Accidental Water Damage Claim
Accidental Water Damage Claim
Insurers sometimes deny water damage claims, even some of those filed as “Sudden and Accidental” water damage. What happens then when an insured makes a claim alleging damage caused by an unknown water leak source? What happens if the unknown source of the water leak becomes apparent when a pipe suddenly and accidentally bursts? Are you, the insured, in for a fight with the insurer regarding a “Sudden and Accidental” leak?
Issues regarding sudden and accidental water damage claims required intervention by the courts on several previous occasions. While an insured likely concludes that a water damage claim is clearly due to a sudden and accidental leak, that is not always the case.
What is a “Sudden and accidental” leak?
The California Department of Insurance points out that homeowners policies do not cover flood damage. While issues of sudden and accidental damage caused by flooding seems pretty cut and dry, other cases are not so clear, especially when an insurer denies a claim for “Sudden and accidental” water damage.
The courts intervened in several cases, one of the most prominent being Brown v. Mid-Century Ins. Co. (2013)215 Cal.App.4th 841. In the Brown case, insured parties Leroy and Terrie Brown observed condensation on windows in their home, as well as on drywall near the windows on or about February 18, 2009. Approximately a week later, Leroy and Terrie Brown noticed mold forming around windows and on walls.
Approximately one month after the Browns first noticed the condensation, Robert Brown, brother of Leroy Brown, unsuccessfully attempted to find the source of the leak. Leroy Brown then shut off water to the house and reported the leak to Mid-Century Insurance Company, on or about March 18, 2009.
Brown then hired plumber, Michael Lewis to find the leak and make repairs. Mr. Lewis searched for and found the leak. Both Lewis and Leroy Brown observed water coming from an open hole in a pipe. The water only leaked out as a drip because Brown turned the water down very low.
Mid-Century claim representative Seann Clifford inspected the Brown home, making notes and taking photographs of visible moisture and mold on each level of the Brown’s three-story home. Rosie Acevedo, another Mid-Century Insurance Agency claims representative, also inspected the home. Leroy Brown advised her that he and his wife first noticed the condensation and mold approximately a month prior.
Mid-Century subsequently quickly denied the claim, citing that the leak was not “Sudden and Accidental,” but from wear and tear and therefore not covered under the Brown’s homeowners policy.
Leroy and Terrie Brown then sued Mid-Century Insurance Company. Brown did not challenge whether the leak was actually sudden and accidental, rather, the Brown expert stated it would take a ‘nano second’ for the pipe to break.
The trial court ruled in favor of the insurer, affirming that the leak was not the result of a “Sudden and accidental leak.” The Appeals Court affirmed the lower court ruling.
In cases since Brown, insurers sometimes rely on the decision of Brown to deny claims regarding the presence of mold in a home. Insurers also use the failure of an insured to specifically claim a leak “Sudden and Accidental” as a deciding factor to avoid covering claims.
Do insurers have duties to investigate water damage claims?
Insurers have a duty to promptly investigate and process claims that arise under insurance policies, as provided under Insurance Code 790.3 (h) (3). Insurers must begin their investigation immediately, or no later than 15 calendar days after receiving notice of a claim.
Insurers must also look for evidence that supports the claim, consider all information and evidence reasonably available to the insurer to avoid acting unreasonably.
Insurance Code 790.3 (h) prohibits failure to acknowledge and promptly act upon claims, requires that insurers act within a reasonable period of time to either affirm coverage or deny the coverage of claims after receiving proof of losses from an insured. Insurers also must settle claims promptly, once liability is apparent.
The court in Mariscal v. Old Republic Life Insurance Co. (1996) 42 Cal.App.4th 1617, 1624 [50 Cal.Rptr.2d 224] addressed the duty of an insurer to investigate a claim, along with actions or inactions that potentially constitute breach of the insured’s policy. After her husband died in an automobile accident, Mariscal’s wife filed a claim to receive her deceased husband’s accidental death benefits.
The insurer failed to contact witnesses or doctors who treated Mariscal before denying the accidental death benefits, attributing the insured’s death to illness. The beneficiary filed suit, after which the jury held that the insurer failed to pay policy benefits. On appeal, the court held that an insurance company is prohibited from ignoring evidence that supports coverage.
The duties under Mariscal equally applies to water damage claims, where there is not always a clear answer regarding whether a water leak falls under the policy requirement of “Sudden and accidental.”
Potential conflicts after water damage occurs
When you have water damage caused by a sudden and accidental leak, your likely reaction is to call a plumber to stop the leak and make repairs. Several potential issues arise, including the fact that your policy potentially does not cover repairs, including opening up walls in your home to find the source of the leak. Another issue concerns the desire and need to immediately repair the leak, which possibly destroys evidence.
The fact that insurers may attempt to challenge accidental water damage claims and attempt to avoid their responsibility to investigate and provide prompt, reasonable assistance demonstrates the advantage for an insured to obtain legal representation when seeking benefits for an accidental water damage claim.
Habitability after water damage and mold
Water damage frequently occurs before you know the source, which gives time for mold to start forming. What will you do when you have water damage and mold?
The California Department of Public Health explains that presence of water damage and mold is unhealthy and represents an increased risk of respiratory disease to individuals allergic to mold as well as to non-allergic people. Habitability after water damage and mold becomes important when the insurer inquires whether any part of the home is uninhabitable.
The insurer has a duty to inform the insured of benefits available under Additional Living Expenses (ALE). ALE benefits, once established, require the insurer to provide accommodations comparable to accommodations previously enjoyed by the insured. ALE issues do often arise between an insurer and insured.
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