Forums

Steve sent me the policy forms (thanks) and I just got in and started to look at them:

CP 10 54 06 95 Wind and Hail Exclusion Endorsement was on top of the stack.

It says:

The following is added to the EXCLUSIONS section and is therefore not a Covered Cause of Loss:

WINDSTORM OR HAIL

My first thoughts are, OK if windstorm is excluded does that include rainfall related to a windstorm also? My second thought is to consider whether the cause of loss could be defined as some other peril besides "Windtorm or Hail" in a good faith effort to "find coverage". What about "back up" as a covered cause of loss? After all, a bullet impacting a glass window can be (and often is) considered both "explosion" AND VM&M.

But as I keep reading:

"we will not pay for loss or damage:....

2. Caused by rain, snow, sand or dust, whether driven by wind or not, if that loss or damage would not have occurred but for the Windstorm or Hail.

In my opinion the Hurricane was a "Windstorm" and the rain would not have occurred [at least not in that location] if it wasn't for that Windstorm.

Therefore the damage seems to be excluded...

But I keep reading:

"But if Windstorm or Hail results in a cause of loss other than rain, snow, sand or dust, and that resulting cause of loss is a Covered Cause of Loss, we will pay for the loss or damage caused by such Covered Cause of Loss. For example, if the windstorm or Hail damages a heating system and fire results, the loss or damage attributable to the fire is covered subject to any other applicable policy provisions."

So I need to figure out if the Windstorm resulted in another Covered Cause of Loss.

Reading the CP 10 30 04 02 form entitled "Causes of Loss - Special Form" it appears that the special form defines "Covered Causes of Loss" as any Direct Physical Loss unless it is excluded or limited in another section. So, to use a term that is in disfavor, it is basically an "All Risk" policy with the "Special" endorsement.

So, to backtrack a bit, is there another causation we can point to that was caused by the "Windstorm" and might be covered? How about "backup" of the drain, or "seepage" from the drain pipe (plumbing)? "Mold" or "wet walls" are not "causes"; they are results of causes. The only possible "causes" I can think of would be "backup" or "seepage". I consider these because I want to be thorough in my analysis to provide good faith.

Under section B Exclusions "Water that backs up or overflows...from a drain..." is excluded, and furthermore it is excluded with anti-concurrent causation language: "Such loss is excluded regardless of any other such cause or event that contributes concurrently or in any sequence to the loss". To me this means that even if the "backup" cause was in turn caused by a "windstorm" cause that wasn't excluded like it is here, the "backup" cause would STILL be excluded because of the anti concurrent cause language.

"Seepage" that occurs over a 14 day period is excluded, and presumably seepage that occurs over a shorter period might be covered. This is where it gets tricky. Is there really a "seepage" cause working here, separate from the "backup" which is excluded? First off, although a plaintiff attorney might argue that the seepage is a distinctly separate cause of loss from the "backup" I'm not so sure the case law is in agreement. More importantly the anti concurrent causation language destroys "seepage" as a possible covered cause because regardless of whether "seepage" is a distinct causation nobody can argue that it wasn't caused by the "backup". Without a "backup" there would be no seepage.

And even if it was a covered cause distinct from "backup" any damage cause after 14 days (all of the mold?) would be excluded.

The anti concurrent causation language throws the "seepage" baby out with the "backup" bath water.

In summary, windstorm is excluded and so is every other possible causation: rain, backup, seepage.

Also, under Limitations it says:

We will not pay for loss or damage...

[to] C. The interior of any building...caused by or resulting from rain,...unless (1) The building first sustains damage by a Covered Cause of Loss to its roof...through which the rain enters...

We know there was damage to the roof but it wasn't damage from a covered cause of loss. The roof failed due to deterioration/decay/hidden defect as far as we know. Also the insured repaired it before we had a chance to look at it.


