Most Recent Philadelphia Water Main Break is a Potential Headache for Insurers
(July 6, 2018) A 92-year old water main burst on July 3, 2018, causing millions of gallons of water to spew into a commercial area of Center City between Juniper and Sansom Streets, resulting in widespread damage and power outages. Businesses in the area will likely turn to their insurance carriers to cover the resulting property damage and losses of income.
Most insurance policies contain water damage exclusions, which bar coverage for damage resulting from surface water or subsurface water. These exclusions are routinely enforced in Pennsylvania to exclude coverage for water damage stemming from burst water mains. See Pavuk v. State Auto. Ins. Co., 1997 U.S. Dist. LEXIS 10355 (E.D. Pa. July 15, 1997); Colella v. State Farm Fire & Cas. Co., 407 Fed. App’x. 616 (3d Cir. 2011); Citi Gas Convenience v. Utica Mut. Ins. Co., 2016 U.S. Dist. LEXIS 15503, (E.D. Pa. Feb. 9, 2016).
Many businesses also lost power as a result of the water main break, which raises other coverage issues separate and apart from the water damage. Commercial policies typically provide only limited coverage for damages resulting from power failure if the failure originates away from the insured premises. Such a limitation may affect coverage for related collateral issues such as inventory spoilage. These claims present complex issues of policy interpretation as they often depend on an interplay of exclusions and additional coverages specifically applied to the facts of each claim.
Access to the affected area of the city has also been cut off, which may implicate civil authority coverage, which provides coverage for actual loss of business income and necessary extra expenses caused by the actions of a civil authority. In order for this coverage to apply in Pennsylvania, there must be a complete inability to access the insured property. See Ski Shawnee, Inc. v. Commonwealth Ins. Co., 2010 U.S. Dist. LEXIS 67092 (M.D. Pa. July 6, 2010). As is typically the case with this coverage, coverage determinations will be highly fact-sensitive.
The age of Philadelphia’s water system is no secret. As there are no immediate plans to update this system, the problems presented by the July 3rd water main break are likely to repeat themselves.
We at the insurance Industry Group at Timoney Knox, LLP pride ourselves on being at the forefront of these insurance coverage issues. Please do not hesitate to contact us if you would like additional information concerning this or any other issue.