Sudden and Accidental Water Losses
Insurers also reject such claims but examine and find evidence that supports
coverage. What happens when an insured claims possible water damage from
buckling floors but doesn't know the leak source?
The adjuster would mostly inquire whether a pipe burst caused damage. Suppose
the insured response doesn't know the answer. In that situation, the
adjuster would likely begin to collect evidence from refuting the argument
because the damage was not caused by an immediate and unexpected plumbing
failure protected by an all-risk policy. If an insured claims for water
loss, what are the insurer's duties? What, if any, are the co-insured
duties? And what acts (or inactions) the insurer takes pose questions
of bad faith? What's a sudden, unintended leak? Often leak longevity is known.
There is an instance where insureds started finding condensation for a
month on the windows before hiring a plumber to take care of the leak.
He watched the water come from an open pipe hole, come out as a drip because
the water was switched off low. Within a day or two, the insurance adjuster
came to the home and examined and took photos. The adjuster observed persistent,
noticeable mold and moisture on each level of the three-story home interior
walls. The insured told another claim agent to watch condensation and
mold a month before the claim. Within a week of the initial inquiry, the
insurer refused the appeal because it was caused by a hole in a pipe that
leaked over time and was thus not sudden and unintentional.
The insured opted not to argue whether the leak was unexpected and accidental.
Instead, the insured argued the pipe's nanosecond split met the sudden
and unintended insurance requirements. Interesting is the court's
discussion of what constitutes a sudden and involuntary leak as follows,
given the small size of the holes from which the water leaked. Since there
was a large amount of water damage, the leak must have continued long
enough, or stopped and started several times, to qualify as 'continuous'
or 'repeated' under any fair construction of those words.
An example is where sudden and unintentional overflowing toilets, but a
malfunctioning toilet that failed to shut down water intake and overflowed
due to sewer line blockage was not protected due to exclusion for loss
or damage caused by water backing up or flooding from the sewer.
A multi-month water leak is not. Ultimately, there was no coverage because
the existence of the pipe's incremental water discharge (even if triggered
by a nanosecond break in the line wall) and the accumulated effects of
water on the house preclude any finding that the release was immediate.
Practical efforts to describe abrupt and accidental. Notes, whatever 'sudden'
implies, is not incremental. There is much space for interpretation between
discussing a pipe break's nanosecond, not cumulative. Insurers refuse
coverage based on mold's appearance in the insured 's house, even
if the mold could be unrelated to a broken pipe, resulting in the insured's
claim or taking days to appear. Moreover, the insurer does not have a
bevy of experts (think mold experts or metallurgists) ready to give opinions
confirming the leak's long-term existence.
Even if a layperson does not usually use the words unexpectedly and inadvertently
to describe a leak, insurers use the insured's inability to detect
the leak as consideration toward coverage. Therefore, when documenting
an argument, these words should be used or defined as to the absence of
any prior water presence manifestations wherever possible. An insurer's
obligation to investigate and provide adequate support. Among the duties
are prompt examination and receipt of insurance claims.
Upon receiving notice of claim, each insurer should immediately do the
following, but in no event more than fifteen calendar days later, unless
the statement of claim received is a notice of legal action, begin any
appropriate investigation of the request.
Often the insurer's obligation to investigate and the insurer's
form of acts or inactions constitutes a contract violation. There's
a case where the insured drove an automobile on the highway as it went
off the road and fell into a 50-foot ravine. During the crash, a family
member had caused them. He observed post-accident conduct. The insured
was lucid, didn't worry about breathing difficulties, and didn't
know why the accident happened.
The insured complained about cutting other observers on the scene to his
head. In a government survey, the officer did not refer to cardiac arrest
or attack. The paramedics arriving at the scene found the insured's
blood pressure and pulse to be okay, and there was no sign of heart failure
before the crash. After the insured's hospital admission of multiple
wound diagnosis, the insured collapsed into a coma and died two days later.
The hospital staff was unsure whether the accident's trauma caused
my predicted infarction or whether it occurred while the patient was driving
the vehicle, triggering irregular heartbeats, syncope, and subsequent crash.
Under her husband's life insurance policy, the insured 's wife
and beneficiary sought accidental death benefits. In its investigation,
the Old Republic asked the doctor to complete the proof-of-loss method.
In the article, the doctor noted that the insured 's death was due
to an accident, indirectly attributable to a brain contusion, coma, and
brain hypoxia. The illness or cumulative reading directly to his death
was cardiopulmonary arrest with precedent causes being myocardial and
atherosclerotic heart disease. A heart attack and accident-related injuries
caused death. The Old Republic retained a third-party investigator whose
inquiry consisted of reviewing the traffic accident report, the death
certificate, some hospital records, the form of proof of loss, and a brief
description of doctor records.
The Old Republic never approached any witnesses at the scene or the insured's
doctor before denying the petition because the insured 's death was
not due to illness and accident. Following the rejection, the insured's
wife brought a complaint, and a jury found the Old Republic unreasonably
refused to compensate for the insurance benefits. It granted extracontractual
damages. The jury's decision was upheld on appeal. The appeal tribunal
addressed the insurer's responsibility to investigate as follows.
The question here is whether the Old Republic found all the information
reasonably available while rejecting the argument and whether that information
offered a basis for coverage. The Old Republic was responsible for examining
the circumstances extensively to decide if the accident caused his death.
