It will likely be increasingly difficult for home and business
owners to find anyone willing to pay for basement flooding.
According to the insurers' Institute for Catastrophic Loss
Reduction, "basement flooding is one of the biggest
challenges facing homeowners, municipal governments and personal
property insurers across the country." Municipalities across
Canada have substantial protection against civil suits for sewer
backups, due to statutory immunities created by each province. At
the time these laws were passed, governments explained that private
property owners should protect themselves by purchasing insurance
against basement flooding. However, property insurers are in
business to make a profit, and can logically refuse to provide
flood insurance for the properties that need it most.
Most insurance is based on a pooling of risks. This makes sense
for auto insurance and fire insurance, and other risks where many
people each have a small, mostly random, risk of a large loss. Each
such person pays a relatively small premium, and as a result,
substantial compensation is available for the very few who turn out
to need it. This rationale does not work for basement flooding,
precisely because the risk is not random. Flooding tends to occur
in the same areas repeatedly, due to surface topography, runoff
patterns, surface treatments, infrastructure, foolish planning
approvals, etc. Some municipalities, such as Toronto, even publish
maps of flood-vulnerable areas; see http://www.toronto.ca/water/sewers/basement_flooding.htm.
These properties simply do not have the same risks as those more
fortunate properties on higher ground. Naturally, therefore, they
may be more expensive or impossible to privately insure against
If private insurance is unavailable, should the risk fall back
on the municipality? The City of Stratford agreed to pay $7.7
million last year to settle a class-action over sewer
backups in the South end of the city on July 28, 2002. The judge
who certified the class action suggested
that the city could be held liable for negligence because it had
failed to take effective action to prevent a repetition of previous
floods, which overwhelmed the sewers in the area. This sort of
analysis almost obliterates the distinction between negligence and
nuisance, and seriously weakens the statutory immunity that
municipalities may think they have.
On the other hand, individual homeowners are no better able to
bear the losses that such floods cause. Unwary purchasers may find
themselves in desperate financial straits when they occur.
Meanwhile, climate change is increasing the frequency, and the
magnitude, of the extreme storms that cause such flooding. We
should be thinking about such issues as a matter of public policy,
because they will not go away by themselves.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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