In my opinion, the person who is holding your watch for you is not liable. I am not a lawyer, but this is not a full legal case either, needing detailed analysis and a knowledge of the laws of a particular jurisdiction. I have taught constitutional law at the college level so I have some idea about how to reason legally.
The reason that I think you are mistaken in your analysis is that the receiver is only required to use "reasonable care" to protect the property that is entrusted to him or her. So unless the person who was holding your watch deliberately caused the flood somehow, they would not be liable. As far as the burglary goes, perhaps if the person left your watch right in their window and the window was open...
West's Encyclopedia of Law, available through eNotes, says:
When a bailor receives the sole benefit from the bailment, the bailee has a lesser duty to care for the property and is financially responsible only if he or she has been grossly negligent or has acted in bad faith in taking care of the property.