Complaint Review: GEICO & TRAVELERS INSURANCE

Since our telephone conversation Friday, July 17, 2008, we have received Mr. Doug Roddy's letter dated May 6, 2008 denying our claim for water damage on the basis of verbiage noted in h*o-3(06-91), Section I perils insured against on page 7 of 21, paragraphs B and C.

Mr. Roddy quotes that the damage is from repeated leakage or water over a period of time, weeks, months or years, from within a plumbing drainage, heating, air conditioning system or an automatic fire protective sprinkler system or from within a household appliance. In addition, he also explains that there may also be additional exclusions that have yet to be investigated to assist in denial of the claim.

As we have constantly stated, we do not know when the event (leak) took place since it was concealed within a wall, hidden from sight. There were no signs, no noise, no vapors, no odors and no detectable dampness until one day. That same day it was detected, the wall was torn out and the problem repaired within hours. As reported, the area is/was not in an obscure remote area of the house, it is in the master bathroom, shared by two people, used everyday.

This is not a case of neglect, negligence, abuse or laziness. It is plain and simple that damage occurred because the pipe was hidden. There was no way to know we had a problem until there were signs of damage. I am confident that when I did notice a problem, it was within hours of it being detectable.

During our telephone conversation you assured me that you would review the claim and the policy and get back with me no later than Monday, July 21, 2008. I regret that you did not since I am waiting on your reply.

I have done some investigation on insurance policies and found several articles that pertain to this same topic:

A). The Snyder Agency wrote in their 2007 report that; damage due to a leaking tub drain (hidden) is covered if reported immediately upon discovery, and you fixed the leak immediately. The actual pipe repair is not covered, but the water damage should be.

B). Everette Lee Herndon, Jr. wrote in his report to Mealey's Mold Conference June 25/26 2001; Prior to 1991, a previously undetected loss (mold, wet rot, etc.) caused by repeated seepage and leakage of a plumbing system was covered in as much as discovery of the problem by the insured constituted a new and unexpected loss for the insured. The 1991 ISO policy was written with exclusion for mold, wet and dry rot. However, confusion arose since the 1991 policy still required the insured to protect the property from further damage once the loss was discovered, implying that the loss was covered, as it had been previously been covered.

The new ISO 2000 h*o-3 policy seeks to eliminate this confusion and specifically gives back the coverage for an undetected loss of this nature. The intent of the h*o-3 open perils policy was originally to only exclude coverage for further damage where no action was taken once the loss was discovered. The ISO 2000 policy makes the intent clear and removes the confusion and the debate that has existed for the past decade.

C). The Institute For Business & Home Safety reported in their 2003 report to the Farm Bureau Insurance Company that one of the most frequent causes of moisture damage is; Plumbing leaks inside walls may go undetected for some time and result in significant damage. There are no recommendations to detect or prevent such leaks.

D). Texas Department of Insurance Commissioner Jose Montemayor addressed the h*o-3 issue on November 28, 2001 stating that; The order provides coverage in the basic policy for removal of mold that results from water discharge, leak or overflow that is sudden and accidental, including those that are hidden or concealed. If a policyholder continuously ignores indications of an obvious such as wet carpeting, the claim for mold removal could be denied.

E). The Fire, Casualty, & Safety Bulletins (FC&S), published by National Underwriter Company; We take the position that hidden water damage from a leaking pipe is covered. This would be the case even if a leak continued from a lengthy period, so long as the damage was reported by the insured as soon as he or she became aware of it. The continuous seepage or leakage exclusion is only intended to apply to the situation where the insured has not fulfilled his or her duty of promptly reporting the loss as soon as he or she becomes aware of it. This is a reasonable approach, since it would be unfair to penalize an insured for not promptly reporting an otherwise covered water loss of which he or she had no knowledge.

F). Mr. Edward Esho, Jr. of the Environmental Risk Resource Association (ERRA) wrote: There is an exclusion for mold in the homeowner's forms. The reason is that the exclusion lies within the group of things that will happen over time, such as rust, corrosion, and wear-and-tear, and thus are uninsurable. When a homeowner allows a leaky pipe to keep on dripping, or allows mold to grow within a steamy bathroom, then there is no coverage. But, the FC&S position is that mold originating from a covered event, such as a major storm or a burst pipe, is covered. And in fact, under certain conditions, the 2000 ISO homeowners' forms specifically cover mold, fungus, or wet rot damage; coverage exists when the damage results from accidental discharge if such damage is hidden.

These are just a few of the examples I have located that support my claim that there was no way that we could have known there was a problem and that the intent of the continuous seepage exclusion is to protect the insurer from those who knowing let a problem continue, not to be used as a tool to deny coverage to the insured, like myself, that acted immediately to protect my home. I would not disagree with your decision had the problem been detectable.

There are hundreds of articles that discuss hidden, or unknown, leaks not being excluded under the continuous seepage clause. Most of them are written about roof leaks but still the topic is hidden leaks. If the leak, or seepage, is unknown, I cannot report it immediately. In addition, most all court cases I have reviewed found in favor of the insured.

I ask that you reconsider your decision so that we may resolve this issue in a fair manner, between the insurer and the insured.

Randy m
Chattanooga, Tennessee
U.S.A.