Insurance coverage Q&A: Shifting house and coverage for repairs
When a water leak causes the house to shift, exactly what is covered under the land stabilization endorsement?
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Reader’s questions:
Hope you are doing well. I have an interesting question.
Insured had a hot water line leak, which caused the house to shift and piers have to be replaced. The house is in a historic district, therefore all repairs have to be approved by the Historic Preservation Office.
The insurance company is covering the piers and other repairs due to the house shifting. The coverage issue is the carrier is stating there is only $10,000 coverage for land stabilization, are replacement of piers limited to the $10,000 coverage? The insured has an estimate for $36,000.
In addition, there is coverage for code upgrades. When the insured applies for a permit and assuming the Historic Preservation Office states that all 11 piers have to be replaced, would the difference be covered under code upgrades?
I included the policy and a letter from the carrier. Please let me know if you need anything else.
— Arizona Subscriber
You do have an interesting situation. In order for land stabilization to be covered, the damage must be from a covered cause of loss.
Under perils insured against, A.2.e.(6), “Settling, shrinking, bulging or expansion, including resultant cracking, of bulkheads, pavements, patios, footings, foundations, walls, floors, roofs or ceilings; ” is excluded. However, there is an exception to 2.e. that states that unless excluded, certain losses are covered. Those losses include:
“ Accidental discharge or overflow of water or steam from within a: (i) Storm drain, or water, steam or sewer pipe, off the “residence premises;” or (ii) Plumbing, heating, air conditioning or automatic fire protective sprinkler system or household appliance on the “residence premises.”
This includes the cost to tear out and replace any part of a building, or other structure, on the “residence premises,” but only when necessary to repair the system or appliance. However, such tear-out and replacement coverage only applies to other structures if the water or steam causes actual damage to a building on the “residence premises.”
Therefore, the settling and shifting caused by the discharge of the hot water line would be covered. However, the adjuster’s letter says the engineer’s report lists the settling of the dwelling over years as the cause of the foundation shifting and the need for stabilization. You need to determine how much of the need for stabilization is due to the shifting, and how much is due to the water leak. The land stabilization endorsement requires damage to the dwelling that requires land stabilization to complete the dwelling repairs — that would be the shifting due to the water leak.
The ordinance or law coverage would apply as well but again, it only applies to ordinance/law that applies to damage from a covered peril. Your challenge is separating out how much of the shifting is caused by the water leak, which would be covered, and how much is just settling over time, which isn’t covered.
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