Unimaginative Denial, Creative Solution

by Mark Goldwich

This week I wanted to write about a claim my firm agreed to take on in the past few days. To me, this claim exemplifies why it is so important to have access to professional claim representation when it comes to property insurance claims, and why you can’t trust your insurance company to answer the question “is it covered?”

In this case, the homeowners live in a planned development, in what’s called a “zero-lot-line” home. This basically means that at least on one side of their property, the exterior wall of their home marks the boundary line of their property, so they have no yard at all on that side. The property is also unusual in that they have an atrium on one side of their home, with no roof above it. This atrium is literally a room inside their home’s footprint – it just has no roof covering it. Inside they have smooth pea-rock, and a few larger decorative rocks, statues and crystals, making it a tranquil space to relax.

What happens when it rains, you might ask. The floor of this atrium room (under the pea-rock) is poured concrete, and the concrete slopes towards the exterior wall of the home. Water then passes through a pair of “scupper” holes, about 4 inches squared (leading to a drain on the other side of the wall), and there is also a drain in the outside corner of the room that connects to an underground pipe leading to the side of the front driveway, where it is supposed to flow harmlessly into the street, towards a larger drain. It sounds like a mess, but for years, this system of holes and drains worked fine.

Image courtesy of wikimedia.org
You can almost guess what’s coming next, can’t you? We had some particularly heavy rains recently, and the drain system did not work fast enough. Rain water falling into the atrium could not escape faster than it was falling, and the atrium room soon filled with enough water that it entered the adjoining rooms of the home on all three sides. Water went everywhere.

The owners quickly called their insurance company, who told them to call a water extraction company and get the home dried out. Shortly after that, an “independent” adjuster working for a firm owned by the insurance company itself, came out to the property, spent 20 minutes taking a recorded “interview” of the homeowner, and another 10 minutes looking around and taking photos.

Now you may really be able to guess what happened next. The homeowner got a letter from the insurance company saying the loss was being denied. The letter noted that according to their “investigation” (if it can be called that), “the atrium was inundated with rising flood water, which entered your home causing water damage to your dwelling and personal property.” The letter kindly suggested they report the “Flood” claim directly to their flood insurance carrier. If they would have asked whether there was flood insurance (and they probably did), they would have known there was no flood policy in effect. They then included the section of the policy titled, “EXCLUSIONS” which says they don’t cover for “water damage, meaning: flood, surface water, waves,…” and also included exclusionary language which was actually removed from the policy by an endorsement the owners purchased (this would lead most people to believe certain events were not covered, when they actually are covered).  So the insurance company adjuster spent 30 minutes “investigating”, and just as quickly sent a letter denying the claim.

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On the other hand, I spent 2 hours at the property, in the home, the atrium, the neighbor’s property, in the front yard, the street in front of the home, and down the street looking at the drainage situation, and I determined this is not a “flood” loss, nor is it “surface water”. You see, real flooding occurs when rain accumulates as a result of “overflow of inland or tidal waters; unusual and rapid accumulation or runoff of surface waters from any source; or mudflow. I think we can safely eliminate mudflow and overflow of inland or tidal waters, which leaves us with the surface water exclusion attempt.

I would (and I will) argue that the water that fell in the atrium in this case is not surface water, it is simply rain water. Surface water is most simply defined as ”water on the surface of the ground”. For the purposes of insurance claims, courts have ruled differently, but generally define surface water as “water which is derived from falling rain, and is diffused over the surface of the ground, while it remains in such a diffused state, and which follows no defined course or channel, which does not gather into or form a natural body of water, and which is lost by evaporation, percolation, or natural drainage.” A bit more complex, but the way I see it, the rain never touched the “ground”, it was not allowed to “diffuse”, and it was forced to follow a course defined by the walls of the atrium.

Image courtesy of commons.wikipedia.org
If this occurred on the enclosed balcony of a 10th floor condo (and I have handled similar claims in th floor condo balcony. The water from the neighbor’s yard did not enter this atrium. Instead, at some point, the water in the atrium simply could not escape to the neighbor’s yard fast enough. Also, the drains were so full of water they were not allowing water to escape fast enough either, and this policy contained an endorsement that could provide limited coverage for such a loss (but the insurance company never mentioned this).
the past), it would not be considered surface water by most adjusters (although I would not put it past a few to try). To me, there is not much difference between this situation and the 10

According to the insurance company, this loss was caused by flooding, or perhaps surface water, and is not covered. In my opinion, the loss was not caused by flooding or surface water, and should be fully covered (the damages could ultimately exceed $20,000). They spent 30 minutes “investigating” the claim, found what they say are 2 reasons why it should not be paid, and apparently could not find, or did not look for, any way to make a payment. On the other hand, I spent 2 hours on just my first inspection, and found their conclusions to be inaccurate and reached in haste. Time will tell, as they say, but I’m betting we’ll be successful in recovering an appropriate payment for our insureds.

In this article I used a real case to highlight the difference between an adjuster that simply goes through the motions of handling a claim with minimal effort or thought (and possibly with an objective of not finding coverage), versus an adjuster who aggressively seeks a way to find the maximum coverage, even when initial evidence suggests no coverage exists.

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.   


  1. So its come to this. Insurances companies need to get grip and stop trying to rip people off.

  2. Thanks for the information. When it comes to insurance most of us don't know what we don't know. Thanks for being an advocate for us.

  3. Where's the friendly, neighborhood insurance agent they show on TV?

  4. "They spent 30 minutes “investigating” the claim, found what they say are 2 reasons why it should not be paid, and apparently could not find, or did not look for, any way to make a payment."
    This was interesting. It's nice to know there's a way to get a second opinion.

  5. Sounds like it would be a good idea to have someone like you on their side!

  6. Thanks for the info! Insurance can get so confusing and it's sad so many are out to rip people off rather than help them! I had no idea we had the option of a second opinion I always thought I had to use who they sent....

  7. Insurance loves taking money from you, but when you have a claim, they always try to find a way out.

  8. p.s, we were successful in showing the insurance company this claim was covered, and they paid over $20,000!

  9. p.s, we were successful in showing the insurance company this claim was covered, and they paid over $20,000!