Accounting for Law

Case shows ground water damage not always excluded from coverage

Not all insurance policies exclude coverage for the flooding of a property from the outside, as demonstrated by a recent case in which a client of Huntsville insurance lawyer David Morin succeeded against an insurer, reports the Toronto Star.

As the Star columnist writes, Morin, a founding partner of Toronto-based Will Davidson LLP, says his client owned a home in Huntsville, with a small creek located some 14 metres from the home and a man-made lake and dam a 20-minute walk along the creek.

Four years ago, a six-metre section of the dam burst on a neighbour’s property, causing a flash flood down the creek, washing away part of the pavement and damaging four driveways, the article notes.

Water, mud and debris entered the home and garage of Morin’s client, damaging part of the concrete block wall in the garage.

The client did have a comprehensive insurance policy, covering damages arising from accidental events, but not against loss or damage caused by water unless the damage resulted directly from water entering “through an opening which has been created suddenly and accidentally,” says the article. The policy did not cover loss or damage caused by surface water.

The insurance company denied Morin’s client’s claim on the basis that there was no coverage for damage caused by ground water.

The homeowner took the insurance company to court, asking for judgment in her favour without a trial, based on the wording of the policy.

In his decision, Justice Edward Koke ruled that the damage resulted from the deluge of water which entered the property. The court found that the policy excluded coverage for damage caused by ground water unless there were any exceptions to the exclusions, says the Star article.

“The judge then pointed out that the policy says that although water damage is generally excluded, certain risks were in fact covered. The policy, he noted, covered water damage caused by the sudden and accidental escape of water from within a swimming pool, water main, sewer, drain, sump or from an opening which has been created suddenly or accidentally by a peril not excluded elsewhere in the policy,” the article notes.

Ultimately, the judge found that the dam was effectively a water management system and that the client’s comprehensive policy provided coverage for the accidental escape of water from a sewer or drain.

“The exclusions for ground water and surface water, he wrote, did not apply since the water from the dam was neither ground water nor surface water,” says the article.

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