Exclusion clauses must contemplate the exact cause of property damage. That was the message delivered by the Saskatchewan Provincial Court after a homeowner commenced an action against the insurer for failure to provide coverage for water damage. The damage occurred after the homeowner removed an exterior pipe that distributed run-off water away from the home. The insurer argued that the loss was excluded from coverage. The Court held that none of the standard form exclusion clauses contained in the insurance policy contemplated the exact peril that caused the loss. Judgment was granted against the insurer.
Wagner v. Saskatchewan Government Insurance,  S.J. No. 10, January 5, 2011, Saskatchewan Provincial Court (Civil Division), B.M. Singer Prov. Ct. J.
The insureds had a comprehensive homeowners policy with the Defendant insurer. The insureds' home had a sump pump that removed naturally occurring run-off water from around the home. The sump pump had an exterior extension pipe that distributed water away from the home.
One of the insureds was worried that the extension pipe would freeze and therefore he habitually removed the extension pipe during periods of freezing and replaced it during periods of melt. One morning, the insured forgot to replace the extension pipe and the water exiting the sump pump re-entered the home through a basement window, causing water damage.
The insurer argued that the loss was excluded under several exclusions in the policy and that the loss or damage was not due to a sudden, unexpected event. Three other exclusions were relied upon:
a) [We do not cover loss or damage] … caused by flood, surface water, waves, overflow of streams or other bodies of water, spray, ice or waterborne objects whether any of the former are driven by wind or not.…
b) [We do not cover loss or damage] … caused by water below ground level including that which exerts pressure on or flows, seeps or leaks through any opening in a sidewalk, driveway, foundation, wall or floor….
h) [We do not cover loss or damage] … caused by continuous or repeated seepage, or leakage of water or steam from plumbing, heating, fire sprinkler, or air conditioning system, household appliance, a swimming pool or its attached equipment, or a public watermain ….
The underwriter called by the insurer testified at trial that the exclusions were meant to exclude damage caused by inevitable occurrences that only require simple preventative measures or ordinary maintenance. However, the underwriter testified that there would be coverage if a toilet bowl suddenly cracked or a person inadvertently overfilled his or her bath tub.
The Court found that the policy was a comprehensive policy and that if a particular loss was not excluded it was included. The policy stated “if the peril that causes loss or damage is not one of the perils shown below, then you are covered." The Court held that none of the exclusions applied in the circumstances. The water damage was unexpected and sudden. It was not caused by a flood as contemplated in paragraph a), nor was it caused by water below ground as contemplated in paragraph b). Lastly, the water damage was not caused by continuous or repeated seepage or leakage of water.
Thus, the Court granted judgment against the insurer for the full amount of the claim less the deductible.
This case was digested by Aaron D. Atkinson and edited by David W. Pilley of Harper Grey LLP. If you would like to discuss this case further, please feel free to contact them directly at firstname.lastname@example.org or email@example.com or review their biographies at http://www.harpergrey.com