Looking at the mold coverage it refers to "specified causes of loss"- are these the named perils, listed on a form I don't have or couldn't find? So I'm not 100% sure the mold isn't covered because I want to see the "specified causes of loss". I know that sometimes "ensuing damage" is covered when the damage related to the proximate cause is not. However this section also says there is only coverage for mold if all reasonable efforts were made to "save and preserve" the property. As an adjuster I might need to ask some questions about what steps were taken/not taken. Did anyone in the Association try to contact each unit owner and inspect the units (after the roofer notified them about the water inside the roof? Was there standing water in the drain 2 weeks after the storm?

As an additional note the policy adjustment may involve coinsurance; there is a clause requiring the insured to "Give us prompt notice of the loss"; "take reasonable steps to protect the Covered property...; and there is a possible "inflation guard" which increase policy limits if paid for as shown on the dec sheet.

Final disclaimer- I could be all wrong! If this was my claim I would study this more before coming to a final conclusion....

Ok, I found the "Specified Causes of Loss". Like I suspected they are typical "named perils". I have to admit I didn't read all the way to the last page because I didn't expect the covered perils to be buried that far into the policy. But I promise not to bill anything for working on this claim.

OK, windstorm is still excluded.

If the backup exclusion was erased by the Property Enhancement Endorsement, then back up might be covered.

Here's how you could find coverage:

"But if Windstorm or Hail results in a cause of loss other than rain, snow, sand or dust, and that resulting cause of loss is a Covered Cause of Loss, we will pay for the loss or damage caused by such Covered Cause of Loss

To pay this claim you could argue

1) There was a windstorm

2) the windstorm resulted in the Covered Cause of Loss known as "backup"

2.1) the windstorm also resulted in a Covered Cause of loss known as "seepage", and some of the seepage was under 14 days old.

3) backup is a cause of loss "other than rain".

3.1) seepage is also a cause of loss "other than rain"

and finally to pay the claim you would have to decide the following limitation does not apply:

We will not pay for loss or damage...

[to] C. The interior of any building...caused by or resulting from rain,...unless (1) The building first sustains damage by a Covered Cause of Loss to its roof...through which the rain enters..

The adjuster could decide this limitation does not apply because:

1) The building first sustained damage caused by "backup", a Covered Cause of Loss. The saturation from standing water in the drain caused the roof failure. The water that entered the resulting opening was rain, or at least partially rain. *

To arrive at a coverage decision this way the adjuster (or carrier) would also have to reject other possible reasons for denial such as the failure to mitigate damages, exhibit the damaged property (prior to repair), and failure to maintain (remove debris from roof and/or drain; install drain guards etc.) **

I think I have outlined how to get to a YES on coverage. I'm not sure everyone will agree that this is the correct conclusion, but I think this is how you would get there. And, in good faith, maybe this is where the carrier should end up.

* Professional roof inspection, anyone?
** ROR letter?

rereading my post I notice something a bit funny:

to get coverage we need to have:

1) a backup that is not "rain" (but its OK to be FROM rain)

2) damage to the roof from the backup saturation (but not from the rain that precipitated the backup) (pun intended)

3) rain that enters the roof due to the damage that wasn't exactly caused by the rain but was actually caused by the backup that resulted from the rain that wasn't exactly the same rain that went inside because

Oh forget it, just pay the claim.

Dear File examiner

I know that someone likes this insured and you have thought hard about the coverage. I am busy and my brain hurts from analyzing things that no lawyer should be forced to analyze. Since you want to pay this claim please send me an email telling me it is covered and I will just do my report saying that it is covered because you said so.

P.S. the agent is calling me constantly about why it might not be covered. Can I give him your number?

Number one, I have to confess I may have lost sight of the forest from the trees. As Dcmarlin points out the limitation he quotes may be so powerful that it trumps other portions of the policy. As for my earlier analysis, I came up with a complicated way of granting coverage when a BACKUP is the result of a (otherwise excluded) WINDSTORM. I'm not sure I would personally decide that the loss was covered the way I outlined it but I did it for sport, to see if it was even possible to make that argument.

What I need to go back and evaluate are two things:

1) If the backup exclusion is removed by the Property Enhanced Endorsement can it grant coverage all by itself, regardless of the Windstorm, and

2) can we overlook the limitation dcmarlin reprints, and just focus narrowly on the existence of a (covered?) BACKUP and just forget about how the backup got there? Or is the limitation so powerful that it excludes a backup, if that backup started with RAIN?

