Water Backup is Not Surface Water

Dec 22, 2023 By Chip Merlin

Christine G. Barlow, CPCU Executive Editor FC&S

What does the insurance industry mean by the term “surface water?” Where does a public adjuster find insurance industry information about a term of art in an insurance policy? There are a number of insurance industry sources that should be regularly used for reference and read by property insurance professionals to keep up on new information.

One is the FC&S, which is now part of ALM's PropertyCasaulty360. An article they posted, Water Backup Is Not Surface Water, posed a situation where a carrier was denying a water damage claim where the policy contained a water backup endorsement. The policy stated it would pay for:



direct physical loss to property covered under Section I caused by water, or water-borne material, which:

1. Backs up through sewers or drains, but not as a direct result from flood or surface water.

2. Overflows or is discharged from a:

a. Sump, sump pump; or

b. Related equipment: even if such overflow or discharge results from mechanical breakdown or off premises power failure but not as a direct result of flood or surface water.

The subscriber noted:

The company is saying that they will pay for backups through sewers or drains but not as a direct result from flood or surface water. The water came in through drains in the home. This was not a case of drains on the street backing up and flooding the home through the foundation. It seems to be a misinterpretation of policy language favoring the insurance company unfairly.

We have denied this claim due to the backup occurring as a result of the sewer filling up due to an inundation of the city's sewer system from naturally occurring rain water. There was no mechanical breakdown or power outage causing the sump pump to fail. The policy excludes water damage as noted above, regardless of any other cause or event contributing concurrently or in any sequence to the loss.

The FC&S then provided the answer:

Rain water is not surface water or necessarily flood water. Surface water is an accumulation of water that meanders along the ground outside of any boundaries of lakes, streams, ponds, etc. Rain water that falls into and accumulates in the sewer is not surface water, it is rain water. Flood water, like surface water, accumulates and inundates large areas of land; rain water collecting in a sewer is not necessarily flood water. The carrier is misreading the exclusion. Depending on the nature of the backup, which you have not described for me, there should be coverage.

One point of this post is that many will start to research an insurance term or insurance policy by thinking about what case law says. That is not the proper method. Instead, I suggest looking for references from the insurance industry to say how its product was meant to apply coverage. Then, a thorough researcher will try to find how lawyers and judges argue and opine what these words mean.

Another point is to sign up for access to ALM's PropertyCasaulty360 (free registration) and subscribe to FC&S Expert Coverage InterpretationChristine Barlow is the Executive Editor of the FC&S. Here is a little information about the product from its website:

FC&S Expert Coverage Interpretation is an authoritative and widely cited insurance reference solution that provides information and interpretations on property & casualty coverage in an unbiased manner. It is designed to benefit the insurance industry as a whole by providing fair and objective policy interpretation. FC&S Expert Coverage Interpretation is considered the gold standard by insurance professionals to support coverage positions and has been cited in numerous court cases, solidifying FC&S as a resource of credible, objective information.

Professionals ask questions to our expert staff of editors, for quick and reliable information regarding unique coverage situations. Our editors are CPCUs and attorneys, with 60 years of industry experience, combined, with specializations in Homeowners, Personal Lines, Commercial General Liability, Personal and Business Auto, Commercial Property and Business Income.

For public adjusters, understanding terms like “surface water” is crucial for effectively representing policyholders. By regularly consulting these industry sources, adjusters can ensure they are well informed and up-to-date, thereby enhancing their professionalism and efficacy in the field. This knowledge not only aids in accurate policy interpretation but also positions adjusters to better advocate for their clients' interests.

This post is a follow-up to my post, “Can a Flood Happen on the Top of a 10-Story Roof? What Is Surface Water?” I will be writing more about water damage and surface water issues over the next week.


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