A Split Supply Hose, Long-Term Seepage, and Loss of Use on an HO-3
Ravi and Priya own a 1962 colonial insured on an HO-3: Coverage A $400,000, Coverage C $200,000, Loss of Use $80,000, a $1,000 all-peril deductible, and the standard mold sublimit. They leave on January 3 for six weeks. On February 12 a neighbor calls: water is pouring out of the garage. A washing-machine supply hose had been seeping slightly for months and finally split wide open. Documented damage: hardwood floors $14,000, drywall and insulation $6,000, mold remediation and testing $18,000. The contractor also finds rot in the subfloor and sill plate that he says took "a year or more" to develop. The family spends five weeks in a hotel ($9,600) and eats out ($4,200) instead of cooking.
1. How much of the water and mold damage is payable, and under what limit?
Read the worked answer
Split hose = covered water damage; mold = covered but capped.
- Sudden and accidental discharge from a plumbing system (the supply hose) is a covered peril. Floors $14,000 + drywall $6,000 = $20,000, less the $1,000 deductible → $19,000.
- Mold is an ensuing loss from that covered discharge, so it is covered - but the HO-3 carries a $10,000 aggregate mold sublimit for remediation, testing, and tear-out. The $18,000 invoice is paid at $10,000, not $18,000. The sublimit is not increased by the fact that the mold came from a covered peril.
Total tender on the property side: roughly $29,000, not $38,000. Explain the sublimit to the insured before the remediation contract is signed, or you will be blamed for the shortfall.
2. The contractor ties the subfloor rot to a year of slow leakage. How does that affect the claim?
Read the worked answer
The rot is excluded, and it may drag part of the claim with it.
The water damage exclusion bars loss from constant or repeated seepage or leakage over 14 days or more, and the deterioration/rot exclusion bars damage from wear and tear, marring, deterioration, and latent defect. A year of slow seepage fits both. The ensuing-loss exception does not rescue it - it preserves coverage for a new peril that follows an excluded cause, not for the excluded seepage damage itself.
The practical split:
- Burden of proof. The insurer must show the seepage lasted 14 days or more. The contractor's "a year or more" statement, plus the pre-loss condition of the subfloor, is enough to carry that burden for the rot.
- The February 12 event. The moment the hose split is a sudden discharge; damage from that rupture, including the floors and drywall, remains covered even if the insurer denies the subfloor.
- Document it. If the adjuster cannot separate the long-term portion from the rupture portion, expect the whole water claim to be contested. Photograph staining patterns and get the plumber's written finding on the hose's condition.
3. The family submits the $9,600 hotel bill and $4,200 of restaurant receipts. What does Loss of Use actually pay?
Read the worked answer
The hotel yes; the restaurant receipts no - only the increase.
Loss of Use pays the necessary increase in living expenses to maintain a normal standard of living while the dwelling is unfit to occupy. That is not a reimbursement of total spending:
- Hotel $9,600 - covered, because it is entirely an added cost (they would have had no hotel bill at home).
- Restaurant meals $4,200 - only the amount above what groceries would have cost for five weeks. If normal groceries would have been about $1,400, the payable excess is roughly $2,800. The base food cost is the insureds' own expense and is not recoverable.
- The $80,000 Loss of Use limit is far away; there is no problem there. But the payment must be reasonable and necessary, and the insureds must not use the claim to upgrade their standard of living - a four-star suite in place of a modest rental invites a dispute.
Also confirm the dwelling was actually unfit to occupy. If only the garage and laundry area were damaged, hotel costs may be denied entirely.