Kansas – Water Damage – Natural Source

INTRODUCTION

In Kansas, it is likely the exclusions for water below the surface and surface water are not limited to losses from natural sources, unless the policy states otherwise.

Under language like that found in the 4/91 edition of the ISO HO-3 form, most courts from other jurisdictions have limited the exclusions for flood, surface water, etc., and water below the surface of the ground, to water from natural sources. The natural source limitation should not apply to the sewer backup provision, since the wording of this part of the water damage exclusion, unlike the “flood, surface water” and “water under the ground surface” provisions, clearly contemplates exclusion of water damage caused by water flowing out of a man-made drainage system.

Note that in the 2000 edition of the ISO HO 00 03 form, it states that the water damage exclusion applies whether caused by or resulting from “human or animal forces.” This was changed beginning in ISO’s 2011 edition of the the HO 00 03 form to, “regardless of whether” the loss is caused by “an act of nature or is otherwise caused.” Based on these additions, it appears that the natural source rule should no longer be relevant. However, note also that ISO has specified that the exclusions for surface water and water below the surface do not apply to loss by water covered under the following three provisions:

(a) the accidental discharge peril;

(b) the exception to the mold exclusion; or

(c) the tear out exception to the wear and tear exclusions.

Therefore, although the newer water damage language,  beginning in the HO-3 2000 form, makes the natural source rule irrelevant in many cases, the water damage exclusions will not apply to the loss by water that is covered under these three provisions.

For a general discussion of the Natural Source Limitation as well as relevant language contained in many policies, see Water Damage Natural Source Introduction.

DISCUSSION

In Kansas, the exclusion for water below the surface of the ground was not limited to water from natural sources.

Leaky Main (not limited by the natural source rule) — Water below the surface exclusion applied to water escaping from a leaking water main beneath the foundation that saturated the soil and caused foundation movement, despite the presence of the accidental discharge peril in a named-peril policy. Followed Park v. Hanover Ins. Co., 443 S.W.2d 940 (Tex. App. 1969), case from Texas, which has since been abrogated by Nat’l Sur. Corp. v. Adrian Assocs., 650 S.W.2d 67 (Tex. 1983). Krug v. Millers’ Mut. Ins. Ass’n of Illinois, 495 P.2d 949 (Kan. 1972).

Ruptured Underground Pipe (not limited by natural source rule) — Corporate Lakes Property, LLC v. AmGuard Ins. Co., No. CV 22-2161-KHV, 2023 WL 34438 (D. Kan. 01/04/2023) (U.S. District Court for the District of Kansas, applying KS law) [reviewed at PLRB, Prop. Ins. L. Rev. 11552 (2023)]. Based on the plain and ordinary meaning of “surface water” a surface water exclusion applied to water from a ruptured underground pipe that seeped to ground surface, into the building’s window wells, and through the windows. In addition, the court noted the language in the exclusion explicitly stated that the water is excluded regardless of whether it was caused “by an act of nature or is otherwise caused.”

Broken Pipe Under Building (not limited by natural source rule) — Auto-Owners Ins. Co. v. Excelsior Westbrook III LLC, No. 2:22-cv-02360-HLT, 2024 U.S. Dist. LEXIS 133320 (D. Kan. July 29, 2024). The water exclusion applied because the undisputed facts showed the damage was caused by water under the ground surface seeping into the building after a pipe located under the building broke. The “caused by an act of nature or otherwise caused” language unambiguously applied to water from any source, not just natural sources. The failure to specifically mention water from broken pipes did not render the exclusion ambiguous. Even if the specified loss exception would provide coverage, it was irrelevant because the water exclusion was subject to the anti-concurrent causation preface.

This discussion is based on the most commonly used forms and is updated to reflect recent changes. However, the discussion cannot discuss all variations in policy forms. The standard forms and form language change based upon introduction of new editions. Also, many companies use manuscript forms that differ from standard forms. Furthermore, certain states have mandatory endorsements or language that must be incorporated or read into a form.