Usually yes, but only if you took reasonable steps to stop it. Most commercial property policies exclude water damage from pipes that freeze unless you did your best to keep the heat on in the building, or you drained the system and shut off the water when the heat was off. For a hotel, the risk sits in the rooms, wings and buildings nobody is using when the first hard freeze comes through.
Below is what Texas businesses learned the hard way during Winter Storm Uri, how the freeze exclusion and the vacancy condition work, where hotels are most exposed, and a checklist to work through before the first cold front.
The Texas Department of Insurance collected claim data from insurers after the February 11 to 19, 2021 storm. As of June 30, 2022, insurers had reported 44,950 commercial property claims with $3.58 billion paid, not counting business interruption. Business interruption added another 7,237 claims and $519.5 million paid (TDI, February 2021 winter weather data call).
Uri was not a one-time event, either. Texas saw another damaging freeze in December 2022, and that freeze is behind one of the clearest court decisions on frozen pipes, below.
On the standard ISO Causes of Loss Special Form (CP 10 30), water that leaks or flows from plumbing, heating or air conditioning equipment because it froze is excluded, unless:
Most carriers use the same idea, sometimes with their own wording. The key words are "do your best." Courts generally look for real effort, not perfection, but you have to have done something, and you have to be able to show it.
A Texas case from last year shows how that plays out. In Barona v. State Farm Lloyds, a pipe froze and burst in a commercial building during the December 2022 freeze. The owner had turned the heat off during a renovation and had not drained the lines or shut off the water before leaving for the holidays. The federal court in Houston agreed that neither exception applied and upheld the denial (as reported by Property Insurance Coverage Law).
A renovation is exactly when heat gets shut off. If you have a PIP underway, read our post on whether your hotel is covered during a PIP renovation.
On the standard form, the freezing exclusion does not apply to fire protective systems. Sprinkler leakage is handled separately, and the vacancy condition below only pays sprinkler leakage in a vacant building if you protected the system against freezing. If you have sprinkler lines in attics, exterior corridors or unheated stairwells, ask your agent how your policy treats them.
The standard ISO Building and Personal Property Coverage Form (CP 00 10) has a vacancy condition. If a building has been vacant for more than 60 consecutive days before a loss, the policy will not pay for vandalism, sprinkler leakage (unless the system was protected against freezing), building glass breakage, water damage, theft or attempted theft, and it reduces payment for other covered losses by 15%.
A few things to know:
One burst pipe on an upper floor can take out several rooms below it. That is a property claim and, if rooms go offline, a business income claim.
If a covered freeze loss damages your hotel and you have to close rooms, business income coverage can pay the income you lose while repairs are made. If the freeze loss is excluded, the business income claim usually is too.
Power outages are a separate question. If the grid goes down but your building is not damaged, standard business income does not respond. Utility services coverage (ISO CP 15 45) can, but only when the utility's own property is physically damaged by a covered cause, and overhead lines have to be specifically included. We went through that in Hotel Business Income Insurance: How Much You Need, and for How Long.
Usually, if you did your best to maintain heat in the building, or drained the system and shut off the water when heat was not maintained. If you did neither, most commercial property policies exclude the water damage.
In practice, yes, or you need to drain the lines and shut off the water to those rooms. Keep a record of the temperature you set and when it was checked.
On the standard form, sprinkler systems are treated differently from other plumbing, and a building that has been vacant more than 60 days only has sprinkler leakage coverage if the system was protected against freezing. Check your policy and ask your agent.
If the freeze damage is covered, business income can pay for the income lost while rooms are being repaired. A power outage with no damage to your building needs utility services coverage, and only applies when the utility's property is physically damaged.
On the standard form, a building that has been vacant for more than 60 consecutive days. Buildings under construction or renovation are not considered vacant. Your carrier's form may differ.
The temperatures you set, when staff checked them, which lines you drained and shut off, and photos of any damage before cleanup.
If you own or operate a hotel in Guadalupe, Comal or the surrounding counties, send us your current property declarations and our hospitality team will look over your freeze, vacancy and business income wording before it gets cold. Call 830-303-8300 or visit our hospitality insurance page.