Logic & Language and Forms & Facts: ‘Thy Toilet Runneth Over’

Anyone who has read my “When Words Collide” book or my blog or attended any of my seminars and webinars knows that I am the country’s foremost advocate of the “RTFP! Doctrine.” Answering coverage questions begins with reading the policy. All of it. Far too much that is written about insurance coverages is steeped in sweeping generalizations that serve no useful or practical purpose.

There may be no better example of this than whether property policies cover water damage that originates from plumbing systems. In this article, we’ll examine two common types of claims. The first is an overflowing toilet, and the second is a hidden water line leak.

A few months ago, an agent approached me with a toilet overflow claim that caused $60,000 in damages while the insureds were away for a few days. Someone flushes a toilet and leaves the premises before the tank refills and/or the water stops flowing into the toilet bowl. While probably more common in homeowners claims, this can and does happen at business locations.

Over the years, I’ve seen these claims initially denied on the basis of water “backup” exclusions, so let’s take a look at the “backup” exclusions in three current ISO forms. Each of these forms excludes property damage caused by the following:

ISO HO 00 03 — “Water or waterborne material which backs up through sewers or drains or which overflows or is discharged from a sump, sump pump, or related equipment.”

ISO BP 00 03 (BOP policy) — “Water that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment.”

ISO CP 10 30 (Special Causes of Loss form) –“Water that backs up or overflows from a sewer, drain or sump.”

Do you see the coverage difference between the homeowners form and the commercial property forms? All of these forms exclude backup and overflow, but they differ in what kind of plumbing equipment is involved in either type of event – backup or overflow.

A toilet overflow is not a backup. The consensus for what constitutes a “backup” is that it involves a reverse flow through the plumbing, sewage or drain system. The primary cause of most toilet overflows is a blockage in the effluent line to the sewer system or septic tank that prevents the water from flowing in any direction. So, the incoming water has no place to go and simply overflows from the toilet bowl.

What could cause a toilet backup? Some years ago, I had a co-worker whose family – she, her parents, grandparents, and assorted other relatives – lived on a very high hill in several different homes. The older you were, the higher on the hill you lived. Which proved to be problematic for my young co-worker who lived at the bottom of the hill.

While on vacation, the sewer line between her home and the street became clogged by tree roots. All of the homes above her shared this main sewer line. Unbeknownst to her, every time someone who lived higher on the hill flushed their toilet, the discharge made its way down the hill with increasing pressure until it hit the clog and backed up into and out of her toilet and into her home. That is one example of a reverse-flow toilet backup, not an overflow of incoming largely potable water.

In the case of the two commercial property forms above, the BP 00 03 and CP 10 30, excluded is damage caused by backup or overflow from a sewer, drain or sump. That language would arguably exclude toilet overflows since the toilet is part of the sewer or drain system.

However, in the case of the HO 00 03, only backup of sewers or drains (including toilets) is excluded. Loss caused by overflows only applies to sumps, sump pumps, and equipment related to sumps.

Almost all of the same words are used in all three forms, but the coverage, when it comes to toilet overflows, is very different. RTFP. You have to read the precise language of each form to determine if a toilet overflow is covered or not. In your current career, perhaps dozing off during sentence diagramming in English class proved to be a mistake?

Hidden Leaks

That brings us to the hidden plumbing leak loss that is so common in property insurance claims, especially again when it’s a homeowners policy.

Both the ISO CP 10 30 and BP 00 03 exclude damage caused by “continuous or repeated seepage or leakage of water, or the presence or condensation of humidity, moisture or vapor, that occurs over a period of 14 days or more.” It doesn’t matter whether the damage is visible or hidden. If the insurer can prove that the seepage or leakage took place over a period of 14 days or more, there is no coverage.

Once again, though, the language in the ISO HO 00 03 is different. In this case, it’s very different. There is, in fact, no “repeated seepage or leakage” exclusion in this form. There used to be, but it was removed in ISO’s 1991 countrywide homeowners program filing. Prior to that time, the form excluded “…constant or repeated seepage or leakage of water or steam over a period of weeks, months or years from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance.”

The only related exclusion in the form today is for mold, fungus or wet rot that results from any accidental discharge or overflow of water, but an exception is made for mold, fungus or wet rot that is “…hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure….”

What the ISO HO 00 03 form now relies on is the neglect exclusion, where “neglect means neglect of an ‘insured’ to use all reasonable means to save and preserve property at and after the time of a loss.” Once the insured discovers the water leak or hidden mold/fungus/rot damage, there is an obligation to then remediate the damage.

This being said, keep in mind that many insurers with proprietary non-ISO forms and those using ISO homeowners forms add their own “repeated seepage or leakage” exclusions. However, for pure ISO insurers, this significantly broader coverage may be appropriate for customers with older homes and plumbing systems. Knowing this can give you a sale

advantage if that is a concern for the customer.

I hope you’ve enjoyed my column this year and that the information I’ve provided has served you well. Best wishes for the holiday season and the coming New Year. And, don’t’ forget to RTFP! And to RTAI (Read The Assembly Instructions)!