Insurance companies offer and sell endorsements that can be purchased to fill coverage gaps. Policyholders pay additional premiums because they believe they are obtaining protection against specific risks when they purchase these endorsements. Yet a recent case, Express Jewelry Enterprises, Inc. v. National Fire Insurance Company of Hartford, 1 demonstrates how that promise of additional coverage can disappear when the endorsement language is drafted in a way that gives coverage with one hand and takes it away with the other.
The case arose from a historic rainfall event in Dearborn, Michigan. More than seven inches of rain fell in a matter of hours, overwhelming the municipal sewer system. Water backed up through the insured’s drainage system and flooded the basement of a jewelry store. The policyholder had purchased coverage for losses caused by water backing up from a sewer or drain. Most business owners reading that endorsement would likely assume this is precisely the type of loss they paid to insure.
The insurer disagreed. While the policy contained sewer backup coverage, it also included a limitation stating that coverage would not apply if the sewer backup was caused by or resulted from a flood. The policy defined flood as a “general and temporary condition involving the inundation of normally dry land.” The insurer argued that the extraordinary rainfall caused flooding, the flooding overwhelmed the sewer system, and the overwhelmed sewer system caused the backup. Therefore, according to the insurer, the loss was excluded. The court accepted that argument and affirmed summary judgment in favor of the insurer.
From a purely contractual perspective, I understand the court’s reasoning. The judges focused on the language before them and followed a straightforward chain of causation. Flooding occurred. The flooding overwhelmed the sewer system. The sewer system backed up. The damage followed. Under that analysis, the sewer backup was a result of flooding and therefore fell within the exclusion.
But there is a larger question that deserves attention. What exactly is the value of sewer backup coverage if it disappears whenever a significant rainfall event overwhelms a municipal sewer system?
Many of the most serious sewer backup claims occur because municipal infrastructure cannot handle extraordinary rainfall. If insurers can characterize every sewer backup caused by an overwhelmed system as merely a consequence of flooding, then the endorsement may provide far less protection than policyholders reasonably expect when they purchase it.
The policyholder argued that the true cause of the loss was inadequate sewer capacity rather than flooding itself. The court dismissed that argument, noting that without the excessive rainfall, there would have been no sewer capacity issue. That conclusion may be legally defensible under this policy language, but it avoids a deeper discussion regarding whether a municipal infrastructure failure should be treated as a separate and independent cause of loss.
This distinction matters because insurance policies routinely separate flood risks from sewer backup risks. They are often rated differently, underwritten differently, and sold to policyholders as different coverages. Yet under the reasoning of this opinion, the distinction can effectively disappear when catastrophic rainfall occurs, and sewers fail to remove the water.
Policyholders and public adjusters should be careful not to overread this decision. The outcome was driven largely by the specific wording of this particular policy. Different flood definitions, different sewer backup endorsements, different anti-concurrent causation language, or different state law could easily produce a different result. Coverage disputes remain intensely dependent on policy language and governing law.
The second aspect of the case provides an equally important lesson. After initially reporting that water reached the first floor through an elevator carrying water from the flooded basement, the insured later advanced a different theory. The new theory alleged that wind damage created an opening in an exterior wall that allowed rainwater to enter the building. Unfortunately for the policyholder, the insurer produced metadata evidence showing that the photographs and video supporting this theory had apparently been created months after the storm. The court found the evidence supporting the wind-damage claim so unreliable that no reasonable jury could accept it.
For policyholders and public adjusters, the lesson is clear. Credibility proving the loss is often as important as coverage. Once a court or an insurer concludes that evidence has been manipulated, misstated, or cannot be trusted, the entire claim becomes vulnerable. In today’s world, metadata, timestamps, digital records, and forensic analysis can quickly expose inconsistencies that might once have gone unnoticed.
As climate-driven storms become more frequent and more severe, disputes involving sewer backups and flooding will only increase. Insurers with this type of limitation will undoubtedly rely on this opinion to argue that sewer backup coverage evaporates whenever flood conditions contribute to the loss. Policyholder advocates must be prepared to distinguish cases like this one based on policy wording, causation principles, and the reasonable expectations created when sewer backup coverage is sold.
When policyholders purchase additional sewer backup coverage, everyone should carefully examine the exclusions and limitations hidden within the endorsement. Sometimes, the most important language in an insurance policy is not the grant of coverage itself. It is the fine print exception that follows immediately afterward.
Thought For The Day
“The large print giveth and the small print taketh away.”
— Tom Waits
1 Express Jewelry Enterprises v. National Fire Ins. Co. of Hartford, No. 25-1783 (6th Cir. May 25, 2026).
