I asked my assistant Nikki to read a draft of this post and make suggestions, and she was like, um, is there any way that you could make this post . . . interesting? Maybe start with a joke or a riddle as a hook? So we both took to AI to find some jokes about roof drains. This was Nikki's best shot:
What's a roof drain's favorite type of music?
Anything with a good flow... unless it's clogged, then it's all about the backup
beats!
I went down a rabbit hole and eventually ended up at this Roofer's Joke Book, which is not exactly on point, but, nevertheless, these are from the back cover blurb:
Want to hear a roof joke? Well, the first one is on the house.
I just signed up to an online dating site for roofers. It's called LocalShingles.com
Did you hear about the miracle of the blind roofer? Well, he picked up a hammer and saw.
And now onto our post:
The Loss
148 High Street owns and operates
an apartment building located in Medford, Massachusetts. On August 19, 2021, a pipe in the building’s
roof drain system, situated between the building’s roof deck and the ceiling of
the top floor, cracked or broke apart at a joint, allowing water from a
rainstorm to infiltrate the building.
The break or crack was caused by some combination of normal use and
latent wear of the joint.
Insurer Asserts that Coverage is Limited to $10,000 Because Only Expanded Property Coverage Endorsement Applies
148 High submitted a claim to its
insurer, Wesco Insurance Company, for a replacement cost value of $413,689.21.
Wesco issued a check for $10,000,
asserting that that amount was the limit under an Extended Property Endorsement
for loss caused by discharge of a drain.* That endorsement provides that the insurer “will pay for direct physical
loss or damage to Covered Property, caused by or resulting from discharge of
water . . . from a sewer, drain or sump located on the described premises. . . . For the purpose of this coverage, the term
drain includes a roof drain and related fixtures.”
The insurer asserted that coverage
was otherwise excluded in the policy under water and wear-and-tear exclusions.
* The correct name of this endorsement appears to be the Expanded Property Coverage Endorsement.
The United States District Court
for the District of Massachusetts Holds that Water Exclusion Does Not Apply
The water exclusion excludes damage
caused directly or indirectly by water, regardless of any other cause or event
that contributes concurrently or in any sequence to this loss. (For budding insurance geeks, this is called
an anti-concurrent causation clause.) The
definition of water for the exclusion includes, “Water that backs up or overflows
or is otherwise discharged from a sewer, drain, sump, sump pump, or related equipment.”
The water exclusion further provides
that the exclusion applies regardless of whether the water loss is caused by an
act of nature or is otherwise excluded. The exclusion states, as an example,
that it would apply to a situation where a dam, levee, seawall or other
boundary or containment system fails, in whole or in part, for any reason, to
contain the water.
In 148 High Street, LLC v. Wesco Insurance Company, __ D. Mass. __, 2025 WL 1586239 (D. Mass. 2025), Judge Young held
that the water exclusion did not apply. He
noted that the Expanded Property Coverage Endorsement adds coverage for "Discharge
from Sewer, Drain or Sump,” and in that endorsement clarifies that for the purpose
of the endorsement, “the term drain includes a roof drain and related fixtures.” Judge Young held that the language strongly suggests
that, in the absence of the clarification, the word “drain” might not plainly
include a roof drain. “In other words,
the Policy itself recognizes that the word 'drain' could be understood in more
than one way.” As ambiguous language is
resolved in favor of the insured, the policy must be interpreted to find that a
roof drain is not a drain.
Judge
Young distinguished the case before him from a New York case that interpreted
coverage for a sink drain, because a sink drain is part of a plumbing system,
but a roof drain is not. He cited a
number of other extra-jurisdictional cases that provide various definitions of
the word “drain.”
The Court Holds that the Wear-and-Tear Exclusion Does Not Apply Because of an Exception for Specified Causes of Loss
The Wear-and-Tear
exclusion excluded coverage for damage caused by:
(1) Wear and tear; [or]
(2) Rust or other corrosion, decay,
deterioration, hidden or latent defect or any quality in property that causes
it to damage or destroy itself[.]
Judge
Young agreed that the exclusion would exclude coverage for the loss, absent an
exception that provides that if an excluded cause of loss (such as wear and
tear) results in a “specified cause of loss,” the insurer will cover the loss
caused by that specified cause of loss.
Specified causes of loss included “water damage.” The applicable definition of water damage in turn included “[a]ccidental discharge or leakage of water . . . as the direct result of the breaking
apart or cracking of a plumbing, heating, air conditioning or other system or
appliance . . . .”
Judge Young
held that the broken roof drain pipe fit squarely within the definition of
water damage.
The Court Holds that the Expanded Property
Coverage Endorsement has a $10,000 limit . . .
Both parties agreed that the Expanded
Property Coverage Endorsement applied, but they disagreed as to whether the
$10,000 sublimit of that endorsement was the maximum limit available.
The endorsement provided, “[t]he
most we will pay for Discharge from Sewer, Drain or sump in any policy year is
$10,000, unless a higher amount is shown in the Declarations.”
148 High argued that this
clause meant that the $10,000 sublimit did not apply, because the policy’s
declarations page showed only a higher general liability policy limit, far in excess
of $10,000. Wesco argued that the Declarations
page did not list a specific higher sublimit for the expanded coverage endorsement,
so the $10,000 sublimit applied.
The court agreed with Wesco, holding that a higher sublimit for the endorsement would apply only if such a higher sublimit were specifically shown on the declarations page.
. . . But That Coverage is Not Limited
to $10,000 for This Loss
The court concluded that the
endorsement provided an additional $10,000 in coverage for drain-related
water losses. The
policy had a provision stating that “if two or more of this policy’s coverages
apply to the same loss or damage, we will not pay more than the actual amount
of the claim, loss or damage sustained.”
Apparently the total loss was less than the general property limit, so
the endorsement simply had no effect.
But if the loss exceeded the general property limit, the limit would be
increased by $10,000.
Takeaway
Even as an insurance coverage
specialist I could not completely follow the court’s reasoning. I would need to have the policy in front of
me and really study it. This leads to my
main takeaway from this case: Layers of
revisions to insurance policies and added forms and endorsements can cause policies
to become Gordian knots. When that happens,
courts properly cut through the knot with the sword that ambiguities are
interpreted in favor of the insured. That’s what Judge Young did here.
With respect to the Expanded
Property Coverage Endorsement: Policies
often have endorsements in which the insurer says, we are adding an exclusion,
and we are adding definitions that are applicable to the exclusion, and then we
are adding back some limited coverage for the loss we are otherwise
excluding. For example, property
policies often have a mold endorsement that states that all mold losses are excluded,
then define mold, and then say, but we will pay up to $10,000 for a mold loss. (Pro tip: The mold endorsement limit is one of the few things that can be negotiated in a typical homeowner's policy. Always ask to go up to a $50,000 mold limit.)
The Expanded Property Coverage
Endorsement in this case appears to have skipped the step of adding an
exclusion. Instead, the insurer relied
on the water exclusion in the main property coverage form of the policy. That gave the court an opportunity to read
the endorsement together with the main property coverage form to find an
ambiguity. And, as I said, ambiguities
are interpreted in favor of coverage.
Massachusetts Lawyers Weekly quoted my thoughts on this case here.
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