A commercial property policy extension granting coverage for an ‘influx of water derived from natural sources’ trumps a policy’s broad form flood exclusion, Alberta’s Appeal Court has found in a 2-1 split decision.

A bowling alley in Fort McMurray, Alta., located about 250 metres from the Clearwater River, purchased an insurance policy extension.

The extension negated a specific policy exclusion in the broad form, so that any damage caused ‘by seepage, leakage, or influx of water’ through the basement’s walls was not to be excluded from coverage.

The broad form of the policy included a flood exclusion that reads: ‘This Form does not insure against increased costs, and loss or damage caused directly or indirectly…in whole or in part by flood, including ‘surface water,’ waves, tides, tidal waves, tsunamis, or the breaking out or overflow of any natural or artificial body of water.’

This commercial property policy was in place in February 2020, when Clearwater River flooded its banks and inundated the bowling alley.