Consider these two policy sections (I marked them A and B) and ask yourself if they contradict each other (in this claim scenario):

A) "But if Windstorm or Hail results in a cause of loss other than rain, snow, sand or dust, and that resulting cause of loss is a Covered Cause of Loss, we will pay for the loss or damage caused by such Covered Cause of Loss

B) 1. We will not pay for loss of or damage to property, as described and limited in this section. In addition, we will not pay for any loss that is a consequence of loss or damage as described and limited in this section.
c. The interior of any building or structure, or to personal property in the building or structure, caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters;

If you believe the backup in this scenario can be considered to be from a cause of loss other than rain (debris for example) then you can decide to cover the loss under "A".

If you believe that the backup was caused by or resulted from rain, and, in addition you also believe at least one of two additional things:

1) Debris cannot be considered the cause of loss
2) the limitation is so powerful it trumps other wording that might give coverage

then you should deny coverage because the limitation excludes it and/or the wording in "A" doesn't work.

(One of the possible ambiguities in "A" is that it refers to cause of loss in the singular. It isn't clear how to interpret "A" if you think there are two or three causes of loss, such as windstorm, debris and backup. Which brings up another way of looking at it: if you think there is an amibiguity in the wording, the decision should probably be made in favor of the insured. Which brings me to another idea- the more I try to think this through the more I think it needs a judge which means Steve must have gotten the scenario from a court case that was decided on appeal.)

Another question I have is what exactly is a "backup"? I wasn't entirely convinced by the discussion at the beginning. Here's how I have usually though of it:

1) sewage made by another home (or grease from the restaurant down the street) coming out of your toilet = backup

2) There is something stuck in your sewer line, blocking it. When you attempt to flush, the water in your tank can't go down the bowl and it overflows onto your floor. This is NOT a backup. The water on your floor never entered the sewer system in the first place. If you call in a claim and say "I had a toilet backup!" that doesn't make it a backup.

Is my way of thinking wrong? What is the correct definition of "backup"? Is it different between states? Any case law?

If the claim scenario we are analyzing is not a "backup" then I think it leaves only one narrow possibility for coverage: seepage as cause of loss combined with the limitation wording not applying.

In general, but this is not set in stone, one determines the difference between "backup" and "overflow" by asking a simple question: "Whose s**t is it?" In other words, if the blockage of the pipe is beyond the property insured, such as in a city sewer, it is usually considered "backup". If the blockage is in that part of the sewer line owned by the insured, it is usually considered "overflow". I'm not sure that distinction applies to a roof drain, but that is the usual rule of thumb.

As far whether backup from rain (or windstorm) is considered as being caused by rain or backup (or windstorm) as a cause of loss, I will answer that anecdotally. In 1196 or1997 I was worked on staff for Nationwide. They sent me to Clarion, PA, where there had been excessive rain which caused flooding. Of course, flooding was excluded on the Homeowners policies, and so was backup of a sewer or drain...EXCEPT... there was also an endorsement attached to every policy extending up to $1,500 for backup from a sewer or drain. The instruction to me were...if there is any part of the damage to the insured's property that is attributable to backup from a sewer or drain, estimate the loss. If you get to $1,500, stop and write a check for the special limit. In most cases, when you find an endorsement for backup it will have a special limit. In our scenario there is no special limit.

That's kind of what I was thinking, this scenario is not a backup.

That leaves seepage and I'm skeptical you can find coverage with seepage. Here's the problems with seepage as a covered cause of loss:

1) you have to ignore the limitation posted by dcmarlin. You would need to decide that the water in the drain wasn't rain water, or that the limitation is ambiguous as I discussed above. I'm sure there are lawyers who would argue that once the water entered the drain it was no longer rain, but I'm skeptical that that is a valid argument and I would imagine the case law doesn't favor that kind of perspective.

2) you would need to ignore the possibility of a denial due for lack of maintenance and other issues.

