Whether residential or commercial, most property coverage policies exclude loss caused by freezing, unless the insured either:

  1. Uses reasonable or best efforts to maintain heat in the building; or
  2. drains the plumbing lines. Application of this freezing exclusion, however, often turns on interpreting or defining what the terms “reasonable,” “best efforts,” and “building” mean.

Many multi-unit residential or mixed use commercial buildings do not define the phrase “building” to include each individual unit or commercial space. So, what happens if heat is maintained in the first-floor commercial area, but not in the second or third-floor residential area and a pipe freezes in the third-floor causing water damage? Is the loss covered? I had this exact situation arise several years ago and presented the issue to a jury. It was undisputed that the loss had been caused by the freezing of a plumbing line and the water had not been drained from the lines. However, the insured had maintained heat in the first-floor commercial area of the building. I argued to the jury that the insured had complied with the policy and maintained heat in the building, alternatively arguing that the policy was ambiguous on whether the policy required heat be maintained in each floor of the building. The insurer argued that the insured failed to comply with the policy and that he did not use reasonable efforts where heat was not maintained in each floor of the building. Ultimately, the jury returned a verdict in favor of the insured.

While most policies continue to use similar language in the freezing exclusion, some policies now are including Protective Safeguard Endorsements related to the maintenance of heat. One such example is found in the case of 455 Companies, LLC v. Landmark American Insurance Company.1 There, the policy contained a Protective Safeguard Endorsement which provided that as a condition of insurance, the insured was required to maintain heat at 55 degrees. The insured moved for summary judgment, asserting that the policy excluded coverage for water damage only if the defendant could show the insured failed to use “best efforts” to maintain heat above 55 degrees. The trial court disagreed with the insured’s interpretation finding that coverage did not turn on whether the plaintiff used “best efforts” to maintain the building’s temperature. Rather, the court found that the protective safeguard endorsement was not ambiguous and any conflict between the terms of the endorsement and the form provisions would be resolved in favor of the endorsement. The policy’s requirements of “best efforts” was trumped by the Protective Safeguard Endorsement which required that heat be maintained at or above 55 degrees.

The Protective Safeguard Endorsement is a good example of how an insurer can draft a policy to include specific requirements for the maintenance of heat, or define “reasonable efforts.”
1 455 Companies, LLC v. Landmark American Ins. Co., 2017 WL 3215197 (E.D. Mich. July 28, 2017).

  • Donald Dinsmore

    Odd coincidence.
    Two (2) days ago, my client settled a homeowners freeze claim from 2014.
    Crux of the issues: whether the limitation was material to the loss?
    Multiple technical and insurance experts deposed.
    Don Dinsmore
    Chapel Hill NC

  • Here’s a homeowners claim I was involved with that provides a variation on the “maintaining heat in the building” exception to freezing exclusions. A water line to an outdoor hot tub froze, causing damage to the hot tub equipment. The insurer initially denied the claim, citing the following exclusion:

    (1) Freezing of a plumbing, heating, air conditioning or automatic fire protective sprinkler system or of a household appliance, or by discharge, leakage or overflow from within the system or appliance caused by freezing. This provision does not apply if you have used reasonable care to:
    (a) Maintain heat in the building; or
    (b) Shut off the water supply and drain all systems and appliances of water….

    Note that the exclusion clearly says that it does not apply if you have used reasonable care to “Maintain heat in the building.” Just as clearly, whether or not the home was heated had absolutely no impact on whether or not an exterior water line/equipment might freeze. However, in policy analysis, common sense sometimes has no place. We were able to convince the adjuster, to his credit, that the policy clearly, conspicuously and unambiguously covers freezing claims as long as heat is maintained in the building.

    This “non-common sense” reading can work for or against the insured. In another claim, a business had property outside their building stolen. The commercial property policy had a Protective Safeguards endorsement attached for their burglar alarm system. The system, however, did not extend to the exterior storage yard, only the building. However, the endorsement excluded ANY theft if the system was inoperable, as was the case that night. Needless to say, it wouldn’t have mattered if the system was operable or not for theft of property from the yard. The claim was not covered despite common sense saying that the operational condition of the burglar alarm was immaterial. Most endorsements of this type are warranties, not conditional representations, and are enforced literally.

    In a similar situation, an inland marine policy on a mobile wood chipper had a requirement that an operational extinguisher be attached to the equipment at all times. The extinguisher was removed overnight for recharging so, of course, that’s the night that vandals damaged the equipment beyond repair. Because the extinguisher was missing, the carrier denied the claim even though (1) the damage was V&MM, not fire, so the presence of the extinguisher would have done nothing to prevent the loss, and (2) even if the damage had been due to fire AND the extinguisher was there, would the vandals have used it to put out the fire they started? Of course not, but the warranty exclusion prevailed.