Insurance and Storm Damage – Who Pays?
by Jennifer L. Moore
O n Thursday, August 23, 2007, severe thunderstorms over-whelmed northern Illinois and other parts of the Midwest, leaving in their wake floods, debris, and enduring power outages. DuPage County was one of several counties that suffered widespread damage and that Governor Rod Blagojevich designated a disaster area. Hitting close to home, even the 18th Judicial Circuit Court in Wheaton, Illinois was forced to close its doors on August 24, 2007 due to a power outage.
The recent storms have likely left many homeowners wondering whether their homeowner’s policies will cover any amount of the damage incurred as a result of flooding. As a general rule, un-fortunately for the homeowner, the answer is no. The following is a flood exclusion provision from a well-known insurer’s homeowner’s policy:
SECTION I – LOSSES
NOT INSURED
* * *
2. We do not insure under any coverage for any loss which would not have occurred in the absence of one or more of the following excluded events. We do not insure for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:
* * *
a. Water damage, meaning:
(1) flood, surface water, waves, tidal water, tsunami, seiche, overflow of a body of water, or spray from any of these, all whether driven by wind or not;
(2) water or sewage from outside the residence pre-mises plumbing system that enters through sewers or drains, or water which enters into and overflows from within a sump pump, sump pump well or any other system designed to remove subsurface water which is drained from the foundation area; or
(3) water below the surface of the ground, including water which exerts pressure on, or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure.
Because the term "flood" is often not defined in a policy, homeowners assert that the term is ambiguous, as it fails to specify whether the term applies to naturally occurring floods, man-made floods, or both. However, the courts consistently look to the term’s plain, ordinary, and generally prevailing meaning and find no ambiguity. 1
In the aftermath of Hurricane Katrina, homeowners once again raised the issue of whether the flood exclusion should be inapplicable to water damage caused by wind-induced storm surge, without success. 2 In homeowner’s policies, wind-induced damage is covered, but damage due to flooding is excluded. Thus, if the vinyl siding on a house is damaged from extreme winds, the cost of repairing the siding should generally be covered under the homeowner’s policy. Homeowners have con-tended that wind-induced storm surge is not a "flood" within the meaning of the flood exclusion, as the water did not escape from the sewers or a nearby watercourse, but fell from the sky during a storm. In other words, the massive amounts of flood water (not covered) were a direct result of the storm’s winds (covered). However, courts have consistently held that water damage is excluded, regardless of whether the water was driven by wind.3
Illinois courts also find the flood exclusion to be in-applicable to water damage caused by storms. In Whitt v. State Farm & Casualty Co., supra, State Farm provided homeowner’s insurance to the plaintiffs, the Whitts, on July 17, 1996, when a massive rainstorm caused water to enter the Whitts’ home in Aurora, Illinois through the basement windows, a hole in the furnace room wall, under the doors to the house and garage, and through the roof and skylight. 4 The Whitts evacuated their home on boats. State Farm paid the Whitts $1,432.86 for water damage resulting from rain entering the home through the roof and sky-light, but denied coverage for the damage caused by water entering the home via other means.5
The Whitts filed a complaint against State Farm and their agent, and State Farm filed a counterclaim seeking a declara-tory judgment that the Whitts’ home-owner’s policy did not provide cover-age for the water damage resulting from flooding. 6 Cross-motions for summary judgment were filed. The Second District Appellate Court of Illinois found that, although Mr. Whitt testified he received a State Farm brochure that depicted drawings of water damage and implicitly promised coverage for same, the brochure was not part of the insurance contract and, therefore, did not dictate coverage.7 Furthermore, the court found that the trial court erred in finding the term "flood" to be ambiguous and granting the Whitts’ motion for summary judgment.8 The policy clearly and unambiguously ex-cluded coverage for the water damage claimed by the Whitts.9
Regarding storm debris, homeowner’s policies will typically pay up to appro-ximately $500.00 to cover reasonable expenses incurred in the removal of tree debris if the tree damaged a structure on the property by coming in physical contact with the structure. If that tree was once rooted in the neighbor’s yard before falling into the homeowner’s yard, the neigh-bor’s homeowner’s policy more than likely will cover the cost of removing the tree and repair to any damage to structures. This is commonly provided for in home-owner’s policies under the "Liability Cover-ages" section, and is also often referred to as "good neighbor" liability coverage.
