The insured commercial property had a water main break beneath the slab. The carrier is excluding the damage citing the language in the CP 10 32 08 08 water exclusion form. Specifically, they are relying on the language that excludes "water under the ground surface . . ." that flows through the floors etc. FC&S has addressed this issue several times over the years and has always taken the position, in the absence of other policy language, that water below the ground is meant to exclude subterranean water, not water from a broken pipe. And certainly not in a situation where, as with this policy, the pipe is specifically included as covered property. I have seen water from a pipe properly excluded when the language in the policy specifically said something like "regardless of the source of the water" which made the intent clear that they wanted to exclude both water from underground pipes as well as subterranean water.

The Water Exclusion Endorsement CP 10 32 08 08 does not have language that says "regardless of source." However, the endorsement does say that the "exclusion applies regardless of whether any of the above, in Paragraphs 1. Through 5. [various listed exclusions such as mudslides, etc.] is caused by an act of nature or otherwise." The endorsement then gives an example of if a dam or levee fails.

The "caused by" language seems very distinguishable from the "regardless of the source" language. Regardless of source is clear that if the source of the water is a pipe it is excluded. The "caused by" language does not address the source at all. It only addresses the cause of loss. So, if the excluded water, such as a flood, is caused by rain or by a failed dam, it is still excluded. It would seem that if the water damage to the building is caused by a failed pipe releasing water from a plumbing system, not subterranean water, that loss would be covered because the cause of loss is irrelevant. Any cause will serve to exclude the water that is meant to be excluded in the endorsement. But, the cause of loss cannot exclude water the type of water that is not otherwise excluded in the endorsement. For example, if a fire suppression sprinkler broke and released water in a building, this endorsement would not exclude that water damage, regardless of the cause of loss, because that water is not excluded. Other language in the policy may apply, but not this endorsement. In our case, when we look solely at the type of water being excluded, we are back to the "water under the ground surface," language which is referring to subterranean water and thus the water from a broken pipe should be covered as it is not subterranean water at all but water from within a plumbing system. Please give me your opinion.