It depends on your policy language and the policy type, as well as what kind of water damages you are asking about. There is just not enough information in this question to give an answer.
Yes it is, depending on the source of the water and and if a leak; the duration of the leak. Ask back as to the cause of the water damage to see if it would be a covered loss.
If people drink the water they can get sick and if animals such as fish are in the polluted water, they can die. Sometimes birds dive for food in the water, and they can die too. So, yes, water can...