Water damage from a broken water supply line is one of the most frequent homeowner’s insurances claims. Quite often, an insurance carrier will assert there is no coverage for the resulting damage by citing to a “leakage” exclusion. In one such instance, while the policyholder was living in Ohio, the water line separated from the wall in an upstairs bathroom in his Michigan home causing a significant amount of water to flow into his home for 27 days.1 The carrier denied any coverage based on this exclusion:
1. “We” do not insure “physical loss” caused by:
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h. Constant or repeated seepage or leakage of water or the presence or condensation of humidity, moisture or vapor, over a period of weeks, months or years unless such seepage or leakage of water or the presence or condensation of humidity, moisture or vapor and the resulting damage is unknown to all “insured” and is hidden within the walls or ceilings or beneath the floors or above the ceilings of a structure.
The insurance policy did not define the term “leakage” or “seepage.” The parties were unable to resolve their differences and the matter proceeded to litigation.
The trial court explained that “seepage” and “leakage” were more akin to a slow release of a small amount of water consistent with “humidity, moisture and vapor” and reasoned that weeks, months, or years were the periods of time it would take for a small discharge of water to cause damage. The appellate court agreed and likewise concluded that the commonly used meaning of “leak” refers to a gradual or low volume water event. The appellate court explained:
For the exclusion to apply, the “leakage” or “seepage” is required to be “constant” or “repeated” “over a period of weeks, months or years.” This time requirement of weeks, months, or years is necessary for a low volume gradual water “leakage” or “seepage” to cause significant damage to a home. As the trial court found, the terms of the exclusion demonstrate [the insurance carrier’s] intent to avoid coverage for losses that are caused by a homeowner’s neglect, failure to maintain, and failure to occupy a home.
The appellate court concluded that the exclusion did not apply because the amount of water that was released into the policyholder’s home would have caused significant damage within hours or days because the separated pipe essentially caused flooding.
While each case has its own distinct facts, if there are concerns about the denial of a water-related or other type of claim, policyholders should seek the advice of a competent professional.
1 Cincinnati Ins. Co. v. Kaeding II, No. 332559, 2017 WL 3090600 (Mich. App. July 20, 2017).