Denied water damage claims are one of the more frequently handled claims by our law firm. The cost to repair these claims can be quite high depending on many factors including the length of time the water leaked, the length of the leak, the nature of the water, and the location of the water leak itself.

Many insurance companies have recently changed policy language or taken positions so water damage claims are more frequently in litigation. Merlin Law Group recently noted denied water damage claims in Follow-Up: My Insurance Claim Was Denied Because My Water Leak Lasted Over a Period of 14 Days or More – Was the Denial Proper, and Policyholders Beware: When You Hear “Drip…Drop” Think “Tic Tock.”

Insurance adjusters can say and do the most outrageous comments and actions. It results with very upset and frustrated policyholders, especially if the claim is denied. Does that mean that if adjusters act unethically and even in bad faith, that such conduct relieves the requirement that coverage is found?

In a water damage denial case, one court recently answered this question “no” stating:

The central fact issue for the jury in this case was whether the Insureds’ loss fell under the repeated seepage or leakage exclusion of the policy. If so, there was no coverage; if not, there was coverage. The main problem with the jury instructions and the Insureds’ arguments at trial is that the jury could have decided the case solely because the adjuster did not “do a good job” regardless of whether the incident fell within the policy exclusion. The instructions focused on whether the adjuster “properly investigated” or “properly adjusted” the claim and talked about a code of ethics. While such considerations may be appropriate in a bad faith case, they have no place in a simple breach of contract action….The Insureds were free to criticize the adjuster’s conclusions without arguing that he breached a duty or obligation to them. If an adjuster makes a mockery of the code of ethics but the insurance company correctly denies a claim, there is no action for breach of contract.1

I am not certain I agree with this in every instance. Suppose an adjuster agrees to coverage, intentionally instructs the policyholder to do something which destroys the evidence of the cause of the loss, and then changes his position and claims no coverage? I could make up many other scenarios.

But, the court correctly noted that whether an adjuster did a good job does not absolutely mean that such breach of the good faith and ethical duties of the adjuster means that coverage exists.

Thought For The Day

Where do the evils like corruption arise from? It comes from the never-ending greed. The fight for corruption-free ethical society will have to be fought against this greed and replace it with ‘what can I give’ spirit.
—A. P. J. Abdul Kalam
1 Citizens Prop. Ins. Corp. v. Mendoza, No. 4D16-1302 (Fla. 4th DCA July 5, 2018).

  • James Purcell

    Makes sense and well explained. Sounds like basically if the carrier’s adjuster reached the correct conclusion, if even improperly, that conclusion stands.

    • Chip Merlin


      Good to hear from you. You must be busy with all the demands for estimates in Florida.

      From the Insurance Company not following the rules perspective, it is sorta like splitting Kings and then winning both hands. It is usually a very bad move unless the deck is stacked for you and the dealer is holding 15 or 16.

      But every now and then, stupid players (aka unethical adjusters) get lucky despite not doing it right or even completely wrong.

      • James Purcell


        Yes, we’re pretty buried with work and doing a lot of depositions and trials, so that has been excellent experience for us.

        Love the blackjack analogy!

  • Bruce Holmes

    I have done investigations for many, many of these cases. Contrary to popular myth, it is virtually impossible to have a pressurized plumbing leak go on for a long time without detection and damage. A hole as small 1/16 of an inch in a pressurized line at 50 psi (common residential pressure) will produce approximately 1 gallon per minute. This is based on credible research and my own observations. Even non pressurized drain lines with breaks show up fairly soon.

    • Chip Merlin


      Good to hear from you.

      I know you and do you work so hard that you never go on a vacation? I went to Bermuda with my dad and others racing a sailboat. We were gone for 13 days from Tampa.

      How do you dedect that water damage if you are away from your home unless you were lucky enough or rich enough to have a water detection system, a maid or somebody else being charged with looking after your home to “detect” this water loss?

      Most people do not have maids. They clean their homes themselves. Most people do not have water detection equipment. And, most people do not bother others with crazy notions that my insurance company will deny my claim unless I discover a loss within 72 hours.

      Many insurance company claims managers must not go on vacations, or their superiors and beancounter bosses do not let them follow the Golden Rule. They just deny claims and hire lawyers to defend their positions.

      • Bruce Holmes

        Good to hear from you! I’ve been following the adventures of “Chip and Donna”. Good that you got to spend some time with your dad.

        Regarding water losses, a pressurized line leak like under a sink shows up real fast, even in less that 3 days. Even a leak of a drop/sec. will produce about 5 gallons of water a day. In waste lines, most policies have access provisions. Just helped get a client 165K in appraisal for a cast iron waste line issue. If I am gone from my home overnight I turn the master water off. However, the 72 hour provision seems unconscionable.

        I’ve been busy with Irma claims for windstorm and flood throughout the Keys, Everglades City and beyond. Haven’t heard from any of your associates regarding losses in a long time.

        Stay tuned, I’m working on a commercial case that has an “underground pipes” exclusion that could have a very interesting outcome.

  • does SFarm still have their exclusion for water damage which occurs “over a period of time”? could that be more vague? that could mean every single leak lasting more than 1 single second could be excluded. they didn’t. but they could. which means they simply picked whichever ones they wanted to deny. was a pet peeve of mine, obviously.

    • Chip Merlin

      The King,

      Hope things in the Jacksonville area have been less frustrating than this topic for you. Trust you are doing well and great seeing you publicly fighting the good fight.

      I agree that this State Farm exclusion is rediculously broad. But, Insurance Company scriveners have now placed language into some polices that say after “72 hours” rather than 14 days. Insurance commision officials and policy wonks are either stupid, overworked or on the take because these forms are being approved.

      So, it is getting worse and not better for policyholders. Maybe your comment and actions help make a change to this.

  • shirley heflin

    Dear Chip:

    I really like your “Thought for the Day” comment. I especially like the acknowledgment of “…evils like corruption arise….from the never ending greed.” That characterizes the actions of insurance companies! They are in business to make money – not pay claims! Sure, they pay some claims, but often ignore and deny claims of the average citizen/claimant who are unaware of their rights as an Insured. They are the ones who get taken advantage of and those are the people that need the most help. This is where the “….what can I give…spirit” of your Thought for the Day comes into play.

    Tampa, FL