A US court of appeals upheld the exclusion in a policy issued by Lloyd’s Underwriters for losses ‘caused directly or indirectly by flood’ in relation to a claim where a river basin marina lost five of its docks in a storm which generated strong winds and 18cm of rain causing the river to rise about a metre above its normal levels and overflow its banks in some places.
An undefined term in an insurance policy is not automatically ambiguous.
The claimants argued that the term ‘flood’ in the exclusion was ambiguous because it was not defined in the policy. But an undefined term in an insurance policy is not automatically ambiguous.
An earlier case defined floodwaters as ‘those waters above the highest line of ordinary flow of a stream, and generally speaking they have overflowed a river, stream or natural watercourse and have formed a continuous body with the water flowing in the ordinary channel’.
The claimants alleged that the high winds had caused strong currents ‘within the banks of’ the river and that the damage was not caused by flood, but there was no genuine issue of fact that the storm caused a flood in the sense defined. The claim was dismissed.