Q

Our client, a manufacturer, is covered under an independently filed inland marine form. That form covers $5 million of “miscellaneous property.”

Recently, a pipe broke because it had rusted through. Water and steam leaked out, damaging both the building and the contents in the room. From the amount of damage, it was apparent that the water had been leaking for quite a while.

The insurer is denying the claim for three reasons. The first is wear and tear. They say that the loss was caused by the rusting-out of the pipe. They also say that the water must have been leaking for more than fourteen days and have used that as another reason to deny the claim. Finally, they say that even if the loss were covered, items like the carpet, the flooring, the wall coverings, etc. would not be covered because they are real property, not business personal property.

We have enclosed a copy of the independent form for your review. We do not believe the insurer is correct.

New Jersey Subscriber

A

The declarations page of the marine policy you sent shows it provides $5 million of insurance on miscellaneous property. It doesn't say miscellaneous personal property—just miscellaneous property. That could be anything—from furniture to fixtures to carpet to flooring to walls. If the insurer wanted to limit the coverage to business personal property only, it should have so stated on the declarations page.

The wear and tear exclusion does not apply. The only item subject to that exclusion is the pipe itself. Any subsequent damage is covered. When the pipe sprung a leak, the property suffered damage from a plumbing discharge.

There is no exclusion for that peril in the form. In fact, as evidenced by the lack of a flood and surface water exclusion, it is obvious that the drafters of the form intended for it to provide very broad coverage.

As to the issue of how long the water was leaking: while the commercial property policy excludes coverage if the leak was over a period of more than fourteen days, this form has no such language. If the insured did not know about the problem until it manifested itself in damaged property, the loss occurred when the insured first learned of it. And it is up to the insurer to prove that the insured did know about the problem and did nothing; it is not the insured's responsibility to prove that he did not know about it. There is coverage for the property covered by this form for this loss.