Plumbing Leak Issue In Insurance

Dallas insurance attorneys will see commercial policies that need interpretation. A recent El Paso Court of Appeals case will help them to understand how courts interpret insurance policies. The style of the case is, American National Property & Casualty Company v. Fredrich 2 Partners, LTD.
This is a case that was decided on cross motions for summary judgment. Here is some relevant information.
Fredrich owned seven commercial buildings insured against property damage under a policy issued by American National. During a severe winter storm where temperatures remained below freezing for four consecutive days, an insulated copper pipe in one of the buildings froze and ruptured, causing water damage to the building’s two interior units. At the time of the incident, one unit was occupied and heated while the other sat vacant and unheated. The pipe that froze and ruptured was located in the attic above the vacant unit.
Fredrich notified American National of the loss and submitted a claim. American National denied the claim, relying on the exclusion in the policy for loss or damage resulting from frozen plumbing. That exclusion and its exceptions read as follows:
[B.] 2. We will not pay for loss or damage caused by or resulting from any of the following:
…
e. Frozen Plumbing Water, other liquids, powder or molten material that leaks or flows from plumbing, heating, air conditioning or other equipment (except fire protective systems) caused by or resulting from freezing, unless:
(1) You do your best to maintain heat in the building or structure; or (2) You drain the equipment and shut off the supply if the heat is not maintained.
First was the argument that by maintaining heat in the occupied unit, Fredrich satisfied the exception requiring that it do its best to maintain heat in the building. The second was the contention that even if the phrase “do your best” was ambiguous, Fredrich satisfied the exception because the pertinent rules of construction required that this phrase be construed narrowly and in Fredrich’s favor. The third was the argument that even if Fredrich failed to do its best to heat the building, the exclusion did not apply because the pipe would have frozen and ruptured regardless of whether heat was maintained in the vacant unit.
In issuing the opinion, the court pointed out insurance contracts are subject to the same rules of construction as ordinary contracts.
If Fredrich did its best to maintain heat in the building, the exception to the general exclusion for water damage due to freezing would apply, and coverage would exist for the water damage.
Fredrich established, as a matter of law, that it did its best to maintain heat in the building in which the water damage occurred. The summary judgment record contains uncontroverted evidence that the building’s occupied unit was heated during the duration of the ice storm. Fredrich met its obligation by providing the heat source necessary to keep the occupied unit heated during the ice storm. Further, the court was at a loss to understand how Fredrich failed to do its best to maintain heat in the building when, in fact, there was heat in the building during the ice storm.
American National further contends Fredrich’s admission that the heat was not on in the unoccupied unit establishes that Fredrich did nothing to maintain heat in the building. But the policy did not require Fredrich to maintain heat in each unit, but rather to heat the building–the property covered under the policy.
The Court found there to be coverage for the damage caused by the busted pipe.