Homeowners policy excludes claim for excessive rainfall damage (US)

Patrick Bracher, Norton Rose Fulbright

In May 2023 a Michigan US court held that an exclusion in a homeowners policy covering physical loss caused by water or waterborne material which backed through sewers or drains but excluded cover for “the inability of the sewer or drain to handle the amount of rainwater, surface water or groundwater trying to enter the sewer or drain”. When 3.7 inches of rain fell on the property, the drain and pumping system failed, water accumulated and eventually entered the basement.

The court held on the facts that the water that entered the basement from the back patio was surface water. Therefore, the policy unambiguously excluded coverage for the damage that the water caused. Surface waters are commonly understood to be 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 rejected the claimant’s argument that the water that damaged the home and personal property had lost its characteristics of surface water by the time the loss occurred. The court held that the water was surface water created by rain that was on the ground and was within the exclusion.

Capital Mortgage Solutions, LLC v The Cincinnati Insurance Company United States District Court Eastern District of Michigan Southern Division, case number 21-cv-10873

First published by: Financial Institutions Legal Snapshot