The great American humorist and writer Ambrose Bierce (1842-circa 1914) published a famous work called “The Devil’s Dictionary,” in which he provided astute (if sardonic) definitions of many common terms in the English language. Bierce defined “insurance” for example, as “An ingenious modern game of chance in which the player is permitted to enjoy the comfortable conviction that he is beating the man who keeps the table.”

I’m thinking of starting “The Devil’s Dictionary: Killian Edition,” in which “federal court” will be defined as “A place where insurance claims go to die.”  That can be especially so when water is involved, in any way.

A recent decision, Villamil v. Sentinel Ins. Co. (which you can read here), involved water damage to a nail salon in Princeton.  Apparently (at least according to the Borough Engineer), a major rainstorm caused a floor drain in an exposed exterior stairwell to fail outside the salon, resulting in water backing up into the salon itself. Of course, since the outside stairwell was exposed to the elements, rain also apparently contributed to water in the stairwell.

The salon owner’s property insurance coverage generally excluded damage caused by flood, but provided coverage for “physical damage to Covered Property solely caused by water that backs up from a sewer or drain.”  (Emphasis mine.) The policy also stated:


We will not pay for water or other materials that back up from any sewer or drain when it is caused by any flood. This applies regardless of the proximity of the flood to Covered Property. Flood includes the accumulation of surface water, waves, tides, tidal waves, overflow of steams or other bodies of water, or their spray, all whether driven by wind or not that enters the sewer drain system.  (Emphasis mine.)

When the damage happened, the salon owner, Tere Villamil, called her carrier (Sentinel) to report a claim, and spoke to a claim representative on a recorded line. Insurance, unfortunately, is a word game, and most businesspeople have no experience in how it works. Instead of referring to the problem as “water damage,” Villamil stated: “We have had a flood in our lower level yesterday that was quite awful.” Upon hearing the magic word “flood,” the claim representative began asking pointed questions to continue to “cement” the loss into the exclusions, such as: “And you said it was a flooding, correct?”

Naturally, the carrier denied coverage, and just as naturally, the trial court parsed the language of the policy to find support for the denial.

First, the Court held that “to acquire coverage, Plaintiffs must show that the salon sustained damages ‘solely’ from water that backed up from a sewer or drain…Stated differently, Plaintiffs bear the initial burden of demonstrating that floodwater did not, in any way, contribute to the damages which the building sustained.” (Emphasis mine.) The Court held that the policyholder had not sustained its burden, in part because “the water which accumulated at the bottom of the stairwell, at a minimum, included surface water which subsequently entered the premises through the salon’s glass door.”

I love the use of the words “acquire coverage” in the opinion, because they show the mindset of the Trial Court in analyzing the problem:  Insurance (as Bierce said) is a game of chance, and, in order to get what you paid for, you have to play your cards correctly.  Otherwise, the house wins.

Of course, the policy does not “in any way” use the words “in any way.” The more appropriate inquiry is, was any of the damage caused only by the water that backed up from a sewer or drain? (The Borough Engineer said yes, because rainwater had overwhelmed the capacity of the drain.) The Court’s interpretation of the language instead seems to create a difficult standard that, if one drop of “flood” water contributed to any of the damage “in any way,” there’s no coverage.  That can’t be what a policyholder would reasonably expect.

Second, the policy stated that a “flood” included “surface water.” In constructing its finding of no coverage, the Court helpfully inserted a definition that does not appear in the policy, concluding that “surface water” means “waters on the surface of the ground, usually created by rain or snow, which are of a casual or vagrant character, following no definite course and having no substantial or permanent existence.” The Court held that since “flood,” as defined by the policy, includes “the accumulation of surface water,” and since rain landed on the exposed steps and created “surface water,” there was no coverage.

Of course, Webster’s defines “surface water” to mean “natural water that has not penetrated much below the surface of the ground.”  Here, the water did penetrate beneath the surface of the ground, because it entered subsurface drainage pipes and then backed up when the drain failed.

Finally, the Court relied upon an anti-concurrent causation clause, reading:  “We will not pay for loss or damage caused directly or indirectly by [flood]. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any other sequence to the loss.” According to the Court, this clause excludes “all coverage for a loss occasioned by a flood, even when a flood acts concurrently or sequentially with a covered peril, such as sewer backup.”

Of course, this means that sewer backup would never be covered if it causes a “flood,” which then causes damage.  So, apparently, the policy only covers sewer backups that somehow do not involve water.  I suppose if your drain starts spewing cannellini beans, though, you’re good to go.

So where does this leave us?  The obvious point is, don’t rely on your general property coverage to protect you from water loss.  Given the impenetrable thicket of exclusionary language (with pro-carrier definitions to be inserted by the Court!), it probably won’t.  Buy flood coverage, and ask about excess flood coverage if the risk is severe enough.  Also, despite what cute little green lizards with British accents or “Mr. Mayhem” would have you believe on TV, insurance claims people are not your friend.  If a loss is substantial, it would be better to allow your insurance consultant or lawyer handle the claim, so you don’t inadvertently give the carrier the words to support a claim denial.  If the unfortunate policyholder here had not used the word “flood,” but instead simply said that water had backed up from a drain and gotten into the salon, things might’ve turned out differently.  Maybe.