Water Damage of $2 million not under insurance cover
Imagine going to the insurance agent and being told: “This does not come under your insurance cover,” after disastrous damage to your home.
This is what unfolded on June 2011 to Mitra Kermani and Hassan Hojjatian when their home basement bath, garage ceiling and foundation sustained major flood damage.
The loss to Toronto House was later estimated by an independent investigator at over $2 million.
And when the demand was rejected by the insurance company, Axa Insurance & Intact Insurance, Kermani and Hojjatian sued for their damages.
In his judgement last year, Judge Suhail Akhtar wrote, “Water damage to a homeowner’s estate is not an unusual event, in the world today,” adding, “in certain situations, the damage may be devastating and cause the property to become inhabitable.”
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In this situation, that’s what occurred.
The position of the homeowners has been that the devastation was due to a strong rainstorm, and that sudden and unexpected water leakage from the plumbing was caused from water coming in from both outside of the house and through the windows.
Added to the physical degradation, the insurers claimed that perhaps the damage occurred by water filtering through the foundation walls of the building, and that the insurance scheme did not cover damage from the sources involved.
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In order to ascertain the cause of the devastation and whether it was protected by the insurance plan, multiple forensic findings were submitted in court. Both the experts agreed that the damage was due to land grading around the building and as such the flood in the home was caused by the water seepage through the basement.
The policy interpretation of ‘surface water’ and ‘ground water’ Justice Akhtar noticed, matched the groundwater in the room and it was not protected through the policy.Indeed, the loss incurred by the water seepage of this kind was expressly excluded under the insurance plan.
Kermani and Hojjatian took a case at the appeal court, dissatisfied about the ruling of the lower court. The decision of the lower court was upheld by a tripartite tribunal in November.
Dayle Semple, my FCA insurance broker clarified when I said I was shocked by this unlucky ruling that “an insurance plan is not really a maintenance contract. An insurance claim is not intended to fix water damage inflicted by unaddressed or neglected maintenance problems.
“All insurance plans are subject to limitations as to which form of water leaks they would respond.” He said. Cover is usually for rapid, unintended escape of water and not for infiltration. That is why the simple insurance plans pay extra for the back-up of the wastewater, “Semple explained.
“Spillage is a standard omission from the insurance scheme and is generally caused by repair and treatment deficiencies.”
Customers are warned by the Canada Insurance Bureau that all home insurance cover sudden and unintentionally bursting of pipes, while damage might not have been covered when freezing triggers the escape of water. Some insurers in Canada began to sell policyholders overland flood risk coverage, but this was just starting to take effect.
The lessons from this:
- Know what your policy covers
- Purchase the coverage of sewage backup.
- Ask your insurance provider if the overland flood risk coverage is eligible.
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