Water is life. Every culture, every profession, and every person understands that truth instinctively. Without it, nothing works. When water goes wrong, too much of it or not enough of it, everything can fall apart. Scientists remind us that all known life depends on water and its unique properties to sustain biological processes.
In today’s property insurance world, water has become something else entirely. It has become the most word-differentiated, most litigated, most contested, and most strategically manipulated peril in residential insurance. A recent federal court decision involving another State Farm water loss denial highlights exactly where this battle is being fought and why every property insurance professional should be paying close attention.
The instant case involves what should be a straightforward claim, like what many policyholders unfortunately find. A homeowner returns home and finds water on the kitchen floor from a dishwasher malfunction. The policyholder says it was a sudden and accidental loss, not anticipated or known to be occurring. State Farm says it was gradual seepage and excluded under the policy. The court ultimately allowed the breach of contract claim to proceed to a jury but dismissed bad-faith claims-handling allegations against State Farm. 1
The lessons that matter are not just based on the outcome. Instead, what matters is how the parties’ arguments were framed and what proof was missing. State Farm’s position reflects a strategy we are seeing repeatedly across the country. It begins with reframing the water loss event, as if the State Farm attorneys are following a playbook used throughout the nation. Rather than addressing what the insured experienced, a sudden and surprising discovery of water causing damage to their home and contents, the State Farm argument shifts to engineering theory. The hose cannot “burst.” The appliance uses limited water. The damage must therefore have resulted from repeated leakage over time. It is a neat narrative that State Farm uses in most of its water-loss cases, carefully crafted and confidently presented.
The problem is that it is often built on assumptions rather than factual proof. In this case, State Farm never established when the leak began. That is not a minor omission. The seepage and leakage exclusion is time-based. If you cannot prove duration, you cannot prove the exclusion. Yet, as in many of these cases, the argument leans heavily on what “must have happened” rather than what did happen.
The policyholder’s opposition, by contrast, grounded itself in real-world facts. Immediate discovery. A contemporaneous plumber’s report. No prior issues. No mold. No indicators of long-term leakage. That is how these cases should be presented, because that is how almost all these losses occur. The key lesson is that the factual narrative starting with what occurred, not what might have occurred in theory, should be shown in every water loss case by the policyholder, public adjuster, or somebody on behalf of the policyholder.
The federal court’s ruling reflects this tension of factual proof. On one hand, the court correctly recognized that there was a factual dispute about how the water was released. It emphasized that the relevant inquiry is not the mechanical failure itself, but the manner and timing of the water discharge. That is exactly right and consistent with what California appellate courts have already begun to articulate.
On the other hand, the court dismissed the bad faith claim, finding that State Farm’s investigation, even if imperfect, was sufficient to create a genuine dispute. That is where the decision becomes more troubling. Because what the record shows is a recurring issue in these State Farm water loss claims. We find another expert who never inspected the failed component. We again find State Farm adjusters and decision makers who rely on limited observations. We again find investigations that focus more on supporting a denial than testing competing explanations. We find State Farm giving the benefit of the doubt to reduce its claims severity rather than paying its customers. The court acknowledged some of these limitations but ultimately concluded they were not enough.
What makes this case even more important is that it sits alongside a recent California appellate decision involving State Farm that took a slightly different tone. In that California case, the appellate court made it clear that if an insurer cannot establish how long water leaked, summary judgment is inappropriate, and it allowed bad faith claims to proceed based on investigative deficiencies. 2 Here, the federal court agreed on the first point but diverged on the second.
While courts are increasingly requiring insurers to prove duration, they should also consistently hold them accountable for how they reach their conclusions and whether they are looking for facts of duration or conveniently missing them, hoping to avoid litigation where this conveniently missing proof will never be proven. Insurance companies know they have to conduct a full investigation, looking for facts that support payment and not just reasons supporting a “reasonable basis for denial.” How can any reason for denial be reasonable if it fails to conduct a full investigation?
There is also a larger industry issue at play. State Farm’s policy language and its approach to water loss claims are not identical to those of every other insurer. In many ways, State Farm is pushing the boundaries, both in how its exclusions are written and how they are applied. At the same time, State Farm remains the residential market leader. What it does today will not stay isolated. Other carriers will watch closely. They will study these decisions and decide whether to follow the same path. These water loss cases matter beyond the individual claim.
If you are handling water loss claims, whether as a lawyer, adjuster, contractor, or insurer, you need to understand where this is going. The fight is no longer just about whether water caused damage. The fight is about when it started, how it progressed, and whether the evidence supports the story being told.
I have been writing about these issues for some time, including State Farm’s approach to water loss claims and how courts are beginning to respond in Water Loss from Burst Pipes and Denials—A Big Win for Policyholders. I strongly encourage readers to review that recent article on water leak denials, as it provides additional context and highlights how these disputes are evolving nationwide.
Water may seem simple. It flows, it leaks, it damages, and it dries. But in property insurance law, water loss has become something far more complex. It exposes how policies are written, how claims are handled, and ultimately, whether the promise of insurance is being honored.
In that sense, these cases are about trust. I want to give a big shout-out to some insurance companies and their property insurance adjusters and managers from PURE, AMICA, Lexington Preferred, and Chubb for often finding these facts and providing coverage for these exact same water loss scenarios, while their competitors almost always deny the claim. Insurance carriers differ in their policy terms, adjuster training, criteria for scoring adjuster performance, and claims payment reputation. These matter when it comes to a claim and whether it is fully paid. Avoiding cheaper insurance in favor of purchasing insurance from one of these other four companies can sometimes make all the difference between whether a policyholder gets paid or must hire a lawyer to get paid.
Insurance agents and others should make certain to inform insurance customers which insurers have better coverage and a better reputation for claims payments. I welcome any insurance company that thinks I have left them off this list of good claim payers and challenge you to explain why. I am certainly fallible and want this property insurance blog to be as accurate as possible.
Thought For The Day
“Thousands have lived without love, not one without water.”
— W. H. Auden
1 Hampartsoumian v. State Farm Gen. Ins. Co., No. 2:25-cv-00404 (C.D. Cal. Apr. 17, 2026). See also, State Farm’s Motion for Summary Judgment, and Hampartsoumian’s Motion in Opposition.
2 Nargizyan v. State Farm Gen. Ins. Co., No. B342340 (Cal. App. Apr. 15, 2026).