First-Party Property / Water Overflow Damage
193 Hooper Street Condo v. Wesco Insurance Co., No. 657266/2017, 2020 WL 228355 (N.Y.Sup. Ct. Jan 10, 2020)
Pursuant to a first-party property policy, Wesco Insurance Company denied a claim for water damage to a commercial structure. Specifically, the third floor unit owner’s toilet malfunctioned while the unit owner was out of town, causing water to overflow to the lower floors. The denial was based on an exclusion for loss or damage caused “directly or indirectly by … [w]ater that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment.”
On Wesco’s motion for summary judgment, the court held that the damage was specifically excluded under the policy wording: “… the malfunctioning toilet constitutes at least ‘related equipment’ within the meaning of said policy exclusion.” The decision is significant because these types of claims are common, and insureds routinely argue that the exclusion does not apply because sinks and toilets do not fall within the definition of a “drain.” There is now precedent making it clear that such fixtures, which are designed to drain water, at the very least constitute “related equipment” that bring them within the policy exclusion.
Additionally, the decision highlights the importance of the specific policy language at issue. The majority of cases involve exclusions for water that backs up from a sewer or drain. Here, the exclusion is broader in that it applies to damage caused by water that backs up from a “sewer, drain, sump, sump pump or related equipment.” The “related equipment” language was recently added to the standard policy exclusion to confirm that first-party insurance does not cover damage for water that overflows from sinks and toilets.