Many first party property insurance policies exclude claims for water damage that occurs when the insured premises is left vacant or unoccupied, unless the insured has used reasonable care to prevent such losses. In litigation challenging the denial of such claims, whether or not the insured’s actions in preventing property damage were reasonable is generally treated as a question of fact to be decided by a jury. However, when the facts are not disputed, and there are no credibility issues presented, a court may grant summary judgment on behalf of the insurer upholding the denial.
Such a result recently occurred in a Pennsylvania case involving substantial losses as a result of water damage from burst pipes. Micalis Pazianas, M.D., et al. v. Allstate Insurance Company, Civil Action No. 16-2018, 2016 W.L. 387, 8185 (E.D. Pa. 07/18/2016). In Pazianas, the insured, Micalis Pazianas, left his insured home in Pennsylvania for England on October 10, 2014, and returned on February 5, 2015 finding water damage in excess of $50,000. Before leaving his home in October, Pazianas did not shut off the water supply or drain the water from the system or appliances. He set the thermostat at 55° F, but its manual directed the replacement of batteries once a year or before leaving home for more than a month. Pazianas did not do so, nor had he replaced them in more than a year. Pazianas thought he would return to the property in December, but he remained in England through January of 2015.
He asked his daughter to check on the property periodically, but in December she said that she could not do so because she was pregnant. Pazianas did not ask anyone else to check on the property, even when he realized that he would not return home in December 2014.
Upon his return on February 5, 2015, the heat was off, the thermostat screen was blank, and water was flowing from the ceilings in the laundry and living rooms. His plumber told him that the water damage was caused by pipes freezing and bursting. Allstate’s experts found that the furnace was controlled by the battery-powered digital thermostat. Gas bills showed minor usage in October of 2014, with less usage in November through January. The engineer concluded that the heating system did not work and the pipes had frozen and burst.
Similarly, water bills established no usage in November or December of 2014, but that 103,800 gallons in January and 164,000 gallons in February were used, despite the water being turned off on February 5, 2015.
The Allstate homeowners policy excluded coverage for losses caused by freezing of plumbing . . . systems or leakage or overflow . . . caused by freezing, when the building is vacant and unoccupied, unless the insured used reasonable care to: (a) maintain heat in the building structure; or (b) shut off the water supply and drain the system and appliances.
In Pazianas, the court converted Allstate’s motion for a judgment on the pleadings to one for summary judgment, because the policy, two separate causation expert reports, and Dr. Pazianas’s examination under oath were attached as exhibits to Allstate’s motion. Pazianas argued that Allstate’s motion should be denied because there were genuine issues of material fact as to whether he had used reasonable care since he set the thermostat at 55° before he left and asked his daughter to check on the property, only intending to be gone for two months.
The court granted summary judgment to Allstate. The court held that since Pazianas admitted that he did not shut off the water supply and drain the appliances before departing, the court only needed to consider if he used reasonable care to maintain heat in the property while it was vacant during his trip to England. Citing Maternia v. Pennsylvania R.R. Co., 56 A.2d 233, 235 (Pa. 1948), the court stated that reasonableness is an objective standard reflecting the degree of care a person of ordinary intelligence and prudence would commonly exercise under similar circumstances. Additionally, the court held that an insured cannot delegate the duty to maintain heat in the property simply by agreement with a third party, citing Dougherty v. Allstate Prop. & Cas. Ins. Co., __ F. Supp. 3d __, 2016 W.L. 2593848, *9 (E.D. Pa. 2016).
Thus, even accepting Pazianas’s allegations as true and granting him the benefit of all reasonable inferences, the court held that no reasonable juror could find that he used reasonable care to maintain heat in the property during its vacancy. Pazianas, 2016 W.L. 3878185, *4.
The decision highlights the need for insurers to obtain as much documentation as possible during the course of a water damage investigation, including water, heating, and electrical bills. Additionally, obtaining the thermostat instruction manual proved important as it helped establish that the insured’s failure to replace batteries in the thermostat before an extended absence from his home was unreasonable.
Finally, this case demonstrates that bills and other documents obtained during a detailed claim investigation, as well as examination under oath testimony may not only provide reasonable support for a claim denial, but may also provide the basis for an early resolution of a lawsuit challenging the denial, and thus avoid extensive and expensive discovery practice.
