Water, Water…Everywhere: Insurance Policy Language Regarding Floods or Water Run Off Requires A Close Look

What may come as a surprise to some homeowners is that a standard homeowner’s insurance policy does not cover damage caused by flooding.  The basic homeowners’ policy supports a home’s structure; personal possessions, such as furniture, clothes, electronics, etc.; certain liability claims brought against the homeowner; and sometimes additional living expenses if you must relocate due to damage from a fire, storm or other insured disaster.  Recent flooding in the Southeast caused by rainfall has highlighted risk exposures many unsuspecting homeowners have failed to insure against.

The nature and classification of water will often sway the determination of coverage or exclusion of coverage for claims arising from water damage under an insurance policy.  Many homeowners’ insurance policies carry an exclusion for losses caused by surface water runoff.  However, the factors of what, where or how the “surface water” caused the damage can make the difference in the application of insurance coverage.  Some jurisdictions have held that surface water that enters an excavation and underground piping can lose its classification as “flood water” or “surface water” to permit coverage previously excluded under an insurance policy.  Selective Way Ins. Co. v. Litigation Tech., Inc., 270 Ga. App. 38, 41, 606 S.E.2d 68 (2004).  Water damage caused by rain and surface water that fails to enter a clogged or blocked municipal drainage system could still face a coverage exclusion under a homeowner’s insurance policy as “surface water”.  Such policies may exclude coverage for a home not located in a flood zone that suffers flood damage due to the negligent conduct of a governmental body, or faulty design, construction, or maintenance of a drainage system.  Williams v. State Farm Fire & Cas. Ins. Co., 581 F. Appx. 733, 734 (11th Cir. 2014).  Reliance on Federal disaster assistance is not always a fallback solution as Federal assistance generally comes in the form of a low interest loan to cover flood damage rather than compensation for your losses.

The law looks to the written language of the insurance policy to determine the scope of coverage and the intent of the parties regarding coverage.  While the duty to prove that a claim is excluded is on the insurance company, courts will not grant a homeowner more insurance coverage than he or she bargained for in the selection of a policy and the payment of a premium.

Dawn N. Pettigrew