§ 3.18 Exclusions - Water Damage (including Flood) - "surface Water"

• Library: Guide to South Carolina Liability and Property Insurance Law (SCBar) (2019 Ed.)

§ 3.18 Exclusions - Water Damage (Including Flood) - "Surface Water"

In M&M Corporation v. Auto-Owners Insurance Co., 390 S.C. 255, 701 S.E.2d 33 (2010), the South Carolina Supreme Court accepted certification of the following questions from the federal district court:

I. Under an all-risk Commercial Property Policy of insurance, does "surface water" encompass rainwater collected and channeled in a stormwater collection system?
II. If the answer to Question I is no, can such non-surface water reacquire its classification as surface water upon exit from the stormwater collection system, and if so, under what circumstances? ¹¹¹

The claimant hotel suffered damage as the result of rainwater exiting the insured's incomplete drainage system. The water discharged from the system and pooled in the hotel's parking lot, entered the hotel, and caused damage to the property. The insurer denied coverage based on a policy exclusion that stated that coverage was excluded for damage resulting from "[f]lood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not."¹¹²

The Court noted that the policy did not define "surface water" or "flood water" and noted...