Water Loss Resulting From Pipe Failure Not Excluded by Policy Language

The Eleventh Circuit Court of Appeals recently ruled that a policy’s exclusionary language did not apply to an insured’s previously denied water loss.

In the case, Cameron v. Scottsdale Insurance Company, the insured, Ken and Michelle Cameron (“the Camerons”), suffered a loss to their residential rental dwelling when a pipe in the plumbing system collapsed, causing water to overflow from the kitchen sink drain and damage the dwelling. The pipe damage was due to age-related failure. The Camerons filed a claim with their insurance company, Scottsdale Insurance Company (“Scottsdale”), which ultimately denied the claim based on exclusionary language in an endorsement to the insurance policy.

The Camerons brought suit, arguing that the water damage was covered by the policy language which provided coverage for a loss caused by, “accidental discharge or leakage of water…as the direct result of the breaking apart of cracking of a plumbing…system…that is located on the described premises.” Scottsdale claimed that the damage was excluded based on the policy’s water exclusion endorsement. The endorsement excluded damage caused by water that overflowed from a sewer or drain.

The U.S. District Court for the Southern District of Florida held¹ that the water was caused by a drain backup, and therefore, the plain language of the endorsement applied. Accordingly, Scottsdale’s Motion for Summary Judgment was granted.

The Camerons appealed, and the 11th Circuit Court of Appeals agreed with the Camerons’ assertion² that the policy’s exclusionary language did not apply because the loss was originally caused by the deterioration of the pipe, which then lead to the drain’s overflow. Since the loss was caused by the plumbing system failure, it was covered under the policy.
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¹ Cameron v. Scottsdale Ins. Co., No. 16-cv-21704 (S.D. Fla. Mar. 28, 2017).
² Cameron v. Scottsdale Ins. Co., No. 17-11907 (11th Cir. April 16, 2018).