Frozen Pipes, Vacancy, and Date of Issue

We have a Homeowners 3 policy issued on January 23, 2019. A Claim came in on February 11, 2019 for freezing and water discharge discovered on February 9, 2019. Basement has standing water with about 2″ of ice formed over it. The house was vacant and unoccupied at the time of loss. We were unaware of this when writing the policy. Insured claims a basement window blew open causing the freezing pipes. There is no heat in the basement area and the main floor heat was on at the time of loss. Insured also indicated they had not been to the dwelling for about 2 weeks prior to discovering the flooded basement. There is extensive damage to the drywall etc. My question is: Do you feel this is a covered loss.

Ohio Subscriber

You have a number of things going on here. First, I'm looking at the ISO HO 00 03 05 11; your policy may have different language. Your policy begins January 23, so you're limited to that time frame. If the insured lied on the application and the property had been vacant before the start of the policy then you have may misrepresentation and reason to deny the claim and cancel the policy.

Otherwise, the policy was put in force January 23. Even if the property became vacant and unoccupied the next day, it is not an issue unless the property was vandalized after it had been vacant 60 days. Freezing of pipes is excluded unless the insured used reasonable care to maintain heat in the building. While not stated in the policy, reasonable care to maintain heat is considered keeping the heat set at 55 degrees. If the heat is for the entire house and there is not separate heat for the basement, and the heat was set to at least 55 degrees, then the insured used reasonable care to maintain heat. Therefore, the loss would be covered.

If the heat was set below 55 degrees or the basement runs on a different system which was not on, then the insured did not maintain heat in that part of the building and there is no coverage for the loss. If you believe that fraud is involved then an investigation would be warranted.

Failure to Maintain Heat

The insured has a secondary home with oil heat. The electricity was on and the heat was set at 55 degrees. During a cold snap when the insured was not occupying the home, the insured overlooked having adequate heating oil—had no auto fuel delivery, the tank ran dry, and the heat shut off, which resulted in frozen and burst pipes and water damage. The insured had an open perils homeowners policy.

Did the insured fail to use reasonable care in making sure there was adequate fuel oil to provide heat?

Kentucky Subscriber

Yes, the insured failed to maintain the property. This is why the policy references draining the pipes if the heat is turned off or leaving the heat on. With fuel oil, the insured should have ensured that oil would be there throughout the season or should have drained the pipes. An expensive oversight to be sure, but one that is not covered.

Winterizing Gone Awry

A client of ours owns a second home in New Jersey and had hired a plumber to winterize his plumbing before the winter because the house was going to be unoccupied. Unbeknownst to him, the water valve at the street had a small leak and water continued to enter his plumbing system despite his attempt to winterize. When the temperature dropped that winter, the water in the pipes froze and caused pipe breaks and water damage in the kitchen, bathroom, and laundry room. The insured did not discover the damage until he checked on the house in the spring. The carrier has accepted that there is a covered freeze loss and is paying for damages to the flooring and drywall. However, they are denying coverage for damages to the kitchen cabinets, bathroom vanity, and paneling, stating that those are long term damages due to the fact that the water ran for more than fourteen days. They are using the following seepage exclusion endorsement:

SECTION I – EXCLUSIONS

Seepage, meaning a gradual, continuous, or repeated seepage or leakage of water, steam or fuel over a period of 14 days or more, resulting in damage to the structure, whether hidden or not. This endorsement takes precedence over all other endorsements attached to your policy.

The carrier is also denying any mold damage, stating that it is the result of seepage for over fourteen days and not the covered freeze loss. Is this the proper application of the seepage exclusion? All of the damages stem from the same sudden and accidental cause of loss: broken pipes due to a freeze. Does that mean that if the insured discovered the damages thirteen days after the loss they would have had full coverage for all of the damages, but since they discovered it more than fourteen days after the loss, the carrier can now deny some of the damages based on seepage?

New Jersey Subscriber

The seepage exclusion exists so that insureds do not neglect their property until a problem becomes a BIG problem. Had someone been living in the home or even checking on it, the leak would likely have been found and the mold prevented. If the pipes did leak or seep continuously, then the exclusion stands. Yes, had the loss been discovered on day thirteen, the entire loss would have been covered. The line has to be drawn somewhere, and fourteen days is generally where it is drawn.

Fire Protective Equipment, Frozen Pipes, and Vacancy Provision

A client had frozen sprinkler pipes in his building. They are above the ceiling so no other pipes in the building froze. It is questionable at this point as to whether or not heat was maintained in the building. The Frozen Plumbing Exclusion states:

"Water, other liquids, power or molten material that leaks or flows from plumbing, heating, air conditioning or other equipment (except fire protective equipment) caused by or resulting from freezing, unless: 1. You do your best to maintain heat in the building or structure; or 2. You drain the equipment and shut off the supply if the heat is not maintained."

This seems to separate fire protective equipment from this exclusion therefore allowing coverage. Am I wrong on this?

Second, the building has been held for rent for 4 months. Is a building that is held for rent considered vacant? There is no tenant in the building but it is actively being advertised by a realty agent and they have had showings in the building on multiple occasions.

New Hampshire Subscriber

You are correct that the exclusion separates fire protective equipment from the frozen plumbing exclusion. However, the CP 00 10′s vacancy provision states that when the policy is issued to a building owner, the building is considered vacant unless at least 31 percent of the total square footage is rented to a lessee or sub-lessee to conduct customary operations and/or used by the building owner to conduct customary operations; if it is being renovated or is under construction, it is not considered vacant. Otherwise, under this provision, your insured's building would be classified as vacant, and the policy will not pay for loss or damage for sprinkler leakage (unless the insured has protected the system against freezing) if the building has been vacant for more than sixty consecutive days.

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