sewer or drain. However, the exclusion specifically applied to "water that 'backs up or overflows from' a sewer or drain". The insured's interpretation had overlooked a critical part of policy language. The court found that the exclusion applied even though the water overflowed from a toilet and not a drain, and affirmed the judgment.

The wording of the exclusion is important because of the word "or" – both a backup or an overflow are excluded, not just one or the other. The court in Cardio Diagnostic found this difference to be critical and interpreted the exclusion to give meaning to both water that backs up and water that overflows from a sewer or drain. When the insured argued that the water overflowed from a toilet and not the drain, the court disagreed. The court stated that the toilet was attached to a drain, and that water/substances that enter the toilet flow through the drain into pipes that enter the sewer system. A blockage in those pipes or sewer pipes will cause the pipes leading to the drain to be filled with additional water that will overflow into and eventually out of the toilet, and that is what happened in the loss in question.

Kelley St. Assocs., LLC v. United Fire & Cas. Co., 2015 Tex. App. LEXIS 12175 (Tex. App. 2015) is another case in which whether the water overflowed from systems within or outside of the building factored into the discussion of the loss. The insured's building flooded as a result of city employees repairing a water meter and valves on the street in front of the building. The insured contended that, while making the repairs, the employees dislodged debris, which entered the water main connected to the insured building, traveled through the main, damaged flush valves in the building's toilets, and caused the septic system holding tanks to rapidly fill up which lead to water coming up through the floor drains inside the building and flood the building. The insured filed a claim with his insurer, which denied the claim based on an exclusion for loss or damage by water that backs up or overflows from a sewer, drain or sump. The insurer stated that the term "drain" included floor drains, and that "sewer" included septic systems. The insured sued.

The trial court denied the insured's motion for partial summary judgment and granted the insurer's motion for final summary judgment. The insured appealed. On appeal, the insured argued that the exclusion for water backup or overflow from a sewer, drain or sump did not exclude losses from overflow from the septic system in the insured's building caused by accidental damage to the plumbing system. The insured argued that the exclusion applied to water originating outside the insured's plumbing system, and that losses caused from within the plumbing system would be covered.

The appellate court disagreed and found that the water exclusion endorsement was unambiguous, was not limited to losses caused by an event "outside the insured's property," and that the term "drain" listed in the exclusion included floor drains. The term "drain" was not defined in the policy nor were there any restrictions or limitations attached to that term. Since a floor drain is a conduit for drain liquid or carrying off surplus liquid, it can be considered to obe the same as a drain defined as "a pipe used to remove the water from the Building to a treatment facility or a body of water". The appellate court affirmed the trial court's ruling.

As is seen here and in other cases, defining terms is crucial, as is the application of policy language. In Kelley St. Associates, the water overflowed from the floor drains flooding the insured's property. The court found that a floor drain was the same as a drain, and that the water exclusion did not only apply to water from outside the structure, but water overflowing from within the structure as well.

Summary

These are just a few cases dealing with some of the water issues we've discussed. Many of these cases involve multiple elements; sewer backup and plumbing discharge, or overflow and sewer backup, it's often hard to separate one issue from another, and determining the root cause of the loss and which policy language applies is often very difficult, even for courts.

Because of the construction of policies, not just one section needs to be reviewed; there may be subsequent exclusions that apply to something that appears to be covered, and there are often exceptions to exclusions that restore coverage.

Note that all of the cases discussed had been appealed, and the appellate court agreed or disagreed with the trial court. Even courts have issues determining whether or not the plumbing, sewer, or drain backed up, discharged, or overflowed. There are always very specific details in any given claim situation that can make or break a case. What's important is to look at the terms and how they're used in the policy and where; when in doubt, especially if the wording is ambiguous, the insured gets the benefit of the doubt.