I think a straightforward reading of the policy would result in a denial. I could also see how the carrier might choose to pay this anyway.

I would recommend denial but encourage the carrier to make the final decision.

I think the denial letter would be a bit challenging to write.

Leland,

I don't want to keep you from your paying work, but let me point one thing out:

The exclusion that is deleted actually includes not just "backup", but also "overflow".

"B. Exclusions

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of
any other cause or event that contributes concurrently or in any sequence to the loss.

g. Water


(3) Water that backs up or overflows from a sewer, drain or sump"

About the lauan topic - we do use lauan in CO on top of the sub-flooring for linoleum insallations. It is not a normal item for a lino installation though. It's a case by case according to a person I spoke with. He also does not use it for wood floor installations. The main purpose of the lauan is that when the lino is removed, the sub-floor is not damaged by the lino adhesives. The lauan is a thin layer that is disposed and replaced when the new lino is installed. If the lauan is not damaged on removal, the older layer may be reused. It may have some vapor barrier qualities like the underlayment you see with pergo or other veneer floors. Given this discussion, I think it is associated more with the floor surface than the sub-floor, kind of like carpet padding.

About the back up... I'd like to restate something I said before... isn't the coverage of the back up external to this question since the water backed up outside of the unit? I mean if a back up happens, don't we typically think of this in terms of relevance for coverage when water or sewage backs up into a unit. That’s why it could be looked at as surface water – could be on the roof, could be in the yard by the foundation, etc. We would not consider a back up from a neighbor’s pipe which spills over into the insured’s yard relevant, as that is really not a back up… it is surface water. The difference here is that the back up is happening on the risk, but it is outside of the building envelope since it is on the roof. Because of the waiver that permits coverage for back up and overflow, we do need to consider this point. Without a problem with the roof, we do not have this damage, as the water will go down the scuppers, evaporate, blow off, etc. So it’s really a roof- surface water and seepage problem more than a backup question.

I think a policy clarification stating that a “backup etc INSIDE your covered property” would reduce the confusion and risk of loss in litigation. I can see how the courts would broadly consider a backup outside of the structure to be covered since the policy does not clarify where the back up has to be. In normal discussion, we think of back up inside a structure, not outside.

Steve- you noted to Ray that you also did not think this was a flood, but you thought if it went to court, it could be considered a flood? I guess that will come out in your summary, but I’d appreciate some clarification on how that could be interpreted. I can see how the courts would look carefully at this waiver and go with the insured because of the (mis) interpretation of back up, but I think the intent of the policy language and our basic understanding was that this would not be a covered loss.

OK, so the exclusion for backup and overflow is deleted which means:

Backup and overflow are no longer automatically DENIED.

However, the limitation is still in effect:

"1. We will not pay for loss of or damage to property, as described and limited in this section. In addition, we will not pay for any loss that is a consequence of loss or damage as described and limited in this section.
c. The interior of any building or structure, or to personal property in the building or structure, caused by or resulting from rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a Covered Cause of Loss to its roof or walls through which the rain, snow, sleet, ice, sand or dust enters;..."

So even if you have an OVERFLOW, you need to tell me how the limitation above does not apply if you want to convince me the OVERFLOW is still covered.

To overcome the limitation-

A) You would need to argue that the overflow is NOT a "consequence" of the rain- but a "consequence" of the debris.

B) You would also need to argue that the overflow is not "caused by or resulting from rain"

C) You would also need to argue that overflow, a Covered Cause of Loss, caused damage to the roof through which rain entered. To make this argument you could say that the overflow caused saturation which eventually damaged the roof.

D) And finally, you would need to argue that rain entered the roof where it was damaged by the saturation from the overflow.

E) Consider a scenario where on Monday and Tuesday the rain filled up the drain. Then on Wednesday, Thursday and Friday the standing water saturated the drain/roof connection until it started to fail. Then on Saturday some additional rain fell and went through the opening created by the saturation.

If you can make a case for A, B, C, D and scenario E then I think the overflow would be covered because the limitation would not apply.

