Business Property Damage Caused by Sewer Backups
A Sewer Backup Can Cause Property Damage and Income Losses
Suppose a blocked sewer pipe causes wastewater to back up into your place of business. Besides creating a terrible mess, the contaminated water causes damage to your floors, walls, and personal property. Will the damage be covered by your commercial property policy? The answer may be no. Most property policies contain a broad water exclusion that precludes (among other things) damage caused by water that backs up or overflows from a sewer, drain, or sump pump. Fortunately, you can protect your business from expensive sewer backup incidents by purchasing sewer backup coverage.
Sewer Backup Coverage
Many insurers will add sewer backup coverage to a commercial property policy using an ISO endorsement or their own proprietary version. The ISO endorsement covers physical loss to covered property if the loss is caused by a discharge of water or waterborne material from a sewer, drain or sump located on the premises listed in the endorsement.
The sewer backup endorsement covers the cost of repairing or replacing your building or personal property damaged by sewer water. It does not cover the costs of repairing the sewer, drain, or sump itself.
If a sewer backup occurs at your business premises, you may be forced to shut down your operations until your property can be cleaned up and repaired. The shutdown may cause your business to lose income. You protect your business against such events by extending your business income coverage (assuming your policy includes this coverage) to cover sewer backups. If you choose this option, your policy will cover income you lose or extra expenses you incur due to a shutdown of your business caused by a sewer backup.
The ISO sewer backup endorsement includes separate limits for property damage and business income. If your business sustains a property damage loss caused by a sewer backup, your insurer will not pay more than the limit shown in the endorsement. This limit is included in the property damage limit shown on your policy. It is not an additional limit. An aggregate limit may also apply. The aggregate limit is the most your insurer will pay for all sewer backups that occur during your policy period.
The ISO sewer backup endorsement contains a few exclusions. First, no coverage applies to sewer backups caused by flood and related conditions like tsunami, waves, and storm surge. If your business is insured under the federal flood program, your flood policy should cover damage to your property caused by a sewer backup if the backup is a direct result of flooding.
The sewer backup endorsement also excludes any discharge that results from your failure to perform routine maintenance or repair to keep your sewer or drains free of obstructions. This means that no coverage will apply if, say, your sewer system backs up because you failed to keep your sewer pipes free of tree roots. Also excluded is any damage caused by the failure of a sump pump due to a power outage. This exclusion doesn't apply if your policy includes utility interruption coverage.
The endorsement covers damage to covered property caused by a sewer backup if the backup results from the sudden mechanical breakdown of your sump pump or its related equipment.
Many sewer backups are caused by tree roots, broken lateral pipes, and blockages in a municipal mainline. Here are some steps you can take to keep your pipes flowing:
- Grease. Dispose of grease or cooking oil in heat-proof containers. Don't pour it down the drain!
- Paper. Only toilet paper should be flushed down toilets. Other types of paper may cause clogs.
- Roots. Have a licensed plumber inspect your sewer lines for tree roots and have roots trimmed if necessary.
- Battery Backup. If you have a sump pump, consider installing a battery that will keep your pump operating if the power goes out.
- Backwater Prevention Valve. Consider hiring a licensed plumber to install backwater prevention valve, which can prevent wastewater from backing up into your building.
- Proper Connections. Sanitary sewers are separate from storm sewers. The former carry sewage while the latter carry rainwater. Don't connect French drains, sump pumps and other elements of a storm sewer to your sanitary sewer! Such connections are illegal and likely to result in clogs.
Zurich. "Water Damage From Backup of Sewer and Drain: Are You Covered?" Accessed April 13, 2020.
Department of Insurance, Securities and Banking. "Discharge From Sewer, Drain or Sump," Pages 7 and 8. Accessed April 13, 2020.
FEMA. "National Flood Insurance Program Summary of Coverage for Commercial Property." Accessed April 13, 2020.
Insurance Information Institute. "Yuck . Are You Insured For Sewer Backup?" Accessed April 13, 2020.
Zurich Insurance. "Water Damage From Backup of Sewer and Drain: Are You Covered?" Accessed April 13, 2020.