The levees did not hold up during Hurricane Katrina, but standardized property insurance flood exclusions did.
Several court challenges were initiated to amend, in essence, contracts that had been filed with and approved by insurance departments in the states affected by the storm. But federal and state courts ultimately upheld provisions stating the clear intent of private insurers not to cover certain catastrophic losses.
Nonetheless, insurers are refining their water exclusions to explicitly address certain points raised in litigation. As part of this, AAIS has filed new provisions addressing water damage under several programs that provide property coverage.
New water damage provisions are included in updated versions of the AAIS Homeowners base forms. The new forms are compatible for use with Homeowners endorsements filed starting in 2006 and currently approved in most states.
Among other things, the standard water damage exclusion in the Homeowners base forms is revised to emphasize that:
- The exclusion applies regardless of the cause of an excluded event;
- There is no coverage for loss caused by matter carried by excluded water (e.g., flood-borne debris);
- There is no coverage for water that overflows, escapes, or is discharged from a dam, levee, dike, etc, designed to retain or control water; and
- Provisions excluding loss due to tidal events now include, but are not limited to, tidal waves, tsunamis, tidal surges, storm surges, and storm tides.
Also, where applicable, provisions addressing loss caused by accidental discharge are refined to specify types of water loss that are covered or not covered.
AAIS has also filed new mandatory water exclusion endorsements under other programs that provide property coverage.
These endorsements replace existing water exclusions with essentially equivalent provisions as the new Homeowners forms.
In addition, however the new commercial and farm lines water exclusions add language, already present in Homeowners forms, that excludes loss from water that backs up through, overflows from,
or is otherwise discharged from sump pumps and related equipment, or any other type of system
that removes subsurface water from the foundation area.
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Joseph Harrington
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AAIS revises water exclusions