Additionally, home-owner’s policies generally do not cover articles that are specifically insured in another policy. For example, if a storm causes damage to a vehicle while it is sitting in the driveway of a home, the homeowner’s policy will not cover the damage because the vehicle is insured under a separate vehicle policy.
Along with power outages comes the problem of food spoliation and mold. Homeowner’s policies will typically cover the contents of deep freeze or refrigerated units on the residence premises for loss due to power failure or mechanical failure. As always, it is the homeowner’s duty to mitigate the damages and give his or her best efforts to move and/or recover the items before they are damaged. Mold, fungus, and dry or wet rot, however, are excluded from most homeowner’s policies, whether they are the result of a power outage’s lack of light and air-conditioning or the result of flooding.
If there is potential coverage for wind damage, spoliation, or water damage resulting from a storm, a homeowner is obligated to give immediate notice of the claim to the insurer or the insurer’s agent, protect the property from further damage or loss, and inventory the damaged items. Furthermore, the homeowner has a duty to cooperate with the insurer as the insurer evaluates the claim to determine whether there is coverage. This may include presenting the damaged property for inspection and providing records of ownership or value. If a homeowner breaches these duties, the insurer may be relieved from paying on the claim.
Fortunately, for homeowners who are consistently threatened by the possibility of floods, there are precautions that may be taken. Most homeowner’s policy insurers offer a back-up of sewer or drain endorsement, which, for an additional premium, covers direct physical loss caused by water or sewage from outside of the home plumb-ing system that enters through sewers or drains, or water which enters into and overflows from within a sump pump. The endorse-ment may cover non-personal property, or that which is part of the residence structure, and/or personal property, individual belong-ings detached from the structure. Alternatively, many insurers write flood insurance policies that are written through the National Flood Insurance Program (NFIP) and administered by the Federal Emergency Management Agency (FEMA).
Although it takes tremen-dously damaging storms and flooding to bring these issues to the forefront, it is imperative that homeowners have a copy of their policies, have a basic understanding of what they do and do not cover, obtain additional coverage if appropriate, and know when to make a claim, and for what the claim should be made. n
1 Wallis v. Country Mut. Ins. Co., 309 Ill.App.3d 566, 723 N.E.2d 376, 383 (2nd Dist. 2000) (finding that the plain meaning of flood is "water that escapes from a watercourse in large volumes and flows over adjoining property in no regular channel ending up in an area where it would not normally be ex-pected"); Whitt v. State Farm and Casualty Co., 315 Ill.App.3d 658, 734 N.E.2d 911, 914 (2nd Dist. 2000) (finding "flood" to be an "inundation of water over land not usually covered by it").
2 In re Katrina Canal Breaches Litigation, 2007 WL 2200004 (5th Cir. Aug. 2, 2007) (flood exclusions in homeowner’s, renter’s, and commercial property policies unambiguously precluded coverage for losses caused by flooding due to breached levees.)
3 Id.; see also, Buente v. Allstate Prop. & Cas. Ins. Co., 2006 WL 980784 (S.D. Miss. April 12, 2006.)
4 Whitt, 315 Ill.App.3d at 659.
5 Id.
6 Id. at 660.
7 Id. at 660-61.
8 Id. at 622.
9 Id. at 624.
Jennifer L. Moore , B.A. 2001, magna cum laude, University of Kentucky and J.D. 2006 Tulane Uni-versity Law School, admitted to the Illinois Bar in 2006 and the U.S. District Court, Northern District of Illinois in 2007. Jennifer is an associate with the firm who practices in the area of insurance coverage. Jennifer is a member of the Illinois State Bar Association, the Women's Bar Association of Illinois, and the DuPage County Bar Association.
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