Coverage Corner

FREEZING EXCLUSIONS AND THE RTFP! PRINCIPLE

By Bill Wilson, CPCU, ARM, AIM, AAM

I live in Tennessee, a locale not known for frigid winters. Although we do often have extended periods of weather where temperatures do not get above freezing, as well as occasional nights where the temperature drops to single digits and, in rare instances, negative numbers.

While this does not normally present a major indoor property damage exposure due to freezing unless there is an extended power outage, we practice loss prevention by insulating pipes, including wrapping outdoor faucets and hydrants in the winter.

But what happens if these efforts are not successful, a fixture bursts, and property is damaged? Does our homeowners’ insurance cover this? We’ll discuss this in more detail below but, by and large, as long as we exercise reasonable care to maintain heat in buildings where plumbing is located, we’re covered for property damage arising from freezing. But what happens if plumbing outside a building freezes?

Some homeowners have outdoor plumbing fixtures more elaborate than simple faucets and hydrants. For example, both of my next door neighbors happen to be retired transplants from the Northeast and both have hot tubs, one inground and one above ground. The latter hot tub has a fairly extensive amount of exposed plumbing. My neighbor insulates it as best as he can and, so far, has not experienced any freezing damage. But what happens if he does? Does his homeowners’ insurance cover resulting damage due to freezing?

As usual, the answer to this question depends on the specific wording of the homeowners’ policy in question, and the only way to answer this, or any, coverage question is to apply the RTFP! Principle. That is, Read The … Policy!

Let’s explore this issue in the context of a claim I consulted on a few years ago with the exact scenario of an above ground hot tub exposed to several days of extreme, virtually unprecedented freezing weather while the homeowners were out of town for a few days. The homeowners’ policy in question was an Insurance Services Office (ISO) HO 00 03 form which had this exclusion:

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….”

So, freezing is excluded unless the insured either shuts off the water and drains the system and appliances or maintains heat in the building. The insured does not have to do both of these things, just one of them.

Needless to say, since the hot tub is used throughout the winter, the plumbing system and hot tub have not been drained of water.

However, the insured did maintain heat in the dwelling.

Wait a minute, I know what you’re thinking … whether or not the dwelling was heated had no impact whatsoever on whether or not exterior plumbing might freeze. Well, for better or worse (and this can work for or against the insured), common sense sometimes does not enter into insurance claims.

The policy language clearly, conspicuously, and unambiguously says that, if you take reasonable care to maintain heat “in the building,” the freezing exclusion does not apply. Again, this doesn’t really make any practical sense, and it seems unfair for an insurer to pay such a claim. But, alas, the insurer’s only option is to modify the insurance contract language to exclude such losses in the future if that’s their intent.

So, do you have customers with outdoor plumbing exposures? If so, does their insurer cover such losses, or must they rely solely on an alternative risk management approach?

Bill Wilson, CPCU, ARM, AIM, AAM is founder and CEO of InsuranceCommentary.com and the author of seven books, including "When Worlds Collide ... Resolving Insurance Coverage and Claims Disputes." He can be reached at BIll@InsuranceCommentary.com.