A water service line burst under the sidewalk outside an insured’s commercial property. After a few hours, the ground was saturated and water came through the foundation and under the door. The claim was set up as “discharge/overflow of water/steam, except water backup,” but it was declined due to the water seepage exclusion.

The definition of seepage is “continuous or repeated seepage or leakage of water, or the presence or condensation of humidity, moisture or vapor, that occurs over a period of 14 days or more.”

The policy has special form coverage. Specified causes of loss includes “water damage,” which is defined as “accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of a plumbing, heating, air conditioning or other system or appliance (other than a sump system including its related equipment and parts), that is located on the described premises and contains water or steam.”

Q: What is the difference between water seepage and accidental discharge from the breaking apart of pipes? Shouldn't we have coverage for the sudden burst of pipes?

Response 1: It appears that the water pipe, which burst under an adjacent sidewalk, was not on the insured’s premises or owned by the insured. That is the primary challenge in finding coverage. 

In this case, the insurer is incorrect in citing the exclusion you describe below, which is B.2.f. of the Causes of Loss – Special Form. Based on your description of the event, it is actually exclusion B.1.g.4. that prevents coverage. This provision excludes:

Water under the ground surface pressing on, or flowing or seeping through:

a) Foundations, walls or paved surfaces.

b) Basements, whether paved or not.

c) Doors, windows or other openings.

For coverage to apply under the water damage provision, the water-containing system or appliance which ruptures or breaks apart must be located on the described premises. The actual rupture causing the water leak in this case does not appear to have occurred on the insured’s premises.

Response 2: The insured should make a claim with the water service provider. 

Response 3: Seepage is gradual. Breaking apart or cracking of a plumbing, heating, air conditioning or other system or appliance is sudden and accidental. It sounds to me as if the bursting water service line was outside of the described premises, but if not, you do a have a valid argument.

This question was originally submitted by an agent through the VU’s Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.