Back It Up

by Mark Goldwich

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.