United States District Court for the District of Massachusetts finds coverage for water loss resulting from roof drain system, holding that policy itself creates ambiguity over the meaning of "drain"

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.  

Massachusetts Appeals Court gives sensible interpretation of contractual interest statute

 

Certain Underwrites of Lloyd's London issued a builder's risk policy to Historic Round Hill Summit covering two buildings, Rogers Hall and Hubbard Hall, that Historic had purchased to renovate.  PeoplesBank, which held an mortgage on the property, was an additional insured under a mortgage holder endorsement.  

A fire destroyed Rogers Hall and caused extensive damage to Hubbard Hall.  Lloyd's asserted that the damage to Hubbard Hall was not covered because it was occupied by tenants at the time of the fire.  PeoplesBank argued that it was entitled to coverage for the loss, even if Historic was not. In June 2018 it submitted a proof of loss to Lloyd's seeking $2.8 million.  Lloyd's rejected the claim, on the basis that PeoplesBank could not submit a claim independent of Historic's claim.  PeopleBanks sued, and the trial judge found that Lloyd's was obligated to cover the loss.  

On April 27, 2021, the parties entered a stipulation that the cost to repair the damage was $2,274,194.07, exclusive of work performed by a contractor, Complete Restoration Solutions (CRS), as Historic was disputing CRS's bills.  Historic and CRS eventually settled, after which Lloyd's and PeoplesBank stipulated that the fair value of the work done by CRS was $236,000.  

PeoplesBank sought prejudgment interest from July 3, 2018, the date Lloyd's had denied coverage to it.  Lloyd's asserted that interest should run from 30 days after the date of the stipulations, under a policy provision that stated:

We will pay or make good any "loss" covered under this Coverage Part within 30 days after:

1.    We reach an agreement with you;

2.    The entry of final judgment; or

3.    The filing of an appraisal award. 

In PeoplesBank v. Certain Underwrites at Lloyd's London, 105 Mass. App. Ct. 476 (2025), the Massachusetts Appeals Court interpreted the dispute under Mass. Gen. Laws ch. 231 §6C, which provides for interest for breach of contract from the date of the breach.  The court held that Lloyd's owed interest from the date it denied coverage, except that interest on the CRS payments was due from the date payment was made to CRS.  That was because the amount sought, except for the CRS payments, had already been paid before Lloyds denied coverage.  Prejudgment interest would not result in a windfall to PeoplesBank and failure to award it would result in a windfall to Lloyd's, which had use of the money it had owed to PeoplesBank.  Absent Lloyd's breach of contract, it would have paid the amount due at the time of the demand.  Lloyd's could not rely on the contractual payment provision when it had breached the contract.  Interest was due for the CRS payment from the date payment was made to CRS, because otherwise PeoplesBank would receive a windfall -- interest on funds that it had not paid.  

Advice for people who are facing property losses in the Los Angeles fires: Hire a public adjuster

I recently saw on a Facebook group I belong to advice for victims of the California fires and how they can maximize their insurance claims. The advice was dreadful. It included, "Make from memory the most detailed list you can of every item in your house that was destroyed, and its value."

This is terrible advice.

One of my specialties as an attorney is representing people with property damage claims against their insurers (Massachusetts only).  I also represent insurers in these losses, more on this at the end.  I have seen from both sides people who have suffered this type of terrible loss who received this advice and got completely caught up in futilely trying to make a complete inventory of their destroyed personal property and its value on their own. Of course, because these items represent their life and have huge value to them, and they get lost in that.

The good news is: there is an entire profession devoted to helping people with this type of insurance claim. Their job is to advocate with an insurance company for the insured for the value of the property damage loss, including personal property claims. They have specialists who will make lists of personal property inventory and value it.  Yes, you will need to work with them and provide them the information, which may include lists, but they will help you and they will provide the valuation.

