In a September 2018 order, the Supreme Court of New York ruled policy language excluding damage from a sewer or drain is not specific with its applicability to internal plumbing. Their decision relies on Pichel v. Dryden Mutual Insurance Co., where an insurer disclaimed coverage on the basis of a water damage exclusion which applies to a loss caused by “water back up through sewers or drains.” However, there was another exclusion in the policy, that provides no coverage for a loss caused by repeated leakage within a plumbing system. Conversely, the policy provided coverage for accidental leakage or overflow from a plumbing system.
The court held that when the exclusions and coverage positions were read together there was ambiguity over losses resulting from a backup and overflow of an external sewer system compared with an internal plumbing system. Damages caused by a back up located within the insured’s property were covered by the policy while a back up originating outside the property’s boundary will trigger the sewer or drainage exclusion. Adjusters always should seek to identify the source of water back up before disclaiming coverage through a sewer or drainage exclusion.