Property Insurance and the 'Slow' Water Leak

The Problem

Recently, one of my tenants discovered water coming up from under the wood floor in the living room. They immediately reported the problem. Our maintenance man discovered that the upstairs A/C drain, that ran within the wall, had a break in it near the downstairs floor. The result was that over the course of a month or so, about a pint of water had been released each day within the wall and went unnoticed until the accumulation had made its way up from under the floor - which was, unfortunately, glued to the slab.

The Insurance Claim Rejected

Having assumed our insurance policy covered our investment property against issues like this, I waited for the adjuster’s report. I was not pleased to learn that my claim had been rejected. Huh? Why?

The Reason

The insurance adjuster informed us that our policy only covered water damage that occurred ‘suddenly’. Really? 

My Response

I, of course, argued the point with our insurance adjuster. For what possible reason would they only cover ‘sudden’ damage, but not damage caused more slowly? The damage was done regardless of the ‘time’ it took to occur. The slowly occurring damage was not due to our tenant’s neglect to notice the leak - since it was behind the wall with no visible evidence of water staining on the wall. The damage was not due to our neglect to maintain the A/C because the part that failed (the PVC drainage pipe) was protected behind sheet rock. Neither an act of God, wear and tear by the activity of the residents in this 10 year old house, nor malfunctioning equipment caused the drain to break. None of this made any difference 

The Cost

Between the demolition of the floor and wall, making the repair, and then replacing of the floor, our total cost was just over $10K. Ugh.

The Lesson

I’ve said all that, simply say this - read your insurance policy. This common exclusion was actually not in the proverbial fine print. It was obvious. My bad. I just never imagined that negligence would not be considered. I have been told that some companies, with the same exclusion, reject a claim where water damage occurred slowly only if it was obvious that neglect was involved. I will be considering some of those companies.

Though many have taken various insurance companies to court over identical issues, in each case I have read, the insurance companies has won. Also, our particular insurance company does not sell a policy that would have covered this kind of leak - at least for rental property. How does your insurance company deal with this type of incident? 

How does your insurance company deal with this type of incident?