NYS Appellate Division, Fourth Department, Holds That the Undefined Term "Reasonable Care" as Used in a Homeowners Policy's Freezing Exclusion, Is Ambiguous

PROPERTY – HOMEOWNERS POLICY – FROZEN/BURST WATER PIPES – FREEZING EXCLUSION – REASONABLE CARE TO MAINTAIN HEAT

McAleavey v. Chautauqua Patrons Ins. Co.
(4th Dept., 6/17/2021)

Some say there are two things one should never watch being made: law and sausage.  If you are one of those (who say that), avert your eyes and move along.  

The McAleaveys owned a seasonal lake house that they rarely used and which had been on the market to sell for over a year.  With respect to structures coverage, their homeowners policy with Chautauqua Patrons Insurance Company (CPIC) contained this exclusion:

    1.    Freezing, Discharge, Leakage or Overflow -Unoccupied Residence-If the residence is vacant, unoccupied (including temporary absence) or under construction and unoccupied, the insured must take reasonable care to:

a.  maintain heat in the building; or

b.  shut off the water supply and completely empty liquids from any plumbing, heating or air-conditioning system, water heater or domestic appliance.

If an insured fails to do this, we do not pay for loss caused by freezing or the resulting discharge, leakage, or overflow from such system, water heater or domestic appliance. 

Forty-three days after Mr. McAleavey was last inside the house to check on things, on February 24, 2018, the McAleaveys received word that a passerby had reported seeing water coming out of house's front door.  Following its investigation of the reported loss and related claims (during which it was learned that the furnace's circulating pump had failed, causing an upstairs toilet tank to freeze and burst, flooding the home), CPIC denied coverage based on the policy's freezing exclusion.

The McAleaveys sued and, after discovery was conducted and completed, moved and CPIC cross-moved for summary judgment.  In DENYING plaintiffs' motion and GRANTING CPIC's cross motion, Supreme Court held: 

    We turn now to the second issue before this Court, did Plaintiffs "take reasonable care to maintain heat in the building."  Plaintiff has acknowledged that from on or about January 12, 2018 to February 24, 2018, no person entered his lake home for the purpose of inspection. At the time of the loss, and for months prior, Plaintiff had set his thermostat at about 50 degrees, but had not drained the water in his house. This Court takes judicial notice that January and February are generally the two coldest months in western New York.  *  *  *  *  *

In the case at bar, the period that the house was left uninspectcd is forty three days, approximately one and a half months. One and a half months without inspection, especially when said months are January and February, results in this Court finding that Plaintiffs lack of care was unreasonable as a matter of law. 

The McAleaveys appealed and the Fourth Department unanimously REVERSED, denying CPIC's cross motion, granting plaintiffs' motion, and remitting the action back to Supreme Court for an inquest on damages: 

"`Before an insurance company is permitted to avoid policy coverage, it must satisfy' its burden of establishing that the policy does not cover the loss or that an exclusion or exemption applies, and that the policy provisions are clear and `subject to no other reasonable interpretation'" (Place v Preferred Mut. Ins. Co., 190 AD3d 1208, 1209 [3d Dept 2021], quoting Dean v Tower Ins. Co. of N.Y., 19 NY3d 704, 708 [2012]; see Gallo v Midstate Mut. Ins. Co., 45 AD3d 1492, 1493 [4th Dept 2007]). "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" (Place, 190 AD3d at 1209 [internal quotation marks omitted]; see Lobello v New York Cent. Mut. Fire Ins. Co., 152 AD3d 1206, 1209 [4th Dept 2017]). 

Here, the parties correctly recognize that their dispute turns entirely on whether plaintiffs used "reasonable care" to maintain the heat in the subject house. If they did, then the loss is covered under the policy; if they did not, then the loss is not covered. 

To this end, in support of their motion for partial summary judgment, plaintiffs established as follows: the home's heating system was recently installed, was regularly maintained, and had never required repairs; Robert P. McAleavey (plaintiff) winterized the property by setting the internal temperature to approximately 50 degrees in the late fall of 2017; plaintiff checked on the home approximately 15 times during the winter of 2017-2018; during those visits, plaintiff ensured that the temperature was appropriate, that no windows were broken, that the toilets flushed, and that the water ran; and plaintiff last visited the house on January 11 or 12, 2018, at which point the interior temperature was "comfortable." Although plaintiff was unable to visit the property between mid-January and late February 2018 due to a broken leg and his resulting hospitalization, plaintiffs' submissions established that, during such period, they had no notice or reason to suspect that anything was wrong with the premises or the heating system. Moreover, plaintiffs' neighbors and realtor periodically checked on the property's exterior. 

In our view, the term "reasonable care" as used in the policy is ambiguous inasmuch as it is susceptible of at least two reasonable interpretations, at least one of which supports plaintiffs' contention that they exercised reasonable care, and this ambiguity was not resolved by extrinsic evidence (see generally Armstrong v United Frontier Mut. Ins. Co., 181 AD3d 1332, 1334 [4th Dept 2020]). 

"`[U]nder [these] circumstances, the ambiguity must be resolved against the insurer which drafted the contract'" (id.; see Cragg v Allstate Indem. Corp., 17 NY3d 118, 122 [2011]; Randolph v Nationwide Mut. Fire Ins. Co., 242 AD2d 889, 889 [4th Dept 1997]). We thus conclude that plaintiff's loss is specifically covered under the policy and that the exclusion relied on by defendant does not unambiguously apply in this case (see Gallo, 45 AD3d at 1494; see also Continental Cas. Co. v Rapid-American Corp., 80 NY2d 640, 652 [1993]). 

Contrary to defendant's assertion and the court's conclusion, nothing in Stephenson v Allstate Indem. Co. (160 AD3d 1274 [3d Dept 2018], lv denied 32 NY3d 904 [2018]) establishes a per se rule that a policyholder's failure to conduct regular interior inspections at specific intervals, irrespective of any other efforts, constitutes a failure to use "reasonable care" to maintain heat. Rather, Stephenson granted summary judgment to the insurer because, in that case, it was "undisputed that [the policyholder] did not arrange for inspection of the premises or take any other action to ensure that adequate levels of heat were actually maintained during [the winter months]" (id. at 1276 [emphasis added]). The policyholder's wholesale neglect in Stephenson stands in stark contrast to plaintiffs' reasonable—albeit unsuccessful—efforts to maintain the heat in this case.

Does this decision stand for the proposition that the undefined term “reasonable care” as used in a policy's freezing exclusion is ambiguous and must, in the absence of extrinsic evidence or disputed facts (always?) be construed against the insurer? 

If that's the case, how is an insurer to define such a term if the policy were to include a definition? Isn’t something subjective—like the concept of reasonableness—always open to debate and/or interpretation?  How exactly is "reasonable care"--the concept--susceptible to at least two reasonable interpretations? Name two, please, because I can't think of more than one.  Isn't the Fourth Department conflating and confusing the needed quantum of reasonable care with the concept of reasonable care?  

Why doesn’t “reasonable care” simply mean what a normal, prudent person would do under the same circumstances to keep undrained water pipes from freezing during the wintertime? Property policies don’t define “promptly”, “immediately”, “temporarily” and similar words, and yet those words, although not defined or understood in exactly the same way by all people, have not been held to be ambiguous. 

Will insurers wishing to assert the freezing exclusion be required first to set specific minimums regarding how often the interior of a vacant/unoccupied house is to be checked for heat?  What ambient temperature must be maintained within a dwelling?  

Things that make you (and this coverage attorney) go hmm.