Could Insurer Avoid Coverage Based on Exceptions to Policy?
The house owned by Michael Zimmerman sustained water damage in the winter due to frozen and burst pipes while he was overseas on an extended five-week trip to India (late November to early January). Zimmerman alleged that Leatherstocking Cooperative Insurance Company breached their insurance contract by disclaiming coverage for the loss. Leatherstocking in turn alleged that the disclaimer was proper because reasonable care was not taken to maintain heat in the home while Zimmerman was away.
After nine prior motions and three years of discovery, the parties filed dueling summary judgment motions. While the parties raised numerous legal issues, the resolution on those motions essentially boiled down to the applicability of the following provision in the policy:
CAUSES OF LOSS SECTION-COVERAGES A, B, C AND D (CAUSES OF LOSS AND REPLACEMENT COST PROVISION)We insure against direct physical loss to property caused by the following causes of loss:…18. Freezing of plumbing, heating, air-conditioning, fire protective sprinkler system or domestic appliance. This does not cover loss on the insured premises while the residence is vacant, unoccupied (including temporary absence) or is under construction and unoccupied. However, this exclusion does not apply if you have used reasonable care to:a. maintain heat in the building or manufactured home; orb. shut off the liquid supply and completely empty the system or domestic appliance.
There was no dispute (at least not on the motions) that Zimmerman was temporarily absent when the loss occurred and that the water at his home was not turned off As such, the applicability of the provision and the exclusion revolved around one main issue for the Court to determine: whether an issue of fact existed as to whether Zimmerman used reasonable care to keep the house heated.
Zimmerman asserted that the loss of heat in the house occurred because of a failed electronic device used for the boiler (namely, an integrated control unit) rather than due to any negligence on his part in maintaining heat in the house. He asserted that the failed electronic device did not require any maintenance and that it failed through no fault of his own. He also asserted that the house was fully renovated pre-loss; it was in immaculate condition; that the thermostats were set at a temperature of 55 degrees or more; Zimmerman put his relator in charge of watching the house as part of the “sales process”; the relator assured him that he would oversee and maintain the house in his absence; the relator agreed to drive by the house at times, visit the house for showings, be there at least weekly to assess it, and do whatever he could to reasonably keep an eye on it while he was away. He further asserted that the relator and/or his team made multiple visits to the house and that nothing unusual was ever noticed on any of these visits until the date of the loss; the heat was always on; and that the electricity was working.
In contrast, LCI disputed most, if not all, of these assertions. LCI asserted that Zimmerman left the property vacant/unoccupied for more than a month prior to the subject loss; the gas and electric bills indicated that there was insufficient heating at the house; Zimmerman failed to set the thermostat to a temperature that would maintain heat; failed to equip the premises with an alarm or system (such as a NEST) that would notify the homeowner if the heat fell below a certain temperature; failed to adequately insulate the property; and knew or should have known that the heat was “uneven,” parts of the house were drafty, the seals on the windows were inadequate, and supplemental heat was required in those sections of the house that were drafty/poorly insulated. LCI further asserted that based on Zimmerman’s past experience with freezing pipes and water damage in the various properties that he had owned, he knew or should have known of the dangers associated with leaving the house vacant/unoccupied and, as such, he failed to take reasonable measures to ensure that the house would be adequately monitored and failed to take other reasonable measures necessary to ensure that the heat would be maintained.
Zimmerman was required to prove that a loss occurred, the loss was a covered event under the terms of the policy no exclusion precluded coverage and he took reasonable care to maintain heat in the home while away. If Zimmerman satisfied that initial burden, then LCI was required to demonstrate that a triable issue of fact existed that reasonable care was not used to maintain heat in the premises, such that the exclusion would prevent coverage.
To support his assertion that the reason for the freeze up of the pipes was the failure of the electronic device, Zimmerman relied primarily on the deposition testimony of an HVAC technician. That witness testified that the device failed and that this could have caused the freeze up. However, the witness did not opine (especially not to any degree of reasonable certainty) that the malfunction caused the freeze up. Rather, the witness testified that he did not know whether the malfunction caused the freeze up or whether the water damage from the freeze up caused the device to malfunction.2
The Court found that Zimmerman misplaced misplaces reliance on an email from the device’s customer service representative, sent in January 2022, in response to an email inquiry by him regarding the device. The email informed Zimmerman that there was no established shelf life for the device, there were no maintenance requirements and they were unaware of any known issues that might cause it to fail. The email from the representative, however, was not notarized. Nor was there any indication that the representative examined the malfunctioned device or that the representative considered any details specific to the case.
