SOS – Limited Coverage for Sewage in Restaurant

Insurer Provided Sewer Back-Up Coverage But Limited its Liability

People who write insurance policies have found a way to avoid contentious claims where the cause of loss is difficult to ascertain or deal with by an insurer. Rather than trying to deal with the task of writing an all encompassing exclusion they create a peril insured against and limit the amount payable. I have seen this used in mold claims, earth movement, and mudflow situations.

In Fouzia Salih v. Ohio Security Insurance Company, Docket No. A-1179-17T1, Superior Court of New Jersey Appellate Division (December 3, 2018) it was used in a sewer back up claim.


Fouzia Salih owned property on Main Street in Paterson, New Jersey which she leased to Jehad Daher, who operated a restaurant on the property. Daher contacted plaintiff’s son, Massy Salih, and informed him that there was water and an odor at the restaurant. When Massy arrived, he immediately noticed water and a very foul odor that prevented him from entering the property any further. Massy contacted Anytime Plumbing, which inspected the property and informed him that there was a clog in the restaurant’s toilet, which resulted in dirty water, including human feces, overflowing out of the toilet, and into the restaurant. The water caused heavy damage to the property’s tiles, basement, first-floor bathroom, and kitchen, and destroyed the water heater and furnace.

The damage rendered the property inoperable, and Daher stopped paying rent. In order to restore the property, Massy hired Sure Kleen Restoration to remove the damaged tiles and dry wall, and to clean and sanitize the premises. Plaintiff’s public insurance adjuster, Chris Powers, determined that plaintiff’s loss was caused by a discharge of water that resulted in $162,933.63 in total damages to the property.

Plaintiff filed a claim with Ohio Security. After an initial investigation and inspection by its insurance adjuster, Ohio Security determined that the “cause of loss” was “from a back[-]up of raw sewage and not an overflow.” As a result, Ohio Security denied coverage for losses in excess of its $25,000 policy sublimit. In making its decision Ohio Security relied on its policy provisions and information gathered from Sure Kleen Restoration, confirming that the loss was from a sewer back-up, as well as the plumber, who “used a snake to clear the sewer line to remedy the issue.”

According to defendant, although under the “Water Exclusion Endorsement,” the insurance policy generally excluded water damage from “[w]ater that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment,” the “Water Exclusion Endorsement” was “deleted and replaced,” and coverage was extended for “direct physical loss or damage caused by water . . . [w]hich backs up into a building or structure through sewers or drains which are directly connected to a sanitary sewer or septic system.” However, coverage under the custom endorsement was limited to a maximum of $25,000.

Based on these policy provisions, defendant issued checks to Sure Kleen Restoration for $16,652.76, and plaintiff for $8347.24, for a combined total of $25,000.

Because plaintiff’s expenses to maintain and restore the property exceeded $25,000, on plaintiff sued alleging Ohio “breached its contractual obligations to pay benefits to [p]laintiff for a loss covered under [d]efendant’s policy of insurance.” Relying on the custom endorsement, defendant moved for summary judgment.

According to plaintiff, because the damage resulted from an “accidental discharge” of water from a blockage in the plumbing system within the property, rather than a sewer back-up originating outside of the property, the $25,000 sublimit in the custom endorsement did not apply, and plaintiff was entitled to recoup lost business income.

The motion judge determined that the custom endorsement limitation controlled. Finding no genuine issue as to any material fact, the judge acknowledged that an insurance policy is a contract to be enforced as written, and that policy exclusions are ordinarily strictly construed against the insurer.


Plaintiff purchased and bargained for coverage for water damage in the custom endorsement which states the most the insurer will pay for loss or damage under the coverage extension is $25,000.

If the evidence of record — the pleadings, depositions, answers to interrogatories, and affidavits — together with all legitimate inferences therefrom favoring the non-moving party, would require submission of the issue to the trier of fact, then the trial court must deny the motion. On the other hand, when no genuine issue of material fact is at issue and the moving party is entitled to a judgment as a matter of law, summary judgment must be granted.

The appellate court agreed with the trial court there are no factual disputes. The issue on appeal presents solely a question of law. Because the interpretation of an insurance contract is a question of law which is to be decided independent of the trial court’s conclusions. An insurance policy is construed in accordance with principles that govern the interpretation of contracts and the parties’ agreement will be enforced as written when its terms are clear in order that the expectations of the parties will be fulfilled.

To that end, an appellate court, when considering the meaning of an insurance policy, interprets the language according to its plain and ordinary meaning. Further, New Jersey courts often have construed ambiguous language in insurance policies in favor of the insured and against the insurer. However, in the absence of an ambiguity, a court should not engage in a strained construction to support the imposition of liability or write a better policy for the insured than the one purchased. Moreover, New Jersey courts will not manufacture an ambiguity where none exists.

Applying the insurance contract interpretation requirement the appellate court agreed with the trial judge that defendant was entitled to summary judgment as a matter of law.

The policy’s exclusionary language was “deleted and replaced” by the custom endorsement, which added water damage coverage for sewer backups. However, the custom endorsement also limited recovery to a maximum of $25,000, and excluded loss for business income or extra expenses.

The policy terms are clear, unambiguous, and support Ohio’s interpretation. The appellate court, therefore, rejected plaintiff’s attempt to create ambiguity and to support an alternate interpretation of the policy provisions by relying on case law from jurisdictions throughout the United States that differentiate a sewer back-up from an accidental discharge of water.


The Ohio Security policy, in clear and unambiguous language, agreed to cover damage caused by the back-up of a sewer and limited its liability for such losses to $25,000. It paid the limit and was sued for applying the clear and unambiguous language of the policy. As I have said until I have turned blue in the face, before suing an insurer, it is incumbent on the litigants and their lawyers to read the policy and not try to create an ambiguity that isn’t there. The New Jersey court read the policy and refused to give the insured a coverage for which she did not pay.

© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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