On the AAIS FORM 3 (2.0) policy, is there wording specific in regard to maintenance issues (due to lack of upkeep by insured)? Wear and tear does not seem to fit for some denials. For example, an insured whose attic is not ventilated properly and has had ongoing issues developing for years. We are looking for a quotable area of the policy.
Pennsylvania Subscriber
The policy covers the property for risks of direct physical loss unless the loss is excluded. Anything that occurs over time is not the same as direct physical loss. If an insured has an attic that is not ventilated properly and the insured does not address it, that is neglect. Any loss that develops over time is going to be seen as faulty maintenance or neglect. An insured has a responsibility to maintain his dwelling. If the insured knows something is leaking, or that a window doesn't seal correctly, or that something else isn't quite right and he doesn't address it, any resultant damage is a result of his failure to maintain his property.
As far as policy language goes, under Exclusions to Coverages A and B the seepage or leakage exclusion is for loss caused by repeated or continuous seepage or leakage of liquids or steam from within a plumbing, heating, etc. appliance. Continuous seepage or leakage is a maintenance issue. An exception applies for accidental leakage, overflow or discharge from certain equipment, but note the language difference – accidental discharge, versus seepage or leakage. The intent of this exception is that if the hot water heater ruptures there is coverage for the loss. If the hot water heater has been leaking for four months, the insured should have addressed it before it damaged the property.
Under the personal property coverage, while accidental discharge or overflow of liquids or steam from a plumbing, heating etc. system is covered, note the exception excluding coverage caused by continuous or repeated seepage or leakage – again this is a neglect issue that the insured should have been aware of and taken care of.
Under the exclusions that apply to all property coverages, the neglect exclusion itself is particular to damage at and after the time of loss. For example, if a tree comes through the roof and the insured fails to have the roof tarped to prevent rain from coming in, that falls under the neglect exclusion. This is not where the neglect of the property is excluded.
The errors, omissions and defects exclusion precludes faulty design, construction, maintenance of property, etc. If the attic was designed wrong or built wrong, that is excluded in this exclusion. If the insured let the water heater leak for a number of months, that is excluded here as faulty maintenance of the property. Since maintenance is not defined, a court would go to a standard desk reference. Merriam Webster online defines maintenance as: the upkeep of property or equipment; the act of maintaining. Maintain is defined as: to keep in an existing state (as of repair, efficiency, or validity)preserve from failure or decline. This is where the neglect of the insured to maintain the property is excluded.
When you look at maintenance issues, anything the insured does that allows the property to deteriorate would be considered a maintenance issue. Note that the errors, omissions and defects exclusion applies to "an act, error or omission (negligent or not)…" so even if the insured is not necessarily negligent, if the property is not maintained for any reason, it is excluded. You then have the wear and tear exclusion, which does not pay for losses from wear and tear, marring, deterioration, inherent vice, latent defect, mechanical breakdown, rust, etc. Most property deteriorates and wears over time – the paint on the side of the house will need to be redone – the interior walls will need to be painted, the carpet will need to be replaced, and most everything has a life expectancy beyond which it needs to be replaced or at least repaired. Here again, you find coverage excluded for the improperly ventilated attic since the conditions in the attic deteriorated over time.
You need to look at the actual cause of each loss and what was involved. Any ongoing issue is going to be considered an act, error or omission relating to maintenance of property. Property that is simply old and starting to fail will be seen as wear and tear and deterioration and be excluded as such.
Insurance is designed for catastrophic losses, not things that can be expected over time. The fire, tornado, or other sudden event damaging the property is what is covered, not the average wear and tear or upkeep that an insured needs to do to keep the property in good condition. We're happy to help you walk through any specific situation you may have.