What happened in Penfield
Two sinkholes opened at Forest Hill Condominiums in Penfield, New York, after a water main break — leaving garages under thick mud and standing water. When one resident tried to file a claim, the insurer refused, calling it flood damage.
The water came from a pipe. The carrier called it a flood. That single naming decision was the whole claim.
It’s not an isolated story. Pennsylvania families were evacuated this year after a water main break triggered a sinkhole in a front yard — and found themselves in the same gap: the city didn’t clearly own it, and the standard homeowners policy didn’t clearly cover it either. The question underneath both stories is the one that lands on a restorer’s estimate: what do you call this water?
What the courts say: water in a pipe isn’t surface water
The insurance industry’s own reference manual takes the policyholder’s side on the core question. According to the International Risk Management Institute (IRMI) commercial property insurance manual, courts generally hold that water inside a pipe is not surface water, citing:
- Ferndale Development v. Great American Insurance Company
- Ebbing v. State Farm
- Popkin v. Security Mutual Insurance Company of New York
- Ender v. National Fire Insurance Company of Hartford
- Mellon v. Hingham Mutual Fire Insurance Company
The legal reasoning runs through a doctrine called ejusdem generis — “of the same kind.” The water exclusion lists flood, surface water, waves, tides, tidal water, overflow of bodies of water. Those are natural phenomena. A burst pipe isn’t of the same kind, so the general term “surface water” shouldn’t stretch to cover it. The Big “I” Virtual University’s coverage experts put it plainly: although broken-pipe water may travel over the ground’s surface, that doesn’t make it surface water “in the context of the exclusion.”
On that reading, the Penfield denial is wrong — and a New York court decision says exactly that about water inside a pipe.
The carrier’s rewrite: “or is otherwise caused”
Carriers read the same cases and changed the form. Newer water-exclusion endorsements add four words that undo the courtroom win: the exclusion now applies “regardless of whether any of the above… is caused by an act of nature or is otherwise caused.”
As one coverage expert put it: a burst water line is “otherwise.”
So the fight has moved from what the water is to which version of the exclusion the policy carries. Same water, same damage — covered under the old form, excluded under the new one. If you’re a restorer trying to predict whether a job gets paid, the policy’s edition date matters as much as the facts on the ground.
The buried-pipe trap
There’s a second trap, and it catches the Penfield facts exactly. In Praetorian Insurance Co. v. Arabia Shrine Center Houston (S.D. Tex. 2016), the court agreed the failed pipe was buried — and therefore all water emanating from it was “water under the ground surface,” a separately excluded cause of loss.
Follow the logic: water inside a pipe isn’t surface water (you win) — but if the pipe was buried, the water was under the ground surface (you lose anyway). A water main is almost always buried. The carrier that can’t call it surface water can call it subsurface water instead. The name changes; the denial doesn’t.
The route matters more than the source
Here’s the nuance working restorers can actually use. Coverage experts draw a line based on the water’s route, not just its origin:
- Pipe break in a wall shared with the insured space → the water exclusion should not apply.
- Water that flowed into a sewer, storm drain, or down the street first → probably excluded as flood.
“The original source of the water is not the determining factor” — the path it traveled is. That’s a documentation directive disguised as a legal point: photograph the break, photograph the path, photograph where it entered the structure. The route is evidence, and evidence is what survives the adjuster’s first “flood” label.
Two related facts worth knowing: ISO’s commercial property forms cover water damage from a city water main that bursts due to wear and tear — so the same loss can be covered or excluded depending on the form. And where a third party broke the main (a demolition contractor next door, a municipality’s aging line), there’s a liability claim independent of the property policy — carriers expect to subrogate, which means your documentation serves two claims, not one.
The other naming game: what category is it?
Coverage isn’t the only place where naming the water decides the money. Veteran operators have watched groundwater intrusion get classified as black water — Category 3 — on nothing more than where it came from rather than what was in it. One hotel job: groundwater pushing through PTAC units, labeled black water, and suddenly the scope — and the bill — reflected sewage rather than seepage.
The pattern is the same as the flood label. The name assigned to the water at the start of the job determines the scope, the tear-out, the estimate, and ultimately what the carrier will entertain. Categories should follow testing and conditions, not assumptions about origin. When the label inflates the scope, document why — or fight it.
What to do on the job
- Document the source and the route. Photograph the broken pipe or main, the water’s path across the property, and the exact point of entry into the structure. The route can matter more than the source.
- Note whether the pipe was buried or in-structure. Buried-pipe water gets relabeled “subsurface” — knowing which argument the carrier will reach for lets you prepare for it.
- Identify who owns or broke the main. A city-owned main or a contractor’s backhoe means a liability claim exists alongside the property claim. Get the name, the agency, the incident report.
- Check the exclusion’s edition. “Or is otherwise caused” is the four-word difference between a covered pipe break and an excluded one. If the policy is on the books, look.
- Don’t accept an inflated water category without evidence. Groundwater isn’t automatically black water. If testing and conditions don’t support Cat 3, say so in writing — the category drives the scope, and the scope drives the fight.
- Know your state’s case law. The same water is covered in one state and excluded in another. New York’s courts have been policyholder-friendly on pipe water; Texas buried-pipe law cuts the other way. Your market’s precedents are part of your toolkit.
- Remember the commercial form is different. ISO commercial property forms cover city-main bursts from wear and tear. Don’t assume the residential denial pattern applies to your commercial client.
This piece is informational, not legal advice. Coverage turns on specific policy language and state law — when the label is disputed, that’s what attorneys are for.