If you read the news recently, a polar vortex is apparently responsible for the recent extreme cold temperatures throughout the nation. Here in Middle Tennessee, temperatures have been falling into the single digits, with some temperatures near zero. As you might imagine, this extreme temperature has resulted in what is certain to amount to thousands of freezing and water claims. That begs the question – what should be done in handling such claims?
The most frequent scenario involves an insured’s water pipe which freezes, and the insured is only later to learn the pipe has burst and has caused resulting water damage. With respect to both the pipe and resultant water damage, a direct physical loss has occurred as required to initially trigger coverage in most policies. However, many policies have exclusions, limitations or other conditions related to “freezing” that should be considered in evaluating these claims.
After the insured meets his burden of establishing a direct physical loss, it is the insurance company’s burden to prove that the loss is actually due to an exclusion for “freezing.” If the carrier meets this burden, even though there has been a direct physical loss, the exclusion applies and coverage is barred. See Farmers Bank & Trust Co. of Winchester v. Transamerica Ins. Co., 674 F.2d 548, 550 (6th Cir.), cert. denied, 459 U.S. 943, 103 S.Ct. 257, 74 L.Ed.2d 200 (1982); Blaine Const. Corp. v. Ins. Co. of N. Am., 171 F.3d 343, 349 (6th Cir. 1999). However, typical freezing exclusions include an exception to the freezing exclusion when the insured used reasonable care or “best efforts” to maintain the heat in the building or shut off the water supply and drain all systems. If the carrier proves freezing is the cause of loss, it is the insured’s burden to prove the “best efforts” exception applies. See Standard Fire Ins. Co. v. Chester O’Donley & Associates, Inc., 972 S.W.2d 1, 8 (Tenn. Ct. App. 1998). Please note the policy refers to such “freezing” issues in the policy conditions as opposed to policy exclusions, a different analysis will apply.
It is usually quite obvious whether the plumbing systems have been drained. Thus, as you might imagine, most cases deal with maintaining heat at the property. These issues come up routinely with vacant properties. A good tip is to inquire with the insured to find out what specific actions were taken to maintain heat in the building. Did the insured set the thermostat at a certain temperature? Did the insured have a specific procedure for personnel to consider in evaluating the property? Did the insured make regular inspections of the property to make sure that the heating system was working properly? These are the types of questions an insurance carrier will want to ask to in order to fully consider and evaluate whether the insured used reasonable care or used his “best efforts” to maintain heat in the building. Thus, though it’s the insured’s burden to prove that an exception to the exclusion applies, it’s a good practice to investigate the insured’s efforts to maintain heat in the building or otherwise prevent the property from freezing.