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Kaye v. Allmerica Financial


July 18, 2007


On appeal from Superior Court of New Jersey, Law Division, Bergen County, Docket No. L-282-04.

Per curiam.


Submitted June 13, 2007

Before Judges Wefing and Weissbard.

Plaintiffs, Steven Kaye and Stephanie Kaye, appeal from an order of summary judgment dismissing their suit against defendant Allmerica Financial, d/b/a Hanover Insurance Company*fn1 (Allmerica). We affirm.

On January 31, 2002, plaintiffs purchased property at 95 Bennett Road, Teaneck. They obtained homeowners insurance with Allmerica. Initially, plaintiffs were not certain whether they wanted to live in the house, which was rundown and required significant renovations to be livable. However, they eventually decided to demolish the house and rebuild. They hired a builder in November 2002, but he did not want to begin demolition until the spring of 2003.

Because the house was empty, a decision was made in December 2002 to shut off the water, gas and electricity.

Public Service Electric and Gas Company shut off the electrical and gas services on December 5, 2002. Arrangements were made with United Water (United) to shut off the water on December 5 or 6, 2002. Plaintiffs, who lived in New York, left the house unlocked so that Public Service and United employees could enter the house to accomplish their work. Plaintiffs were told by both utilities that they would not confirm that their work was completed but would call plaintiffs if there were any problems.

In March 2003, plaintiffs received a large water bill from United, indicating that the water had never been turned off. As a result, a hose in the house froze and split, causing 140,000 gallons of water to flow into an upstairs bathroom, causing extensive damage to the building. The house was subsequently demolished in May 2003, and a new house was built.

Plaintiffs asserted a claim against defendant for the water damage, which was rejected. In declining, defendant cited a provision of its "all risk" policy with plaintiffs which excluded coverage for "freezing of a plumbing . . . system or of a household appliance, or by discharge, leakage or overflow from within the system or appliance caused by freezing." The provision continues as follows:

This exclusion applies only while the dwelling is vacant, unoccupied or being constructed, unless you have used reasonable care to:

(1) Maintain heat in the building; or

(2) Shut off the water supply and drain system and appliances of water.

It was undisputed that the building was vacant and that no heat was maintained. However, while reasonable efforts were made to "shut off the water supply," no effort was taken to "drain the system of water."

In his deposition, Steven Kaye conceded that he had never read the policy and was unaware of the need to drain the system of water. Nevertheless, plaintiffs took the position that they acted reasonably in requesting United to shut off the water, believing that United would take care of all "water issues." Plaintiffs' position was that whether they acted reasonably under the circumstances was a jury question, not an issue to be resolved by summary judgment. In granting summary judgment, Judge Moses said, in pertinent part:

Plaintiff argues that it's a jury question as to whether they used reasonable care, we've all been using the phrase reasonable steps, but the policy says reasonable care, to winterize the home, because they contacted United Water and informed United Water that the heat would be turned off. Plaintiff also relies on J.M.B. ENTERPRISES [v. Atl. Emp. Ins., 228 N.J. Super. 610 (App. Div. 1988)] although I don't understand why, in J.M.B. ENTERPRISES, where the Court said that directing another person to do the winterizing work, even if the person ends up not doing it, could be reasonable for getting out of the exclusion, but if you look at the facts in J.M.B., they are so inapposite to the facts here as not to be controlling.

In that case, the homeowner directed the realtor to contact a plumber to winterize the house, to which the realtor agreed. So he knew about the need to call a plumber to drain the pipes. Months later, a pipe froze and broke, due either to the lack of winterization or proper winterization. That was not known. So the Appellate Division remanded the case so a jury could decide if the plaintiff acted reasonably in what he did there.

Here, plaintiff says, well, our contacting United Water is, on all fours, to what the plaintiff did in J.M.B. I disagree. I don't think any rational fact finder could find, given the fact that even though plaintiff asserts in argument that he believed United Water was doing everything necessary, that he believed he would -- it was doing whatever was necessary to take care of water issues, this plaintiff was completely unaware of his contractual obligation or his real life obligation, his practical obligation to drain the pipes of water.

He assumed United Water was going to turn off the water and since they knew the heat would be turned off, they would take care of all water issues, including draining of the pipes. How could he assume they were going to drain the pipes, when he didn't know about the need to drain the pipes? He knew nothing about draining the pipes. No rational fact finder could find that was reasonable care, just to call the water company and say turn off the water and assume that everything would be taken care of.

So even looking at the facts, in a light most favorable to the plaintiff, given his concession he knew nothing about the need to drain the pipes, the -- whatever the phrase is, the water -- I keep forgetting, I'm sorry, to drain the system and appliances of water, nobody, in the Metropolitan New York area who's a college graduate thinks the utility company's going to do any of the work for you, and no rational fact finder could believe it. It's just an incredible, naïve assumption. And two, he didn't read his contract. It's absolutely unambiguous, the language. It's in clear English, it is -- it is not a lawyerize (phonetic), despite the fact that he's a lawyer, it's plain and straight forward. Summary judgment granted.

On appeal, plaintiffs argue, as they had before the motion judge, (1) that there was a fact issue as to whether they acted reasonably, and (2) that, even assuming they unreasonably failed to have the system drained, the exclusion "should only be enforced to the extent of the damages based upon failure to drain the pipes, it being conceded by all that defendant took reasonable steps to turn the water off."

We agree with the judge that the matter was ripe for summary judgment. Plaintiffs are correct that insurance policy exclusions are strictly construed, Simonetti v. Selective Ins. Co., 372 N.J. Super. 421, 429 (App. Div. 2004), and that the burden is on the insurer "to bring the case within the policy exclusion." Burd v. Sussex Mut. Ins. Co., 56 N.J. 383, 399 (1970). Here, however, defendant did bring the matter within the exclusion, which was clear and unambiguous, even if strictly construed. Merely because plaintiffs proffer a reason for their failure to drain the system as required, does not mean that a jury question is presented as to whether they acted reasonably.

We agree entirely with Judge Moses that no reasonable jury could conclude that plaintiffs used "reasonable care."

It has long been the rule that in the absence of fraud or other unconscionable conduct by the insurer, an insured is bound by the terms of a policy they have received and had an opportunity to read. Heake v. Atl. Cas. Ins. Co., 15 N.J. 475, 483 (1954). The insured is under a duty to read his policy. Martinez v. John Hancock Mut. Life Ins. Co., 145 N.J. Super. 301, 310 (App. Div. 1976), certif. denied, 74 N.J. 253 (1977). Plaintiffs have failed in that fundamental obligation and, regrettably, must suffer the consequences.

We reject as without merit plaintiffs' alternative argument that the exclusion is severable and that even if the system had not been drained, there would have only been minimal damage if United had turned off the water as directed. R. 2:11- 3(e)(1)(E). Plaintiffs provided no factual support from an expert in support of that conclusion.


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