Interior Damage by Water Leaked Through Atrium Doors

THIS ARTICLE, WHICH APPEARED IN CLAIMS MAGAZINE, REFLECTS THE STATE OF THE LAW AS OF 2/01/1997. FOR CURRENT INFORMATION ON THE ISSUES RAISED HERE, PLEASE SEE THE RELEVANT TOPICS ELSEWHERE IN THE DATABASE. SPECIFICALLY, REGARDING SURFACE WATER, SEE PLRB, Q & A ISSUE 147 – WATER DAMAGE (11/01/96, updated 12/01/2002).

Issue:

The insured's home has an open-air atrium surrounded by four walls with sliding glass doors accessing the interior of the home. During a heavy rainfall, water accumulated in the atrium and leaked through the closed doors. The water could not enter the drain because either the drain was blocked with debris, or the drain could not accommodate the rainfall at that rate.

Does the surface water exclusion in the insured's HO 00 03 04 91 policy preclude coverage for interior water damage?

Analysis:

Absent case law directly on point, decisions evaluating the scope of the exclusion provide useful insight.

By definition, the term "surface water" suggests that the water originates from a natural source, without being contained or diverted from its natural flow over the ground, before causing the claimed damage.

Surface water is water from melted snow, falling rain, or rising springs, lying or flowing naturally on the earth surface, not gathering into or forming any more definite body of water than a mere bog, swamp, slough, or marsh, and lost by percolation, evaporation or natural drainage. Surface water is distinguished from the water of a natural stream, lake, or pond, is not of a substantial or permanent existence, has no banks, and follows no defined course or channel.

Heller v. Fire Ins. Exchange, 800 P.2d 1006, 1008-09 (Colo. 1990). The definitions of excluded flood and water below the ground surface carry the same implications. Indeed, of the courts that have rendered reported decisions addressing their application, a majority have imposed a "natural source limitation" on these exclusions, either by name or by implication.

A clear example of water that is not from a natural source is water leaked from a pipe, either above or below ground. The containment and diversion of the water by the pipe prevents its characterization as being from a natural source, and thus prevents application of the surface water or water below the surface exclusions, even though the water may have in the past been naturally occurring. See, e.g., Novick v. United Servs. Auto. Ass'n., 639 N.Y.S.2d 469 (App. Div. 1996) (broken water main).

In Holcomb v. United States Fire Ins. Co., 279 S.E.2d 50 (N.C. App. 1981), an unusually heavy rainstorm caused a gutter downspout to fail, depositing an abnormally large amount of water adjacent to a wall. The surface water and water below the surface exclusions did not apply to hydrostatic pressure damage to the wall because the water had accidentally discharged from a plumbing system. In contrast to water in a pipe or downspout, the water in the atrium never entered the drainage system, but instead accumulated outside of it.

The natural source limitation does not confine the application of the surface water exclusion to water which has pooled or flowed over only undeveloped land; if it did, the exclusion would never apply in urban areas. Water from rain that enters a home after pooling on a simple ground-level concrete patio is still surface water, since the patio is an extension of the ground surface. Regarding water on a roof, courts have disagreed. See American Ins. Co. v. Guest Printing Co., 152 S.E.2d 794 (Ga. App. 1966) (exclusion confined to water on ground surface); Sherwood Real Estate & Investment Co. v. Old Colony Ins. Co., 234 So. 2d 445 (La. App. 1970) (merely an artificial elevation of the ground); Cochran v. Travelers Ins. Co., 606 So. 2d 22 (La. App. 1992) (not surface water). The atrium seems more like a patio than a roof because the atrium's flooring serves as a substitute for the earth's surface, and it is not pitched as a roof might be. However, the atrium is unique because its walls artificially impounded the water. When the doors were closed and the drain was not functioning as intended, the atrium essentially became a manmade container which leaked water into the home.

Is the water's unnatural accumulation in the atrium determinative? In Heller, water from melted snow runoff was diverted onto the insured's property by man-made trenches, 15-20 feet long, six inches deep, and lined with plastic sheets, rocks and tree limbs. The surface water exclusion did not apply because the runoff was diverted and prevented from percolating, evaporating or naturally draining. Unlike the trenches in Heller, the atrium in the present scenario was not built to change the natural flow of water. Also contrary to Heller, the water was not diverted into the atrium. Nevertheless, as in Heller, the atrium walls prevented the water from dissipating through percolation, evaporation or natural drainage.

Courts have applied the exclusion where rainwater that was prevented from entering a blocked or overtaxed sewer or drain caused water damage. In Front Row Theatre v. American Mfr.'s Mut. Ins. Cos., 18 F.3d 1343, 1345 (6th Cir. Ohio 1994), a theater in the round was encircled by a parking lot at a higher elevation, forming a "basin-like physical arrangement." Water from the lot was supposed to drain into upper manholes, through underground pipelines to lower manholes, and away from the theater. Due to a blockage, water from the lot ran through the doors and damaged the theater carpeting. The water which never entered the sewer system before entering the building retained its character as excluded surface water.

The court in Front Row did not explain whether the doors were at a flat ground level and the slope to the stage was indoors, or whether the water ran down a slope in the lot, into the "basin," and then through the doors. If the former was true, the "basin" configuration did not cause the damage, and the case is distinguishable. If the latter was true, the exclusion applied even though the "basin" may have served as an outdoor artificial container of rainwater, and thus by analogy, the water in the atrium was also excluded surface water.