Some insurance policies contain water exclusions or limitations of coverage to the interior of the building, or the property contained in the interior of the building, unless a windstorm damages the exterior roof or walls of the structure through which the water enters. This policy limitation/exclusion is often referred to as the wind-driven rain exclusion. It is important for insureds to be aware of this common provision when reporting claims to their insurers or giving statements about the details of a loss. This is particularly important for the many policyholders along the East Coast who were affected by Hurricane Irene.

An example of the typical wind-driven rain policy limitation/exclusion is:

We will not pay for loss or damage to the interior of any building or structure, or the property inside the building or structure, caused by rain, snow, sleet, sand or dust whether driven by windstorm or not, unless the direct force of Hurricane, other Wind, or Hail damages the building or structure causing an opening in the roof or wall and the rain, snow, sleet, sand or dust enters through this opening.

Courts across the United States have given the limitation/exclusion various interpretations. In Florida Windstorm Underwriting v. Gajwani, the Florida trial court entered judgment in favor of the insureds for coverage. The insurer appealed and argued there was no evidence that a windstorm damaged the exterior of the building allowing the water to enter. In Gajwani, the parties basically agreed that the water entered by seeping through existing openings to reach the interior of the building. The Florida Third District Court of Appeal upheld the policy limitation/exclusion and rejected the insured’s argument that it was against public policy to allow the Florida Underwriting Association (Citizens’ predecessor) to exclude such damage.

This policy limitation/exclusion is not only asserted in hurricane claims, it arises in different loss situations across the country. The question often arises whether a windstorm was the direct cause of loss. For example, in Granchelli v. Travelers Insurance Company, the Appellate Court in New York State interpreted whether a windstorm was the direct cause of damage to the interior of The Palace Theater in Lockport, New York. (I recall attending movies at The Palace Theater as a kid; Lockport, N.Y. is my hometown). The policy in the Granchelli case insured against direct loss “by windstorm or hail.” In February 1985, the theater sustained water damage to the interior of the property causing approximately $116,000, in damages. A windstorm had blown open a door on the roof, and subzero air entered the building, causing a pipe to freeze and burst, resulting in the water damage. The insurer denied coverage on the ground that the theater’s loss was not a direct loss caused by the windstorm within the meaning of its policy. Burst water pipes was an excluded cause under the policy.

The trial court granted the insurer’s motion for summary judgment and found that, while the windstorm was a link in the chain of events leading up to the loss, it was too remote to be the direct cause of the loss. The appellate court disagreed, holding that direct loss is equivalent to proximate cause. The court concluded that the burst water pipe could have been proximately caused by the windstorm. The court overturned the judgment for the insurer and remanded the case to the trial court.

Unrepresented policyholders may often think that their property insurance policies should be commonsense. If the interior of their insured building is damaged, it should be covered. As this brief explanation of the wind-driven rain exclusion and direct windstorm damage requirement reveals, it is not always that easy. If insureds discuss their claims with insurers before having the claims reviewed by their own professionals, the insurers’ one-sided conclusions can have detrimental consequences on the coverage case. The term “opening” is not often defined in policies, and there can be situations where water enters through an “opening” that may not even be visible to the untrained eye.

As discussed many times in the Property Insurance Coverage Law Blog and the Condominium Insurance Law Blog, property insurance policies contain a maze of detailed exclusionary and limiting provisions. Policies of insurance are filled with legal buzz words that present a gauntlet of challenges for the policyholder to navigate through in a coverage case. Being aware of this fact and using the appropriate damage consultants is often critical for policyholders to put together the damage claim in support of coverage.