An insurance provider can not deny evidence supporting coverage. If it
does, it behaves unreasonably against the insured and violates good faith
and fair dealing. The Old Republic says it did not break the covenant
of good faith and fair dealing because it received any current writing
setting out the insured's cause of death. It argues these writings
represent that the cause of death was the insured's heart failure,
not the injuries he suffered in the car accident.
The Old Republic did not fulfill its obligation to collect readily available
testimony from all percipient witnesses. The Old Republic knew nobody
knew what caused the tragedy. No one ever addressed the matter while investigating
the accident. The Old Republic adjuster did not recognize medical problems,
and the Old Republic did not consult its doctor. Claims officials dismissed
facts supporting coverage and did not fulfill their responsibility to
The insurer must obtain proof supporting the allegation. A case illustrates
an insurer's need to examine and find facts supporting coverage systematically.
The obligation extends similarly to insurance claims for water damage,
where an after-the-fact examination of the premises does not result in
a conclusive response as to whether or not the leak was appropriate for
sudden and unexpected policy requirements. In a claim for water damage
and a pipe burst, the obligation to investigate promptly is especially
paramount, where the cause of water damage is not evident.
The essence of that obligation is also complicated by the insured's
duty to mitigate, i.e., avoid water flow if the damage to the leak continues.
So in our hypothesis, where the insured finds any buckling of his floors
and calls his insurer, the insurer's first reaction could be to advise
the insured to employ a plumber to stop the leak. Although the insurance
will cover damages from the leak, it does not cover the leak's actual
repair, and the insurer has no obligation to include a plumber's name.
Most policies do not cover the walls required to locate the leak source.
Many plans compensate for any opening if the loss is protected. On the
other hand, the policies could cover emergency services required to dry
the premises. Under any situation, and if the insured asks, the insurer
must provide the insured with emergency providers' names to fix the
harm caused by the leak. The remediation phase could include demolition
of walls, removal of drywall, dry rot, etc., raising the issue of whether
the insurer could perform its investigation before any dry-down, possibly
destroying evidence that the insurer could later assert should have retained.
It can be argued that, despite the insurance company's insistence that
the insured locate the source of the leak before performing its investigation,
the state of the premises and the need to repair it immediately could
require the insurer's immediate presence on the property at or around
the time the leak is discovered to preserve and provide guidance to safeguard
the leak. The possible tension between the insurer's duty to support
and investigate and their lack of obligation to repair a leak under the
policy raises significant challenges in a real-time situation where remediation
facilities are on the insured's premises.
Their work involves decisions on what facts will need to be retained to
justify coverage while ensuring that potentially hazardous materials are
removed from the premises. Anecdotally, agents were known to blame the
insured for removing drywall (which could indicate signs of mold and support
denial of coverage) and failing to remove drywall (thus demonstrating
an insured inability to mitigate).
If the insurer fails to investigate immediately, the insurer can have advice
beyond saving the broken pipe. For example, did the insurer advise the
insured to photograph the area around the line (or other leaks) sources
for premature leakage signs? Did the insurer explain its standards of
drywall removal or preservation? Or, conversely, should the insurer choose
not to investigate immediately, should it be stopped from relying on subsequently
collected and potentially damaged or insufficient proof in favor of a denial?
Plumbers and remediators need to note that insurers are likely to recruit
experts to help denial of coverage. For example, the mold may prove the
leak as this mold variant takes a long time to produce, indicating that
the leak may be long-term. It can also be beneficial to take samples of
the mold contained on-premises or airborne models before remediation to
provide an alternate reason for the decline. The insurer relies on decay
as evidence of a long-term leak.
Additionally, the level of moisture and the materials on-site may be factoring
in accelerating mold growth. It can negate testimony indicating molds'
existence confirms the long-term presence of the leak. This again increases
the value of gathering proof of the premises' state before any remediation,
which might be necessary to minimize harm to the insured. Also, the adjuster
can proactively ask the insured if the water damage makes the whole or
part of the home uninhabitable and, if so, inform the insured of his or
her entitlement to benefits under the policy's Extra Living Expenses (ALE).
The ALE benefits kick where premises are uninhabitable or otherwise unsafe
to live in awaiting repairs or inquiry. Since policies don't specify
what's unfit, there is considerable space for interpretation. The
insured has good claims about unfit or uninhabitable premises. Contaminants
like mold, lead, or asbestos is found when small children or elderly adults
live on the premises. The degree and nature of the effect of water damage
on the premises (e.g., the kitchen) also play a role in deciding the habitability
problem. Until the insured's right to ALE benefits is established,
the insurer must provide accommodation equal to those enjoyed by the insured
before the loss.
Consequently, if the insured was staying in a multi-million dollar home
when the failure occurred, he or she might be entitled to hotel accommodation
falling under the same high-end requirements. Not surprisingly, there
are wide ranges of an insurer's ability to meet their policy's
ALE criteria, and so ALE concerns are often extremely contentious. Conclusion
While a water-damage claim can seem clear on its face, insurers vigorously
contest any aspect of water-damage claims and frequently use the insured
's obligation to mitigate to escape their responsibility to investigate
proactively. When the cause of water damage isn't unexpected and unintentional,
insurers have a huge advantage to be portrayed when pursuing rewards under
their all-risk plans.