Homeowners and businesses must be reminded that flood insurance is important, but excluded under most standard homeowners and commercial policies. This was demonstrated in a recent case from the Third District Court of Appeals, Intrepid Ins. Co. v. Prestige Imports, Inc., 2011 WL 4808798 (Fla. 3d DCA October 12, 2011). While the case did not involve a hurricane wind event, it presented a problem that policyholders sometimes face in windstorm claims. Did an excluded “flood” cause the damages, or any portion of the damages?

Intrepid Insurance insured Prestige’s auto dealership, including its vehicle inventory. The policy included the following exclusion:

c. Flood—waves, tides, surface water, overflow of any body of water, or their spray, all whether driven by wind or not, including any earth movement or mudslide caused by or resulting from the accumulation of water on or under the surface of the ground.

On December 17, 2009, a heavy rainfall caused storm water drainage systems next to Prestige’s dealership to overflow. A large volume of water flowed onto Prestige’s property and approximately thirty-one vehicles were immersed in the water. Prestige made a claim under the insurance policy, and Intrepid denied the claim based on the flood exclusion. Prestige filed a lawsuit against Intrepid to challenge its denial.

Prestige filed a motion asking the court to enter judgment in its favor finding coverage for the claim. Prestige argued that the damage was a result of storm drain back-up, which the policy neither excluded nor included in its definition of “flood.” According to Intrepid, falling rain pooled in areas adjacent to Prestige’s property and then flowed into Prestige’s property.

The trial court entered judgment in favor of Prestige, finding coverage for the claim. Intrepid appealed that ruling to the Third District Court of Appeal, asserting that any of the damage claimed was caused by surface water, which is excluded under the policy.

The Third District found that there was a disputed issue of fact regarding where the water originated which prevented the entry of judgment in favor of Prestige. By the Third District’s reasoning, if the water originated by drain back-up, the policy did not specifically exclude the damages and there could be coverage. But if the water originated by ponding surface water, the Court stated that would be an excluded cause. So the case was sent back to the trial court level for the determination of where the water originated.

There was an interesting dissent written by Senior Judge Schwartz. A dissenting opinion occurs from time to time and means that particular Judge does not agree with the majority’s opinion. Dissenting opinions are not binding authority. They show law is full of gray areas that do not contain bright line definitive answers. Senior Judge Schwartz wrote that he would have not only reversed the trial court order from the case, but would have essentially issued a judgment in favor of Intrepid that the loss was excluded from the policy.

Although I agree with reversal, I do not agree that determination of the coverage issue requires the resolution of any issue of fact. In my opinion, it is clear that the flood which damaged [Prestige’s] property was caused by the inability of the drainage-storm sewer system to cope with the unprecedented downpour in the area. This conclusion requires a finding of no coverage as a matter of law.

The majority responded in a footnote which states:

In response to the dissent, counsel for [Intrepid] was specifically asked at oral argument if Intrepid Insurance had also moved for summary judgment and he responded that it had not. Although Judge Schwartz’s point is logically attractive, it would in effect have us grant a motion that was never filed at the trial level.

What is important to take away from the case, is the importance of having flood insurance in addition to hurricane and standard fire and theft policies. Flood insurance allows policyholders to minimize the risk of being left with no coverage for a claim when damage occurs to property because of surface water.