Zimmerman also did not established that the house was in perfect condition, as he contended. Zimmerman and his husband (both interested witnesses) asserted that the house was renovated shortly before it was listed for sale. He also provided photographs of the house (pre-loss) depicting it in good condition. Nonetheless, the house was allegedly built in the mid-1850s. There was little, if any, evidence in the motion papers regarding the pre-loss condition of the house where the pipes burst, the heating system, the insulation, and the maintenance of the boiler and the heating system. Most of the testimony on those issues concerned generalized comments. To the extent details were provided, they mainly concerned references to improvements that occurred years prior to the loss (e.g., the replacement of the boiler in 2006 or the insulation improvement in 2011).
Further, the listing activity report contained contrary feedback from two potential purchasers who viewed the house in early December 2018. One potential purchaser commented that the “[h]ouse does not show as well as the pictures made it look” and that the “[h]ouse needs a lot of updates/renovation.” The other potential purchaser “felt there was still some work to do with all [three] full bathrooms[.]” LCI’s investigator further obtained a recorded statement from Zimmerman’s tenant who allegedly vacated in or around September 2018. He described the house as “kind of run down and dirty,” “drafty,” “unevenly heated,” and “chilly.” He did not believe the insulation was adequate, explained that he had an issue once with snow entering through the windowsill of one of the bathroom windows, and he used space heaters in parts of the house to maintain adequate heat.
These causation and evidentiary issues aside, the motion papers also contained little, if any, testimony regarding the heat and temperature in the house at or around the time of the loss. While the motion papers contained photographs of thermostats, Zimmerman failed to explain who took the photographs and when they were taken. In addition, the deposition testimony (if any) regarding the heat consisted largely of generalized statements. It is unclear who (if anyone) turned on the heat, which thermostats (if any) were turned on, and whether this was done before the loss.
The letter from the relator from July 2019 (dated months after the loss), moreover, similarly asserted in only a generalized manner that the heat was always on and they did not notice anything awry. Aside from being vague, the letter was not notarized, and the relator was speaking (at least in part) on behalf of other persons on his team and therefore making conclusions (at least in part) for which he lacked personal knowledge. For example, the letter stated that “we” found the water damage. However, he testified at his deposition that another member of his team found it and that he did not believe that he visited the property after the loss occurred.
Further, while Zimmerman asserted that the relator conducted regular and weekly interior inspections of the house while he was away, the evidence on this issue was inconsistent and largely incomplete for purposes of a motion seeking judgment as a matter of law. The relator, for example, testified that he and his team visited the property several times. However, he could not identify any specific dates during his testimony. The listing activity log further identified only two showings, one on December 2 and the other one on December 8, 2018. The relator was not listed as attending either showing.
The relator also sent an email to Zimmerman referencing two additional visits that occurred on December 14 and 28. However, it was unclear how he obtained those dates. In addition, it was not clear based on the relator’s records and testimony whether he personally visited the property on those dates or whether someone else from his team visited. Rather, those dates appeared (at least in the motion papers) only in the email the relator sent on February 25, 2019, almost two months after the loss. The relator also did not provide any of his text messages or emails regarding the house. He claimed at his deposition that he no longer had access to them.
There was an email in the motion papers from Zimmerman asking the relator to remove an item from the porch (dead mums) on December 25, and a response from the relator on December 27. However, when asked during his deposition about whether the person from his team went inside the property when they went to remove the item, the relator testified that he did not believe she did.
Most critically, the engineer’s report indicated that a member of the relator’s team entered the house (first floor only) on December 28 and that the house had heat at the time. That was apparently the last time that anyone visited the house prior to the loss. Zimmerman did not provide any affidavit or other sworn testimony from that person. It was also unclear based on the motion papers what that last visit consisted of, how long it took, and what observations, if any, lead the person to believe that the house had the heat on at the time and that no issues with insulation or cold temperatures existed on the second floor.
