Water damage claims are one of the most frequent and costly
type of home insurance claim. Whether from burst pipes, roof or appliance
leaks, flooding, or sewer back-ups, the damage from water can be fast and
devastating. Not to mention the mold that can quickly grow if the property is
not immediately and completely dried out.
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Water damage can be even worse in the case of commercial
buildings. The large multi-national carrier Zurich (www.zurichna.com) says,
“Water damage is the number one source of property claims for owners of
high-rise residences, hotels, office buildings, retail establishments and other
commercial structures.” They noted the total damages to commercial property
caused by water is in the billions of dollars each year. In a 2010 study,
Zurich found 62% of all water losses were caused by wear and tear or human
error, which they suggest could have been prevented by water prevention
programs.
However it happens, water can be fast moving, and not
immediately obvious, traveling through wall cavities and other tight spaces
before being noticed. If the water source is pressurized, and no one is in the
property at the time of the leak, tremendous amounts of water can be released
in just a few hours, let alone a weekend, or longer. All that water usually
leads to damage.
Water damages all kinds of property, and does so relatively
quickly. Many building materials and personal property absorb water on contact.
Water causes items to stain, swell, sag, weaken, and to rust, and cause
electrical components to short out or fail. Finished surfaces may bleed onto
carpets, and oriental carpets may have colors run or fade.
The good news is most water damage can be covered by
insurance, but you have to know what the insurance covers so you can get the right
insurance, with the right endorsements. That is a whole other discussion
altogether, and one that should be done with a good insurance agent.
I did want to point out something that demonstrates the
level of complexity and subtlety that can be found in insurance policies, and
the importance of knowing someone that can assist you through the process,
especially when it involves something as frequent, damaging, and costly as
water claims.
The example I am thinking of is water “back-up”, as opposed
to water “fill-up”. In most insurance policies, damages caused a water “back-up”
is not covered, in fact it is specifically excluded, unless you have a specific
endorsement called “Back-up of Sewer or Drain”, or something similar, that
gives you back the coverage. Since it is an endorsement, it comes at an
additional cost. And because insurance is expensive enough, many people tend to
decline such endorsements that increase their premiums. On the other hand, most
insurance policies do not exclude “fill-ups”, so they can be covered.
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So, what is the difference between a “back-up” and a
“fill-up”? As the name implies, a water “back-up” is when water backs up
through your sewer or drain pipes, and enter your home, usually at the
showers, tubs, and toilets. This water usually originates from beyond your
drain line, and unless you have a septic system or drain field on your property,
it usually originates away from your premises (community sewer system).
In a “fill-up” situation, there is a blockage in the drain
line on your property (or common property in the case of a condominium or
similar property), and the water “fills” up in the drain line until it enters
the home, again, usually at the showers, tubs, and toilets.
For ease of understanding, I explain it this way…if
localized heavy rains cause the city sewers to fail and water is pushed through
the city lines and into your lines and it comes out of your drains and toilet,
that is a “back-up”, and is generally excluded by homeowners insurance. But if
your son is playing with a tennis ball at the same time he is using the
bathroom and happens to drop the ball in the toilet as he is flushing (anyone
care to guess how I thought up that scenario?), and the ball clogs the line and
causes water to come out onto your floors, that is a “fill-up”, and is
generally covered under most policies (currently). Obviously, there can be many
different scenarios for each type of loss (especially the “fill-up”), but I
hope you get the basic picture. If you do, you’re a step ahead of nearly all
homeowners, and far too many insurance adjusters.
In the end, the damage looks exactly the same. Water (sometimes
called “grey water”, “black water” or “category 3 water”) comes up from drains
and toilets. But in one case, the resulting water damage is excluded, and in
the other case it is covered. If that wasn't bad enough, I have personally
handled several cases where the insurance company adjuster did not seem to know
the difference, did not know there was a difference, or didn’t bother to determine
whether it was from a “back-up” or a “fill-up”. They simply denied the claim,
citing the standard “back-up” exclusion – that is, until I required they
revisit the claim and correctly pay the appropriate claims as “fill-ups”.
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I have no doubt this denial scenario happens many times a
week, every week of every year, throughout the country. This results in millions
of dollars not paid to premium-paying policyholders who purchased the coverage,
but did not understand why the claims were improperly denied, did not get
adequate treatment from their insurance company, and did not get assistance
from an experienced consumer advocate (usually because they did not know they
could).
It just goes to show how a subtle difference in terminology,
based on the understanding of how a specific loss takes place, can make all the
difference in whether or not a claim is paid, and the importance of knowing who
to use as a resource for a particular situation.
Mark Goldwich is president of Gold Star Adjusters, a group of public insurance adjusters dedicated to helping citizens get the maximum settlement for any insurance claim.
