Insurance – Natural Peril Exclusions – Flood
Flood is commonly covered by ARPI policies but, on occasions, some policies exclude it or, alternatively, provide the client with the option of extending the policy to cover it as an additional peril. The meaning of flood has been considered infrequently in the English courts and, the courts have first to consider the meaning of flood in the context of the policy as a whole. In the case Young v. Sun Alliance and London Insurance Ltd.  3 All ER 561, where the word “flood” was incorporated in a phrase with “storm and tempest”, it was held not to cover damage caused by three inches of water leaking into a bathroom from an underground spring-storm and tempest suggested a more violent event.
In the case of Computer & Systems Engineering Pic v. John Lelliott (Ilford) Limited and Others (The Times, 23 May 1989), during building operations at the assured’s premises, a metal purlin was dropped onto a sprinkler system pipe. The pipe was damaged, allowing water to escape which in turn damaged the property of the assured. The court was asked to decide whether or not the property owner was obliged to bear the risk of damage under clause 22C: 1 of the JCT Standard Form of Building Contract (1980 Edition) because the damage was not caused by “flood” or “bursting of pipes” within the definition of the clause 22. First, the court considered what an ordinary reasonable Englishman would say if asked “What was it that caused the damage?”. His answer would have been “the negligent dropping of the purlin which fractured the sprinkler pipe”;
As a result of the lack of direct case law, the court referred to the various insurance cases dealing with the term “flood’*. It relied upon Young v. Sun Alliance (above) and Commonwealth Smelting Limited v. Guardian Royal Exchange Assurance Limited  1 Lloyd’s Rep 121, as supporting the propositions that:
– flood should involve some natural phenomena or abnormal occurrence; and
– “bursting and overflowing” were to be construed intransitively, involving some interruption of a pipe from within. (In other words, without the assistance of extraneous factors.)
Therefore, the damage to the sprinkler system constituted neither a flood nor a bursting or overflowing of water from tanks, apparatus or pipes. The Court of Appeal confirmed the decision suggesting that the word “flood” suggested the invasion of property by a large volume of water caused by a rapid accumulation or sudden release of water from an external source, usually, but not necessarily, as the result of a natural phenomenon such as storm, tempest or downpour. Certainly, US authorities have not distinguished between man-made floods (such as the bursting of a dam) and floods resulting from natural perils.
Thus, as when considering the definition of any phrase within the context of ARPI, a court will:
– look at the context in which the word is found;
– enquire as to whether or not the word has any ordinary meaning in common parlance; and
– look at judicial precedent to see where the courts have previously been required to consider the word in a similar context.