Chimney Damage-Faulty Maintenance or Covered Fire Loss? – Claims Magazine

ISSUE

The insured homeowner recently had his chimney inspected and was told there were cracks in the flue tiles and damage to the liner caused by a chimney fire. The insured has filed a claim for the cost of repairs, including replacement of the liner. Is this a covered loss due to fire?

ANALYSIS

These kinds of claims are common due to increasing public awareness of the dangers of chimney fires. Chimney fires are caused by creosote, a highly combustible material that builds up inside chimneys during normal use. Regular inspection, cleaning, and repairs are therefore necessary to avoid the tragic and costly results of fires that spread beyond the chimney flues. According to the Chimney Safety Institute of America, "[w]ith proper chimney system care, chimney fires are entirely preventable."

This poses some difficulty for claims personnel who are reluctant to pay the cost of what appears to be routine maintenance, although such maintenance can clearly prevent much larger losses. From the standpoint of coverage analysis, the conflict is between traditional coverage for fire losses without regard to the negligence of the insured and more recent policy exclusions for faulty or inadequate maintenance.

Note that there is no such conflict when a chimney fire spreads outside the chimney system and damages other parts of the dwelling or its contents. Those kinds of losses are clearly covered under standard Homeowners policies regardless of negligence by the insured as long as no fraud is involved. This discussion only addresses damage within the chimney.

"Friendly" vs. "Hostile" Fires

Early case law attempted to address similar concerns by distinguishing between "hostile" and "friendly" fires and finding no coverage for losses caused by "friendly fires." This doctrine originated in an English case involving a closed chimney flue, Austin v. Drew, 4 Camp. 350, 6 Taunt. 436, described in Mitchell v. Globe & Republic Ins. Co., 28 A.2d 803, 804 (Pa. Super. 1942). In that case the court denied coverage for loss of sugar in a sugar refinery caused by excessive heat and smoke. It reasoned: "There was no fire in the building that ought not to be there. Nothing was on fire that ought not to be on fire." 28 A.2d at 894.

Modern courts have tended to limit application of the "friendly fire" doctrine to very narrow circumstances or to abandon it altogether. See Sadlowski v. Liberty Mut. Ins. Co., 487 A.2d 1146 (Del. 1984); Schulze & Burch Biscuit Co. v. American Protection Ins. Co., 421 N.E.2d 331 (Ill. App. 1981); Engel v. Redwood County Farmers Mut. Ins. Co., 281 N.W.2d 331 (Minn. 1979). See also, 10 Couch on Insurance 3d, § 149:24 et seq. (1998). However, as long ago as 1896, the Supreme Court of Massachusetts refused to extend the doctrine to chimney fires, reasoning as follows:

[W]e find it by no means easy to determine whether the principle should be extended far enough to cover an occasional fire in a chimney, incidental to the ordinary use of a stove, or whether such a fire should be held to be one for whose unexpected injurious consequences an insurance company should be liable. We are inclined to the opinion that a distinction should be made between a fire intentionally lighted and maintained for a useful purpose in connection with the occupation of a building, and a fire which starts from such a fire without human agency, in a place where fires are never lighted or maintained, although such ignition may naturally be expected to occur occasionally, as an incident to the maintenance of necessary fires, and although the place where it occurs is constructed with a view to prevent damage from such ignition. A fire in a chimney should be considered rather a hostile fire; and as such, if it causes damage, it is within the provisions of ordinary contracts of fire insurance.

Way v. Abington Mutual Fire. Ins. Co., 43 N.E.1032, 1033-1034 (Mass. 1896) (emphasis added). Later an Ohio appeals court reached the same conclusion in Washington Twp. Mut. Fire & Lightning Ins. Assn. v. Sherrer, 168 N.E.234 (Ohio App. 1927), cited in 10 Couch on Insurance 3d, §149: 31 (1998), "Chimney Fires" at n. 41.

These cases suggest that under ordinary fire policies, any loss caused by a chimney fire, including damage to the chimney, should be covered. Although the facts of the cases did not involve damage to the chimney alone, the reasoning that a chimney fire is a second, accidental, and unintended fire would still apply.

Faulty Maintenance Exclusions

Such reasoning disposes of the question of whether a chimney fire is an unforeseen accident despite the fact that it is a common occurrence and one that is arguably preventable — in other words, whether it is a fortuitous loss. That, however, does not answer the question of whether the modern exclusions for faulty maintenance could apply to deny recovery for loss to the chimney.

Application of these exclusions depends in part, on application of any ensuing loss provisions. For example, the HO 00 03 10 00 prefaces its faulty maintenance exclusion with the following:

We do not insure for loss to property described in Coverages A and B caused by any of the following. However, any ensuing loss to property described in Coverages A and B not precluded by any other provision in this policy is covered.

The H0 00 03 04 91 similarly provides for "ensuing loss . . . not excluded or excepted in this policy . . . ." In jurisdictions where this coverage extends to closely related events, a court might find that only the build-up of cresote and the costs to remove it would be excluded and damage from the resulting chimney fire would be covered.

Even aside from the issue of ensuing loss, courts may be wary of limiting coverage for fire losses, especially in those jurisdictions where statutes and regulations expressly or implicitly require broad coverage under standard fire policies. Traditionally, "mere fault, carelessness, or negligence" of an insured does not bar recovery absent fraud. 10 Couch on Insurance 3d (1998), §149.65. Therefore, damage attributable to a sudden, accidental chimney fire probably should be covered absent a clear exclusion to the contrary that conforms to state law.

Exclusions for Wear and Tear or Deterioration

This does not mean that all claims for chimney damage are potentially covered under the HO-3 — only those directly resulting from chimney fires. Our understanding is that certain types of chimney liners or flues are susceptible to cracking over a period of time as a result of the changes in temperature involved when furnaces and fireplaces are turned on and off, as well as temperature changes caused by sudden environmental changes. In other words, cracking of certain types of chimney flues and liners normally occurs with the passage of time and normal usage.

This kind of cracking may be considered excluded "wear and tear" or "deterioration." The fact that cracks may not have been visible one year but are the next does not necessarily mean they occurred fortuitously or accidentally. The deterioration process caused by temperature changes is continual and progressive and may only produce visible cracks over a long period of time.

Of course the problem is distinguishing between this kind of damage to chimney flues and liners and that caused by chimney fires. An expert opinion probably is required to determine the true cause of the loss.

Conclusion

Although most chimney fires may be prevented by ordinary care and maintenance, case law suggests that damage that is the direct result of such fires could be covered under most Homeowners policies. However, damage that is merely the result of exposure to the elements, heat from normal venting of hot gases and smoke, and other kinds of wear and tear should be excluded.

Kathryn K. Jensen

Kathryn K. Jensen is Research Counsel for the Property Loss Research Bureau in Downers Grove, Illinois.

This month's Coverage Analysis Column is prepared by the Property Loss Research Bureau as a service to Claims readers. It is designed to present information about case law and other authority applicable to the interpretation of insurance policy provisions. Every effort has been made to insure that the information provided is accurate. However, the opinions expressed here are for internal use only. They do not constitute a substitute for legal advice as to the law of a particular jurisdiction as applied in the full factual context of a particular claim.

The opinions expressed in this month's column are those of the staff of the Property Loss Research Bureau and do not necessarily represent the opinions of members or other insurers. The opinions of PLRB staff do not represent an indication or prediction of any future action or position of any member or other insurer. Readers should consult with management to determine their company's positions on the issues discussed in this column.