The introduction of water on E-10 fuel can be disasterous. E-10 can hold up to four teaspoons of water in suspension per gallon. Once this saturation point is exceeded, the solution separates and the gas floats on top while the ethanol and water mix on the bottom. This event is called "phase separation". Ethanol fuel can absorb enough water to reach it's phase separation point in just over 3 months at 70% humidity.
While the phase separation slurry in itself can cause problems by clogging fuel systems, the more immediate problem is that the remaining gasoline has now lost it's original octane value which can cause poor running and in some cases engine damage. When phase separation occurs, the fuel should be drained and replaced.