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May 21, 2015  

 
 Q&A of the Week

Frozen Pipe and Amount of Heat

A Pennsylvania subscriber recently asked the following question:

On a commercial property policy, there is no coverage for water damage caused by a frozen pipe bursting unless heat is maintained in a building. What is the proper level of heat that must be maintained?


ANSWER: We have not seen a specific temperature given for the proper level of heat. The CP 10 30, Causes of Loss—Special Form, states only that the insured must do his best to maintain heat in the building. The form does not provide a temperature, but it can be assumed that this would require having a power source and a properly working furnace or other heat-providing apparatus in the building.

 
 Litigation Watch
Insured Property and Coverage under the SFIP

The insureds brought an action against the insurer seeking payment under the Standard Flood Insurance Policy (SFIP) for the cost of removing sand and other debris deposited during a hurricane on their land in front of and behind their house. This case is Torre v. Liberty Mutual Fire Ins. Co., 781 F.3d 651 (2015).

The Torres own land and a house in New Jersey and also hold a flood dwelling policy issued by Liberty Mutual. The property sustained substantial damage during Hurricane Sandy and the Torres submitted the claim to Liberty Mutual. The insurer paid $235,751.68 to the Torres. The Torres then sought an additional payment of $15,520 for the cost of removing sand and other debris deposited on their land in front of and behind their house. Liberty Mutual denied this claim on the ground that SFIP does not cover it.

The Torres filed a lawsuit against Liberty Mutual. The U.S. District Court ruled in favor of the insurer and this appeal followed.

The United States Court of Appeals, Third Circuit, noted that the sole issue on appeal is whether the SFIP covers expenses for removing debris not owned by the Torres from their land outside their house. The debris removal provision in the policy stated that the insurer will pay the expense to remove nonowned debris that is on or in insured property and debris of insured property anywhere. So, the court said, the appeal turns on the meaning of the term "insured property". The insureds argued that insured property means not only the specific structures and items of property that are insured by the SFIP, but also their entire parcel of land. The insurer countered that insured property means only the property insured under the SFIP, and the SFIP does not cover land.

The court found that the SFIP specifies in great detail which items of property it covers and which it does not cover. Items not covered by the policy include land, lawns, trees, shrubs, fences, retaining walls, seawalls, bulkheads, or those surfaces located outside the perimeter, exterior walls of the insured building. In sum, the court said, the SFIP provides coverage for certain structures and other items of property but not for an entire parcel of land. The entire parcel of land cannot constitute insured property because it is not insured by the SFIP at all. And, because the entire parcel of land does not constitute insured property, the provision of the SFIP requiring Liberty to pay for the removal of nonowned debris that is on or in insured property does not apply to the expenses the Torres incurred in removing nonowned debris from their land outside their home.

The Torres raised essentially four arguments in an effort to avoid the court's findings, but the court dismissed each one by referring to the words and phrases in the SFIP. The court concluded that the term "insured property" clearly and unambiguously means property that is insured under the SFIP, that land is not insured under the SFIP, and that the SFIP thus does not cover costs the Torres incurred in removing debris not owned by them from their land outside the home. The ruling of the district court was affirmed.

Editor's Note: The U.S. Circuit Court rules that the SFIP is specific in what it considers insured property and what is not insured property. In this coverage dispute, the court found that insured property did not cover the entire parcel of the insureds' land, as the insureds claimed, so the debris removal clause in the SFIP did not apply to the expenses incurred to remove sand and other debris deposited on the insureds' land in front of and behind their home.
 
   
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