Does a Water Backup Exclusion Include Sewage?

Standard property policies typically contain an exclusion which provides that the insurer “will not pay for loss or damage caused directly or indirectly by . . . water that backs up or overflows from a sewer, drain, or sump.” A reasonable reading of that language would likely include within the application of the exclusion, damage caused by sewerage that backed up or overflowed from the sewer. Not so fast. Until recently in Ohio, the water-backup exclusion had been found to not include damage caused by sewerage as a result of the backup or overflow. However, in AKC, Inc. v. United Specialty Insurance Co., 2021-Ohio-3540, 187 N.E.3d 501 (Ohio 10/6/21), the Ohio Supreme Court reversed the ruling of the Ohio Ninth District Court of Appeals and found that a water-backup exclusion necessarily included sewerage within the scope of the exclusion. The Court of Appeals had found that the exclusion was ambiguous because it did not specifically use the word “sewerage.”

The Ohio Supreme Court found that when water backed up or overflowed from a sewer, the water was necessarily going to contain some sewerage. Referring to the Webster’s dictionary definition of “sewer” and “sewage”, there was no doubt to the Supreme Court that the average person purchasing insurance would understand this to be so because sewers naturally carry a watery mixture that most people typically call “sewage.”

The Ohio Supreme Court rejected the ambiguity methodology of the Court of Appeals. According to the Ohio Supreme Court, the Court of Appeals had improperly created ambiguity in the insurance policy by asking whether the insurer could have included different or more express language in the contract. The Supreme Court found that the question was not whether the water backup exclusion could have been worded differently or should have specifically stated that it applied to sewerage, even though “it could have necessarily and succinctly done so with the mere addition of the very word. The correct question was whether the water backup exclusion, as written, applied to sewerage carried into the insured property during a backup or overflow event. The Supreme Court found that it plainly did.

The Supreme Court also noted that there were standard endorsements available for purchase to the insured that effectively removed the water backup exclusion from the policy and thereby would have provided property owners with coverage for that type of event.

The obvious intent of the water-backup exclusion was to bar damages caused directly or indirectly by water that backed up or overflowed from a sewer. As such, the exclusion applied to damage caused by sewerage, even though the word “sewerage” was not used in the exclusion.