The contractor is obligated to locate underground lines and avoid them, or properly remove and replace them. If they damage them instead, it is no different than if they ran their excavator into the side of your house. They are responsible for the damage.

I would say that, except as modified by the contract, the contractor's duty is to perform all the work in a prompt, neat and workmanlike manner that produces a result that generally passes as acceptable in the trade. This would include a duty to be aware of, and take into account, the likely presence of underground utilities, such as gas, electric and water lines.

On the other hand, when it comes to drainage lines, I can see that the contractor may have a defense. First, drainage lines, at least in most neighborhoods, are not nearly so common as gas, electric, water and regular (sanitary) sewer lines. Second, drainage lines are more likely to be plastic and thus not show up with use of a metal detector or most pipe-locating apparatus. Finally, they are likely to be owner-installed rather than utility-installed, hence will not be in any "call before you dig" data bases. Thus, there may be a defense that the contractor was not negligent because the presence of the drainage lines was not foreseeable by a careful and competent contractor.

Of course, if the contractor noticed, or should have noticed, that he was damaging drainage lines in the course of doing the work, and did nothing about it, that would weaken this defense. Upon noticing the drainage pipes, the contractor might have been justified in charging you extra to repair them and then work around them in completing the job, but it would not be justifiable to ignore and cover up the damage.

Another factor that might weigh upon whether the contractor has a defense to a charge of negligence would be whether or not you, as the current owner, knew about the drainage pipes and failed to inform the contractor. This could be contributory negligence.

Finally, if this incident lead to a lawsuit, there could be an issue as to whether the contractor was liable for just the direct damage (the cost to repair the drainage lines) or for consequential damages (the results of the flooding) as well. Probably the latter.