Exclusions
Breach of Contract; Property

Claunch v. Travelers Lloyds Ins. Co.
No. 07-0548
(N.D. Tex. Jan. 10, 2008)

Property insurance policy excludes coverage of flood due to broken sump pump.

The U.S. District Court for the Northern District of Texas granted summary judgment in favor of an insurer on a breach of contract and bad faith suit, finding that the insurance policy excluded coverage of flood damage resulting from a sump pump overflow.

James R. Claunch P.C., a law firm, had an insurance policy for its premises issued by Travelers Lloyds Insurance Co. The policy provided coverage for damages to the premises, but contained exclusions for flood damage due to the overflow of a sump pump.

On July 9, 2007, the insured notified Travelers that it had water damage in the basement of its premises. Thus, an insurance adjuster came to the property to evaluate the damage. The adjuster initially concluded that the damage resulted from water that was entering the basement from an exterior door. The adjuster found that the damage was covered under the policy.

Thus, the insured hired a company to pump the water out of the basement. However, the water could not be pumped out of the basement, and the company could not determine from where the water was coming. The insured called a plumber, who found that the sump pump was broken, causing water to flow into the basement.

Travelers denied coverage of the damages, citing the exclusion for damages arising out of a malfunctioning sump pump. The insured sued Travelers for breach of contract and bad faith, and the insurer moved from summary judgment.

The district court found that the policy clearly excluded coverage of flood damage resulting from a broken sump pump. The district court granted summary judgment in favor of Travelers, finding that the damage was not covered under the policy.

Texas Insurance Law & Litigation Alert
February 15, 2008