Obviously it would be a stretch to make this a covered loss, at least the way I'm looking at it. I could be wrong.

Also remember that we never got the chance to inspect the damaged roof and we still have the problem of possible denial due to failure to maintain the roof.

For the sake of argument maybe you can tell me that the limitation doesn't apply- maybe the deletion of the backup/overflow exclusion also cancels out the limitation- its possible. If that's true please show me.

To really thoroughly analyze this takes a lot of time, I do enjoy the learning, but to be honest I would need to spend even more time on it if it was a real claim. The reason I mention my job is because I feel bad throwing out an opinion when I know I haven't studied it as hard as I would if it was a real claim I was working on.

But thank you for taking the time to post the scenario. I have been turning it over and over in my mind while I was driving and while I was trying to sleep last night.

Yes, we never got a chance to inspect the roof. That is definitely a problem, and a possible violation of policy conditions.

And I will probably post my answers between now and Monday. And I am not going to claim to have the final answer on this one. I'm having foot surgery on Tuesday, so any posting I make that day I hereby declaim and chalk it up to the effects of pain killing medications. I know not everyone is going to agree with my resolution. And it's possible that they will be correct and I will not be. Let's see if anybody is waiting for me to give my answer to this so they can analyze my reasoning abilities. If there are any rabbis out there, some rabbinic training would probably be helpful in understanding and evaluating this scenario.

Too much thinking on this loss. Break it down to a few bites of the elephant. The broadest coverage is in play "risk of loss" (unless excluded) all of the causes of lost are in the CP 20. Its 17 perils and backup or inability to drain are not one of the 17. Next windstorm is xxx out, there fore rain with the windstorm is xxx out. A roof holding water is not a flood defined by any flood insurance policy. The cause of loss exclusions clearly eliminate any of the causes such as seepage that could be called one of the losses under the risk of loss meaning.

Its a shock to Homeowner adjusters to read the hostile opening in the roof or wall. or the doors and windows language in commercial coverage. Many Homeowner adjusters come behind the wind pool adjusters after a hurricane and pick up all the "leakers" and "wind driven rain" inside damage losses. If you really want to pull your hair out get your hands on a Business Owners Policy (BOP) which a couple of us has pointed out, and I think you will find it very simular to the HO 3.

Ray, there is no CP 20 (CP 10 20) attached to this policy. The only "Causes of Loss" form is the CP 10 30. You do have a way of cutting to the chase, though.

My calendar just cleared for early evening (if you don't count the studying for CPCU 540 Finance for Risk Managers and Insurance Professionals test), so maybe I'll find the time tonight to walk through this loss and give my answers.

Ray- the "special" broadens the coverage beyond the named perils- it's basically "all risk" with some exclusions and limitations.

If a typewriter fell out of a sightseeing hot air balloon and landed on the roof it would be covered because it's not excluded.

And you're right, I might be overthinking it. But if and when I write my denial letter it will be airtight.

And my excuse for overthinking it is that Steve doesn't want to tell us the answer yet. Blame it on Steve for creating too much suspense.

The CP policy with the CP 30 has to have a CP 10 or 20 The 10 is 11 named perils that I have in a prior post. The CP20 has 3 more perils listed listed. #12 Falling objects #13 Weight of Snow, Ice or sleet #14 water damage. This policy does not have the CP 20 (stated before in a post from me)... so now go to the CP 30 and the following coverage A. Covered Causes of Loss: When special is shown in the Declarations, Covered causes of loss Direct Physical Loss unless the loss is:

1. Excluded in Section B. Exclusions ; or
2. Limited in section C. Limitatations
You then read about 5 pages of exclusions.
On Page 5 of 9 you find C Limitations: The following limitations apply to all policy forms and endorsements unless otjherwise stated. Then go to definitions and read the water damage and you will find accidental discharge from within na plunbing, heating or cooling device. BUT remember this has the windstorm xxx form and how can a rain event with wind be ant thing but a winstorm, and dont say the wind did not reach 39 MPH; therefore its not a windstorm. This BS was stopped before I started. Its just not a covered loss............