Homeowners Policies Do Not Cover Floods

Our team was recently getting ready for trial.  Part of the process included preparing “points for charge”  — these are concise statements of the law the parties propose for the Judge to read to the jury before they deliberate.  Our case was an insurance fight, and involved damages caused by a flood, i.e. groundwater.  Floods aren’t covered by homeowners policies. But a lot of folks, including many Judges, don’t realize that.

The main reason there was going to be a trial was a fundamental disconnect between what the homeowners thought they had purchased, and what they actually purchased.  These plaintiff homeowners believed that their homeowners policy provided coverage for flood damage.  Like most homeowners policies, it didn’t.  But the court wanted to hear the insurance company’s engineer actually testify to that.  So be it.

It was no mystery that if the decision was left to a jury, there would be some sympathy for the homeowners.  They’re nice, reasonable people and there was no disputing that their house suffered real damage.  The case, in many ways, was about these folks and the expectations they had of their insurance policy.  We did some research about the expectations of the normal American consumer when it comes to flood coverage in homeowners policies.  According to a 2016 consumer survey completed by the Insurance Information Institute, 43% of American homeowners incorrectly believe that flooding from heavy rains that travels into their house from the outside would be a covered homeowners claim.  Meanwhile, only 13% of homeowners in the Northeast region of the United States have a separate flood insurance policy.  That’s the disconnect we described earlier.  These plaintiffs were left in the gap between their expectations (covered) and their policy terms (not covered).  The odds, and our research, told us that some of our jurors would have the same misunderstanding.

The misconception that a flood is a covered homeowners claim may lead to disappointment, significant out-of-pocket expense, and even, in some instances, a Philadelphia lawsuit, where consumer expectations may make a difference.  However, Pennsylvania law, not even the so-called doctrine of reasonable expectations, should change the clear terms of an insurance policy.  Flood losses are not covered.  That’s what a flood policy is for.

More to come and stay tuned.