Freezing – Claims Magazine

ISSUE

The insured Northeastern homeowner, having grown weary of the bone-numbing cold of the record-setting winter, decides to use some of the vacation time he has been carrying over from prior years to escape the season's icy grip. Living alone, being single with no dependents, and employed in a field where winter is a "slow" period, he is free to depart for his favorite Caribbean island on February 1 for a two-month stay in much warmer climes. Before leaving, he checks his home's fuel oil tank and notes that it is only one third full. He makes no arrangements for delivery of additional fuel and does not ask any friends, neighbors, or relatives to check on his home periodically.

However, he sets his thermostat at 45 degrees so that the oil will not run out before he gets back. As luck would have it, the extreme winter continues at home while the insured is basking in the tropical sun, the fuel oil does run out, the insureds' water pipes freeze and burst, and the insured is greeted with heavy water damage to his dwelling and personal property when he returns at the end of March. Is the water damage covered under the insured's ISO HO 00 03 04 91 Homeowners policy?

ANALYSIS

In my experience, many claims people, when confronted with a scenario like this, tend to let their judgments of the reasonableness of the insured's behavior cloud the reasonableness of their coverage analysis. In actuality, the reasonableness of the insured's behavior is probably irrelevant here.

Yes, all the Section I coverages are subject to the neglect exclusion, and Coverages A and B are subject to the acts or decisions; faulty, inadequate, or defective maintenance; and weather conditions exclusions. But do any of these exclusions apply here? The neglect exclusion only applies to "neglect of the 'insured' to use all reasonable means to save and preserve property at and after the time of a loss" (emphasis added).If the insured acted negligently, those acts occurred prior to any loss.

The weather conditions exclusion only applies "if weather conditions contribute in any way with a cause or event excluded in paragraph 1. above to produce the loss."The neglect exclusion is in paragraph 1., but, as stated, it does not apply here, so neither does the weather conditions exclusion.

And while the insured's actions might well be excluded acts or decisions or faulty, inadequate, or defective maintenance, both those exclusions, like the weather conditions exclusion, are prefaced with a broad exception stating that "any ensuing loss . . . not excluded or excepted in this policy is covered."

Thus, these exclusions are only relevant if the ensuing loss due to the freezing of the plumbing system is itself an excluded peril.

Of course, freezing of a plumbing system is generally a covered peril. However, both Coverage C's named peril of freezing and Coverage A's open perils coverage are subject to exclusions for particular freezing losses. For example, Coverage A's open perils protection excludes loss caused by freezing and resulting discharge "while the dwelling is vacant, unoccupied, or being constructed, unless you have used reasonable care to . . . [m]aintain heat in the building . . . or . . . [s]hut off the water supply and drain the system and appliances of water."

Unfortunately, many claims people, when faced with this type ofloss, focus on the emphasized portion of the exclusion, and begin to debate whether the insured has used reasonable care.

But note carefully that this freezing exclusion can only apply here if the dwelling was "unoccupied" at the time of loss. Many assume that if no one is living at the home for two months, the dwelling must be "unoccupied."The courts, however, have made no such assumption. A number of cases have held that a temporary absence, included an extended vacation, does not render a dwelling unoccupied.

For example, in Krajenke v. Preferred Mut. Ins. Co., 242 N.W.2d 70 (Mich. App. 1976), the damage to the insured's home, which occurred as a result of pipes freezing and bursting, came at a time when she was on one of her numerous extended vacations. The court held that the insured's temporary physical absence from her home was insufficient to render the house "vacant or unoccupied" for purposes of an exclusion in her Homeowners policy for "vacant and unoccupied buildings unless the insured shall have exercised due diligence with respect to maintaining heat in the building."Therefore, the adjuster's conclusion that the plaintiff failed to exercise such diligence was of no consequence.

Again, in Monarch Ins. Co. v. Rippy, 369 P.2d 622 (Okla. 1962), the insureds were vacationing in Florida for nearly three months during the winter season and failed to either maintain heat or shut off the water (in spite of the wife's suggestions that this be done).The court found that such absence was temporary, was not for an unreasonable length of time, and cited Foley v. Sonoma County Farmers Mut. Fire Ins. Co., 115 P.2d 1 (Cal. 1941), which stated:

It is thus generally accepted that a person's dwelling constitutes not the boundaries but the focal point of his life. He does not cease to have a home when he is temporarily absent there from, nor does his home cease to be an occupied dwelling. It is not his physical presence which renders a dwelling occupied . . . .

Having reached that conclusion, the court felt it was unnecessary to consider whether "due diligence" had been exercised.

To the same effect are Hemenway v. American Cas. Co., 11 Fire & Casualty Cas. (CCH) 1108, 1109 (U. S. Dist. Ct. La. 1963), (ten- day absence for business trip); and Blaylock v. American Guar. Bank Liab. Ins. Co., 632 S.W.2d 719 (Tex. 1982) (freezing occurred while out of town on vacation of unspecified length).

No contrary cases have been located.