1. Forms
2. HO
3. HO-04-95

What the Form Is

The HO 04 95, Limited Water Back-Up and Sump Discharge or Overflow Coverage endorsement, is designed to add back a measure of protection to a homeowners insurance policy for losses that are typically excluded under the standard water damage exclusion. Specifically, it provides coverage, up to a scheduled limit, for direct physical loss to insured property resulting from water or waterborne material that:

• Backs up through sewers or drains from within the dwelling; or
• Overflows or is discharged from a sump, sump pump, or related equipment, even if due to mechanical breakdown or power failure.

It's important to note that this endorsement does not increase the overall limits for Coverage A (Dwelling), B (Other Structures), C (Personal Property), or D (Loss of Use) but rather provides a specific sub-limit for this particular peril.

Classes of Business It Applies To

This endorsement is used in personal lines for homeowners insurance policies. It is particularly relevant for:

• Homes with basements where sump pumps are used to prevent groundwater intrusion.
• Properties with older plumbing systems or those in areas prone to municipal sewer backups (though coverage for backups originating outside the dwelling may be limited or excluded depending on the edition and specific wording).
• Any homeowner seeking to mitigate the financial risk of water damage from these specific sources. For example, a homeowner with a finished basement containing valuable furniture and electronics would benefit from this coverage if their sump pump fails or a sewer line within their home backs up.

Special Considerations

• Coverage Limit: A specific dollar limit for this coverage is chosen by the insured and shown in the policy schedule (e.g., $5,000, $10,000, up to $25,000 or more). This limit is the maximum payable for any one occurrence.
• "Originates From Within the Dwelling": Many editions of this endorsement, particularly the "Limited" versions, specify that for sewer or drain backup, the water must originate from within the dwelling. This means if a municipal sewer main backs up into the home, it might not be covered under this limited form if the blockage or cause is outside the home's plumbing system.
• Negligence: Loss caused by the negligence of an insured is typically not covered. For instance, if a sump pump is manually operated and the insured fails to turn it on during a heavy rain, the resulting damage might be denied.
• Sump Pump Equipment: The endorsement generally does not cover direct physical loss to the sump pump or related equipment itself if the loss is caused by mechanical breakdown or power failure, although the ensuing water damage from the overflow would be covered.
• Flood Exclusion: This endorsement does not cover loss caused by flood, surface water, or water backing up through sewers or drains as a direct or indirect result of a flood. It is not a substitute for flood insurance.
• Availability of Broader Coverage: Insurers often offer a broader version, such as the HO 06 95 (Broadened Water Back-Up And Sump Discharge or Overflow Coverage), which may remove the "originates from within the dwelling" restriction, providing more comprehensive protection.

Key Information for Agents and Underwriters

• Risk Assessment: Underwriters should assess the property's susceptibility to water backup. Factors include the age of the home and plumbing, presence of a basement, reliance on a sump pump, local topography, and history of sewer issues in the area.
• Educating the Insured: Agents must clearly explain the coverage limitations, especially the scheduled limit of liability and the "originates from within the dwelling" provision if applicable to the policy's edition. Discussing the difference between this limited endorsement and broader options like the HO 06 95 is crucial.
• Adequacy of Limits: Agents should help clients select a coverage limit that adequately reflects the potential cost of water removal, drying, and repairing/replacing damaged property in areas like basements. Costs can escalate quickly.
• Not Flood Insurance: Emphasize that this endorsement does not cover flood damage. If the property is in a flood-prone area, a separate flood insurance policy should be recommended.
• Pricing: The premium for this endorsement will vary based on the selected limit and the underwriter's assessment of the risk.
• Claims Handling: Adjusters will need to determine the origin and cause of the water backup or overflow to confirm coverage under the endorsement's terms, paying close attention to whether the event was due to an insured's negligence or if the water originated from outside the dwelling (for limited forms).