The motion papers also called into question the reasonableness of Zimmerman’s reliance on the relator and whether such reliance constituted reasonable care. Zimmerman relied exclusively on the relator to maintain the heat in the house during his temporary absence. He admittedly did not make any alternative arrangements for interior inspections or maintenance with any friends, family members, or any professional caretakers. And also admittedly did not install any devices to remotely monitor or control the heat inside the house while they were away.
Notwithstanding his alleged delegation of that important duty, Zimmerman admittedly did not pay the relator for keeping an eye on the property and conducting weekly interior visits. He also did not memorialize his agreement in writing or follow up with the relator about any alleged maintenance/care of the house during the temporary absence. The motion papers also contained only one written exchange between Zimmerman and the relator during the temporary absence. That email, however, did not request any interior inspections or inquire about the heat in the house. Rather, Zimmerman simply asked the relator to remove an item (dead mums) from the porch.
In addition, despite Zimmerman’s testimony to the contrary, the relator did not recall any arrangement requiring him to check on house on a weekly basis. He testified that he never agreed to act as an uncompensated house sitter or caretaker, and that when he wrote a text message in November about weekly checks on the house, he may have been referring generally to drive-by checks on the outside. The relator testified that he was not going over to check if windows were closed, and that he did not have an obligation to go inside to make sure the heat was maintained in the house. The relator did not recall if he ever had a conversation with Zimmerman to discuss what checking on the house would entail.
Based on the motion papers, the Court found that issues of fact precluded granting Zimmerman’s motion seeking partial summary judgment—because of the rule that the credibility of interested witnesses even if their testimony be uncontradicted when contradiction is impossible and its truthfulness or accuracy open to a reasonable doubt, is exclusively for the jury.
To the extent LCI sought to avoid coverage, it had the burden of establishing that the policy did not cover the loss or that an exclusion or exemption applied and that the policy provisions were clear and subject to no other reasonable interpretation. Policy provisions must be interpreted according to common speech and consistent with the reasonable expectation of the average insured, and ambiguities are to be construed against the insurer.
On its motion for summary judgment, LCI sought to disclaim coverage based on the provision/exclusion regarding the freezing of the plumbing system. LCI also asserted that the policy excluded coverage based on “neglect”. “Neglect,” as specified in the policy, included “neglect by an insured to use all reasonable means to save and preserve covered property at and after the time of a loss”. And in addition, it also included “neglect by any insured to use all reasonable means to save and preserve covered property when endangered by a covered cause of loss”.
The Court found that LC did not demonstrate, as a matter of law, that Zimmerman failed to use reasonable care to maintain heat or otherwise engaged in any neglect. Rather, in disclaiming coverage, LCI relied on the engineer’s reports. The reports, however, were based on numerous assumptions. They also specifically identified and raised several questions of fact, without resolving them. The reports also did not address the issue regarding the malfunction of the electrical device used for the boiler.
Further, when viewed in the light most favorable to Zimmerman, the evidence demonstrated that the house was in good condition; the heat was turned on; the relator and his team frequently visited the property and went inside it frequently while Zimmerman was away; and there were no complaints about the lack of heat in the house.
Accordingly, LCI’s motion seeking summary judgment was denied.
LCI also relied on a different provision of the policy that covered loss for “accidental discharge or overflow of liquids or steam from within a plumbing, heating, air conditioning, or automatic fire protective sprinkler system or domestic appliance.” That provision excluded coverage “if the residence has been vacant for more than 30 consecutive days immediately before the loss[.]”
But LCI did not disclaim coverage based on that provision. Nor was the provision asserted as a defense in the answer. And Zimmerman further objected to the interjection of that defense on grounds of surprise and prejudice,. LCI did not provide any argument or legal authority to the contrary. The Court was therefore not inclined to consider it for purposes of the motions.3
Nonetheless, even if the Court was to consider that provision, the Court had already determined that issues of fact justified denying Zimmerman’s motion. The issue was therefore academic for purposes of Zimmerman’s motion seeking partial summary judgment. Further, to the extent LCI relied on the provision to obtain judgment in its favor, the provision was inadequate. Specifically, it was ambiguous and did not specify that it applied to cases involving water damage due to frozen and burst plumbing. In contrast, coverage expressly applied to cases involving the freezing of a plumbing system. In addition, the plain language of those provisions did not identify them as being mutually exclusive. Considering those ambiguities, the Court declined LCI’s invitation to preclude coverage based on the vacancy exclusion contained within the “accidental discharge” provision.