The rain fell hard and the culvert overflowed but Cooper Road, running above the culvert, acted as a dam and kept the water away from the surrounding properties. The water suddenly burst through the road, cascading onto and through Joe’s property. Because of the action of the water exploding through the road, Joe figured his loss was covered under his commercial policy with Phenix Mutual Fire Insurance Company.

The court disagreed. While an argument could be made as to whether the road exploded or merely collapsed, all the damage was due to flooding, which was explicitly excluded in the policy.

Click here for more details on this court case.

Most insurance policies cover explosion but do not define the term. When a term in a policy is not defined, its definition is based on common usage and court precedents. Fire, windstorm, hail and explosion are all examples of undefined perils or causes of loss.

Click here to review a PF&M discussion
on the term “explosion.”

What Joe needed was flood insurance. Hopefully, Joe's insurance agent had recommended that he purchase it. When a loss that is not covered occurs and causes substantial damage, the customer and his attorney use every resource available to find coverage. They might find the coverage in the agent's errors and omissions coverage if it is determined that it was available but had not been discussed or offered.

Click here to review the Producer’s Commercial Lines Risk Evaluation
Client/Agent Coverage Agreement you might use to discuss this and
other coverages with your customers.

Flood coverage is available through the National Flood Insurance Program (NFIP). While there are some limitations, most insureds qualify for coverage. In addition, Difference in Conditions (DIC) coverage forms and policies often provide flood coverage for limits in excess of the NFIP limits.

Click here for an overview of the National Flood Insurance Program.

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