Has your Homeowner's Policy Sprung a Leak?

by Mark Goldwich

At our weekly team meeting this morning, we talked about claims we are currently handling, and how various insurance companies are using everything at their disposal to minimize claim payments, or avoid paying altogether – and what we can do about it. It’s one of the main reasons we meet each week. This week, it just so happened that a few of the claims involved water damage, and we talked about a few of the technicalities involved in these types of losses. 

In one case, the insurance company sent out an engineer to inspect the claim. That in and of itself was not so unusual, but my adjuster knew an engineer was not typically sent out for this particular type of water loss. So, when my adjuster met with the engineer (as we usually meet with anyone an insurance company sends out), he asked enough questions to learn exactly why the insurance company picked him (a certified mold specialist) to inspect this claim. The engineer explained there are known types of molds that only grow after a certain number of days. Right away, this told my adjuster more than it would ever tell even the most savvy property owner. The insurance company was hoping the engineer could identify a species of mold that could only grow after an extended period of time. Why? We are convinced it is so they could try to deny the claim under a technical policy exclusion that precludes coverage (theoretically) for “repeated leakage or seepage of water from a plumbing system” – most property policies have an exclusion that reads something along those lines.

Image courtesy of commons.wikipedia.org

Some policies go on to say there is no coverage if the leak goes on for at least 14 days, some exclude good neighbors on your street, odds are at least 1 of them are insured by this huge national company with a catchy jingle and endless ads on TV) doesn’t always take full advantage of this exclusion. After all, if they did, they could deny every single plumbing leak claim that is ever presented, since all leaks and seepages, by definition, occur over “a period of time”. You have a sudden and accidental pipe burst, and water goes everywhere, causing a lot of damage to your home and belongings. That should be covered, right? Not so fast according to the wording of this particular insurance company policy. Even if you were home, and awake, and standing right where the pipe burst, how long would it take you to get to the main water shut-off valve and turn the water off? I guarantee the answer is “a period of time”. Now, I will say this particular insurance company (I won’t say who it is, but if you have at least 5 good neighbors on your street, odds are at least 1 of them are insured by this huge national company with a catchy jingle and endless ads on TV) doesn’t always take full advantage of this exclusion – after all, if they did, they could deny every single plumbing leak claim that is ever presented, since all leaks and seepages, by definition, occur over “a period of time”.

Instead, they simply pick and choose which they want to cover, and which they don’t. To be honest, I don’t know how they have been able to get away with this for so long. A good public relations team, and good lobbyists, are probably a good start. These leaks, if they result in rot or mold, and one just says the loss is not covered if the leak “occurs over a period of time”. Think about that for a minute (or any period of time). You have a sudden and accidental pipe burst, and water goes everywhere, causing a lot of damage to your home and belongings. That should be covered, right? Not so fast according to the wording of this particular insurance policy. Even if you were home, and awake, and standing right where the pipe burst, how long would it take you to get to the main water shut-off valve and turn the water off? I guarantee the answer is “a period of time”. Now, I will say this particular insurance company (I won’t say who it is, but if you have at least 5

I will say this though – regardless of the language they use, and the resources they employ to have the scenario appear to fit the exclusionary policy language, we are usually able to get these claims paid. How? Because we use technicalities too. When the carrier says the leak went on for more than 14 days, we simply address the damages that occurred during the first 13 days (and we usually find it is not much different than the damages that took place from day 14 on. If they find mold that only grows after an extended period of time, we can find other mold present that only takes 72 hours to grow. If they claim this leak resulted in rot, we may be able to establish that the rot they are referring to resulted from a completely different leak several years ago, and is therefore unrelated.

Image courtesy of en.wikimedia.org

Not all leaks come from pipes. Another common leak source we deal with frequently comes from roofs. Roofs can leak for a number of reasons, some are covered, and some are not. Generally, if the leak occurred due to storm damage, falling object, vandalism, or some other sudden and accidental cause, the roof repair is usually covered; but if the leak was due to a lack of maintenance, faulty construction or design, the roof repair is usually excluded. What about the damage done inside the home as a result of the roof leak? This again may depend on the specific policy language. Some policies cover this interior “resulting damage” regardless of whether or not the roof itself is covered, and some policies specifically say a covered event must create an opening in the roof (or wall) before they will pay for the interior water damages. When pressed on what constitutes an “opening” that the water enters through, adjusters vary. Some will pay if roof shingles are damaged in any way, and others insist the word “opening” means, “if you are standing inside the home and can look up and see the sky.” We eat those guys for lunch!

And I recently wrote about two other water claims that were vehemently denied. In one case a covered source of rainwater was improperly denied as being “flood” or “surface water”, when in fact it was neither. And in another case, an extensive water loss was strongly denied because the carrier erroneously believed the loss occurred after the property was left vacant for more than 30 days, when it was not. In both cases, a more technical investigation of facts and policies led to payments exceeding $50,000.

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As you can imagine, in a voluminous insurance policy, rife with legalese containing coverages, conditions, exclusions, exceptions, and exceptions to exclusions, there is plenty of room for technicalities, and for debate over said technicalities. This is all the more reason to have an insurance claim expert on your side, just as the insurance companies have experts on their side.

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.