Insurer successfully defends flood exclusion in water damage endorsement

A Quebec home insurer successfully defended a flood exclusion to its policy’s water damage endorsement, on the basis that the insurer would not cover water damage that “occurs when a flood reaches the surface of the ground on the premises.”

Quebec’s Superior Court upheld the language of The Personal’s flood exclusion in a claim made by Cynthia Rogerson and Anthony Minall.

Rogerson, Minall and their children were evacuated from their home in Sainte-Marthe-sur-le-Lac due to the breach of a dike and the flooding of the Lake of Two Mountains in April 2019.

They reached out to The Personal for coverage for their additional living expenses and for the damages to their basement, which totalled more than the $50,000 limit in the water damage endorsement for water damage due to sewer backup. The Personal denied their claim based on the “flood” exclusions to the insurance policy and the Water Damage Coverage Endorsement.

“The court finds that the coverage and the exclusion of the endorsement are not ambiguous and that it need not resort to the rules of contract interpretation to apply them to Rogerson and Minall’s claim,” the Quebec Superior Court ruled in a decision released Wednesday. “Damages caused directly or indirectly by a flood are not covered.”

The Personal’s policy states:

“We do not insure loss or damage caused directly or indirectly by flood.
Flood includes waves, tides, tidal waves, tsunamis, seiches, dam breaks and the rising or overflow of any stream of water or body of water, whether natural or man-made.
This exclusion applies whether or not there is another cause or occurrence (whether covered or not) that contribute concurrently or in any sequence to the occasioning of the loss or damage.”

However, Rogerson and Minall had also purchased the Water Damage Coverage Endorsement. An endorsement is typically purchased at extra cost to include coverage for things that are otherwise excluded in the base policy.

The Personal’s Water Damage Coverage Endorsement provides coverage for, among other things, “water escape, overflow or backing up of” sewer connections, sewers, septic tanks, or “ground or surface water that enters or seeps into the building through walls, foundations, basement floors or other means, or through openings therein.”

However, the water damage endorsement itself contains a flood exclusion for:

“Loss or damage caused directly or indirectly by a peril insured by the endorsement which occurs when a flood reaches the surface of the ground on the premises.
This exclusion applies whether the loss or damage arises before, during or after the arrival of this flood on the premises. For the purpose of this endorsement, flood includes waves, tides, tidal waves, tsunamis, seiches, dam breaks and the rising or overflow of any stream of water or body of water, whether natural or man-made.
This exclusion applies whether or not there is another cause or occurrence (whether covered or not) that contributes currently or in any sequence to the occasioning of the loss or damage.”

The policy defines “premises” as “located within the lot lines of the dwelling” identified in the policy.

Rogerson and Minall claimed the damage to their basement was caused due to sewer backup alone. In support of their argument, they referred to the contents of a letter issued by the City of Sainte-Marthe-sur-le-Lac. The letter, written in French, confirms the pumps of the sewer system failed to function because of an electricity failure caused by the floods.

The court observed the city’s letter confirmed flooding was the source of the sewer pump failure.

“The immediate cause of failure of the sewer pumps is the flooding,” the court ruled. “If water entered Rogerson and Minall’s home, it is because of the flooding. The flood was the first element in the chain of causation of the damages.”

Furthermore, the court found, The Personal had set up a committee to adjust losses arising from the breach of the dike, which resulted in many insurance claims. The committee relied on aerial photographs and mapping implemented by Desjardins to review claims from insureds following the flooding of the Lake of Two Mountains.

“More particularly” the court noted, “the aerial photographs taken on April 29th show water flooding the area of Rogerson and Minall’s home. The mapping of the area also illustrates that the flooding reached their home.”

This evidence triggered the exclusion based on “a flood [reaching] the surface of the ground on the premises,” the court observed.

Feature photo courtesy of iStock.com/PaulMcKinnon  (Editor’s Note: This image is taken of of an unrelated flood in Gatineau, Quebec, and is used for illustrative purposes only.)