They are called public adjusters. They get paid by contingency fee, typically ten percent (at least in Massachusetts; maximum percentage is set by state law), so cost nothing up front, and for any major loss are well worth the cost because you will recover more working with them even with their fee than you would trying to do it yourself, and they will act as a buffer between you and the insurer and reduce your stress in this aspect of your loss significantly.

In all honesty, some public adjusters are terrible and some are great (and most are in between). As with any professional doing something major for you, you will want referrals if possible. Meet with several. Ask for references. Google them. But a good public adjuster will save you time and aggravation and help you move forward. Even a not very good (but not terrible) public adjuster is better than you trying to do this yourself.

My advice for anyone who may need to evacuate but is currently safe (and everyone else, do this while you are thinking about it): Go around your house and take pictures of everything. The exterior walls. Everything you own inside. Appliances. Bookshelves. Open your closets, your cabinets, and your drawers and take pictures. (Not of each item, but of the inside of each drawer.  I am not trying to make you crazy here. Maybe individual photos of items you own of high monetary value.) Hopefully you will never need to look at them, but if you do need to show what you owned, this is a good way to do it. (I do this every couple of years. It takes 30 minutes or so.) You can hand the photos to the public adjuster, who can use them as a basis for their inventory (along with conversations with you).

Why is it terrible advice for you to try to inventory and value your own goods?  Because unfortunately sentimental value has nothing to do with insurance coverage.  The items you love the most – your photo albums, the souvenirs you picked up on your travels, your paperback copy of The Lord of the Rings trilogy that first belonged to your father that you have carried around since you were 12 (yes I’m projecting here) – you will obsess over their loss, they will make you sad,  you will mourn them, all of which is understandable, but they have little value in an insurance claim.  Your ergonomic chair in your home office that you never think about may be worth something.  You will obsess over that as well.  Even if you don’t, your lists will not be put together in a way that an insurer can easily work with.  (You will also need to understand the difference between actual cash value and replacement cost value.  Actual cash value broadly speaking is the value of the item you own today.  My beloved copy of Lord of the Rings is falling apart and has no value; even a thrift shop would just throw it out.  But its replacement cost value is $26.38, because that's what I would spend for it on Amazon.  I will get that amount from the insurer if I timely actually purchase a new copy.)  This will take your attention from where it needs to be, which is working with a contractor to rebuild your house within the amount the insurer will pay. 

I have seen advice that if a house suffers a total loss don’t waste your ten percent on a public adjuster because you will get your policy limits. This is an oversimplification.  There are various coverages that a policyholder may not know about on their own, that insurers may ignore. Everything from code upgrades, which is huge (you have to rebuild to current code, which is an extra expense and an extra coverage but the amount has to be proven based on local codes) to landscaping coverage. (These coverages are often but not always in addition to your building coverage limit.)   Again, the difference between actual cash value that you get paid up front and replacement cost value, that you get paid after the rebuild is complete if you have that coverage, can be significant, and you need ACV to pay your contractor to do the work. (Some contractors understand insurance claims; most don’t -- they just want to build houses.)  And don't forget loss of use coverage, which is rent while your house is being rebuilt.  (In my experience public adjusters generally don't charge their percentage for this but if needed they will help you advocate for a suitable place to live.)  With personal property (your stuff) you have to show the value of your destroyed property, which may or may not reach the coverage limit. Many public adjusters are not interested in coming into a loss late. So, if you are someone who can read and understand an insurance policy and advocate effectively for yourself with the overworked insurance adjusters who will be flooding into California from other states, and you have the time and emotional wherewithal to do this on your own, sure, go for it. As an attorney in the industry, I would 100 percent hire a public adjuster in this situation.

Very important note: I don’t want to make it sound like I think insurers are evil. Quite the opposite.  I represent insurers as well as policyholders, and many insurance adjusters are wonderful people with integrity who do their absolute best to be fair.  But if you get off on the wrong foot with a claim it can be very difficult to course correct. Some insurance adjusters will advise you not to hire a public adjuster.  Some will be happy if you do because they know they will receive information in a form that is easiest for them to analyze.  Ultimately the choice is yours, but you know where I stand.