Property Insurance: Broadly Worded Water Exclusions Can Defeat Cover Regardless of How the Loss Is Framed

A United States court has held, in Express Jewelry Enterprises, Inc. v. National Fire Insurance Company of Hartford, No. 23-10615 (E.D. Mich. Aug. 7, 2025), that a broadly worded water exclusion – covering both flood and sewer or drain backup, and applying regardless of any other contributing cause – defeated a policyholder’s claim for storm-related water damage. The decision illustrates a principle of general application: where an exclusion clearly and specifically captures the peril in question, an insured cannot avoid it by characterising the loss narrowly as arising from a different, related mechanism.

Background

The insured, a jewellery business, held businessowners property insurance. During a storm, rainwater could not exit its premises because of a blockage in the drain connecting the premises to the municipal sewer system, and water backed up into the basement. The insured’s own submissions attributed the loss to the local sewer system being overwhelmed by the volume of rain. The insurer’s investigation likewise concluded that the loss was caused by a backup of the basement drains during the storm, with water also entering through the elevator shaft. The insurer denied the claim, relying on the policy’s water exclusion.

Policy Language and the Water Exclusion

The policy excluded loss or damage caused directly or indirectly by “flood,” surface water, or overflow of any body of water, as well as water or sewage that backs up or overflows from a sewer, drain, or sump – and provided that such loss was excluded “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.” Separately, the policy’s businessowners coverage form offered an extension for loss caused by water backing up or overflowing from a sewer, drain, or sump, but that extension itself excluded backup caused by or resulting from flood.

The Court’s Analysis

The court applied the ordinary principle that an unambiguous insurance policy must be enforced according to its plain meaning. It found the water exclusion clear and unambiguous, noting that it applied to loss caused by flood or by water and sewage backing up or overflowing from a sewer, drain, or sump.

The insured argued that its loss was properly understood as a sewer backup covered by the policy’s separate backup extension, rather than as an excluded flood. The court rejected this narrower framing. Because the exclusion covered flood and sewer/drain backup together, and because it applied regardless of any other contributing cause, it made no difference which of the two excluded mechanisms was responsible for the water entering the basement – both fell within the same exclusion.

Takeaway

The decision reflects a principle of general application in insurance disputes. Where an exclusion is drafted clearly and specifically enough to capture more than one related peril – here, both flood and sewer or drain backup – an insured cannot escape it by characterising the loss under only one of those labels. This is reinforced where the exclusion also applies regardless of any other contributing cause.