A sewage backup caused by a flood may be covered by an all-risk homeowner’s policy

The insureds’ application for coverage under their policy for damage to their home during a flood was allowed. The insurer did not meet its onus of establishing that the claim fell within the exclusionary language of damage that occurred “before, during or after flood damage to the premises.” The insureds’ claims for bad faith and mental distress were dismissed.

Langton v. Personal Insurance Co., [2009] A.J. No. 837, July 29, 2009, Alberta Court of Queen’s Bench, B.E.C. Romaine J.

The insureds’ residence was located near Elbow River, Calgary, which flooded in June 2005. The insureds evacuated their residence at approximately 11:30 p.m. on June 18, 2005. At that time they were also advised that the city would be removing service from a nearby lift station, as it had become overwhelmed, and that, as a result, sewer would back up into their basement. When the insureds returned the next day, river water surrounded their house. They testified that the inside of their home was full of foul smelling water and refuse to a depth of about 10 inches.

The insureds had an “all risks” insurance policy that excluded water damage caused by sewer back-up. However, they had purchased an additional endorsement that covered such damage. The endorsement contained an exclusion for loss or damage that “occurs before, during or after flood damage to the premises.” The insurer denied coverage based on the exclusionary clause.

The insureds argued that all the damage to the interior of the house was due to sewer back-up and that the house was not otherwise damaged by the flood, therefore the exclusion should not apply. The insurer took the position that the sewer-water damage was not the only water damage to the interior of the house and that, even if it was, there was additional damage to the exterior of the premises caused by the flood.

The court accepted the insureds’ expert evidence, that the damage to the residence was caused by sewer back-up and that if any river water did enter the house in addition to the sewer back-up, it did not contribute in any material way to the damage already caused by the sewage back-up. Therefore, the court found that the insurer did not satisfy its onus of establishing that there was any damage caused by flooding to the interior or exterior of the dwelling and thus the damage caused by sewer-back-up did not occur “before, during or after flood damage to the premises.” Further, the court found that evidence such as silt covering the lawn, driveway and deck did not constitute “damage” within the ordinary meaning of the word.

The court agreed that the insurer’s investigation of the claim was perfunctory and inadequate. However, it found that the insureds did not suffer injuries that would be compensable even if the conduct of the insurer was in bad faith. Furthermore, the disappointment, frustration and anger that the insureds suffered was not sufficient to found a claim for damages for mental distress.

This case was digested by Natasha D. Morley and edited by David W. Pilley.

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