In July, 2016, what has been called a 200-to-500 year thunderstorm dropped between five and seven inches of rain in a two-hour period in Princeton, New Jersey. The heavy rain fall resulted in water pooling at the bottom of a stairwell below street level, next to a salon’s glass door entrance.

Water leaked through the door causing extensive damage to the building. The salon, La Jolie Salon & Spa, was insured by Sentinel Insurance Company with a “Hartford Spectrum Business Insurance Policy.” The policy’s terms and provisions obligated the insurer to provide coverage for:

[P]hysical loss of or physical damage to Covered Property and Cause of Loss are defined pursuant to the Agreement to include:

1. Covered Property

* * * *

b. Business Personal Property located in or on the building(s) described in the Declarations at the “scheduled premises” or in the open (or in a vehicle) within 1,000 feet of the “scheduled premises,” including:

(1) Property that you own that is used in your business;

(2) Tools and Equipment owned by your employees, which are used in your business operations

(3) Property of others that is in your care, custody or control; [and]

(4) “Tenant Improvements and Betterments”

3. Covered Cause of Loss

Risks of Direct Physical Loss unless the loss is

a. Excluded in Section B., Exclusions

b. Limited in Paragraph A.4 Limitations; that follow

However, the policy’s terms and provisions did not provide coverage for damage or loss arising from “flood, including the accumulation of surface water” or “water that backs up from a sewer or drain.” “Such loss or damage is excluded regardless of whether any other covered cause or event… contributes concurrently or in any sequence to the loss.”

The policy did however have Additional Coverage which would pay for direct loss or physical damage to Covered Property solely caused by water that backs up from a sewer or drain.

The policy was clear that it was not a flood policy and stated:

We will not pay for water or other materials that back up from any sewer or drain when it is caused by flood. This applies regardless of the proximity of the flood to Covered Property. Flood includes the accumulation of surface water, waves, tides, tidal waves, overflow of streams or other bodies of water, or their spray, all whether driven by wind or not that enters the sewer or drain system.

The Salon did not dispute it did not have a policy for flood insurance, they argued the heavy rains flooded the area, and that rain water does not constitute flood waters. Plaintiff maintained that water accumulated on the building’s roof, which entered the building’s drain system. The high volume of water which entered the building’s drain system created an “over-pressurization,” and as a consequence, water ejected through the salon’s numerous sinks and toilets. It was plaintiff’s contention that that water caused the damage, as opposed to the water from the street that had accumulated at the bottom of the stairwell.

At issue was whether the salon sustained damages “solely” from water that backed up from a sewer or drain.

To determine the causation, plaintiffs relied on three expert reports. The court determined the expert opinions were unable to refute that the water which accumulated at the bottom of the stairwell included surface water which entered the premises through the salon’s glass door. The New Jersey District Court granted defendant’s motion for summary judgment.1

Here, plaintiff did not have a flood policy of insurance and because of the way policy language has evolved, the loss was determined to be from an excluded cause. Even outside of a flood zone, a flood policy would have benefitted the salon in this instance. It’s important to read and understand what your policy covers so you do not end up in this situation.
1 Villamil v. Sentinel Ins. Co., No. 17-1566 (D.N.J. Dec. 21, 2018).