The question typically involves clogged drains. For example, leaves cover a drain opening on a flat roof, so rain cannot enter the drain and be carried away from the roof. A corner of the roof invariably leaks, and water cascades down the inside wall of the building, causing damage. Is that an overflow or back up of a drain? Our standard answer is “no,” as water that never entered the drain cannot have backed up or overflowed from it. Therefore we do not believe this situation is covered, even though the policyholder may have paid the premium for the endorsement.

Another confusing situation involves damage to an interior or to personal property within the building by rain, snow, sleet, ice, sand, or dust. There is no coverage unless the opening through which the elements entered the building was made by a cause of loss that is covered by the policy or if the damage was caused by the thawing of snow, sleet, or ice that had been on the building. Seem fairly clear cut? Often confusion arises not because of the interpretation of the limitation but, rather, because of variation in how property policies typically word the limitation.

For example, the standard ISO cause of loss form (CP 10 30) states that interior damage to both the building and the personal property within the building is limited in this type of situation. The ISO businessowner's policy (BP 00 03) is less restrictive. It only limits coverage in this situation to the building itself. Personal property within the building that is damaged by these elements is covered even if the hole through which the elements entered was not made by a covered cause of loss. So what is the difference here? If a policyholder leaves a window or a door open and snow or sleet enters, then contents would be covered on a businessowner's policy but not on a commercial property policy. Many insurance professionals would be surprised by how many times insurance agents and claims adjusters forget that seemingly minor difference when arguing for or against a claim being paid.

Falling Objects Are Closer Than They Appear
Of course, then there are the claims that are caused by “falling objects.” One of the most vivid memories I have is my first experience with a falling object claim. In that situation, a crane had dropped a heavy piece of steel within a manufacturing facility. The steel thankfully did not injure anyone when it fell, but it did demolish the piece of machinery that was directly beneath it. At the time, I was certain that the damage to the demolished machinery would be covered because falling objects was listed as a specified cause of loss on the commercial property form as well as on many other standard property coverage grants.

At that point, I recall that I was seeing only half of the story. Although falling objects definitely is considered a covered cause of loss, the coverage once again is limited by the situation. Damage to the interior of a building, or to the contents of that building, is not covered unless the roof or an exterior wall is first damaged by a falling object. Because the falling object in my situation did not damage the roof or an exterior wall, the machinery was not covered. This unfortunately resulted in a very large uninsured loss for that manufacturing facility.

From a liability perspective, one of the situations that may be missed by an adjuster or claims department involves the fact that defense provisions on a liability policy are most often much broader than coverage provisions. Our experience with claims adjuster subscribers leads us to believe that most of them clearly understand this concept. However, the theory may become muddled when the allegations are lengthy and involve many allegations that clearly are not covered, with perhaps only one that potentially is covered on the policy.

Needle in a Haystack?
In many jurisdictions, defense is required for the whole of the claim even when only one tiny piece might be covered by the insured's policy. This type of situation frequently arises when the claimant prepares a laundry list of allegations, and many of them are clearly excluded. This is when the experienced adjuster checks the jurisdiction of the incident to see whether it requires the insurer to provide defense for the entire claim when only a minor part of it actually will trigger coverage.

Although the insurer may subsequently be allowed to recoup some of the defense costs, the initial necessity may be to provide a complete defense until the court says otherwise.

It is these types of situations that make P&C insurance so interesting. Insurance agents and claims adjusters must be well-versed, even experts, on coverage language so that they can quickly and correctly apply the stipulated coverage.

This skill is frequently learned through training and education. However, the experience gained by dealing with ever-changing details and situations is what separates the professional claims adjuster from the one who simply follows a company policy manual. It takes both training and experience to become an accomplished professional.