This may be the case with your neighbor, especially since it appears you've been monitoring the supposed activity the neighbor claims and seen nothing that confirms this.Some home owners are just nosy people who would rather see an empty building than tenants living there.My story....we once had an incident where a young man decided to ride his bicycle down to the local Kroger very early one morning to buy his uncle some soda. 

Insurance isn't going to not cover you because you failed to inform them of an incident that may or may not result in a lawsuit.

@Zach Quick @Andrew Johnson We mutually agreed to terminate our PM contract after eviction is complete, which was before this pipe incident occurred, because I planned to do rent to own lease after eviction but this PM is not interested in anything like that.  

Why would you feel any obligation to help her out, it has nothing to do with you or  the water incident a year ago.

One of my properties has a common law couple with a recent domestic violence incident and criminal charges including Domestic Violence Protection Order (DVPO).  

In the event of an incident your defense and settlement costs would be covered up to the policy limit. 

I've lived in this home for 11 years myself and have a network of neighbors ready to alert me of any incidences.

This was the last incident that caused our attorney to change our management agreement that owners are to NOT contact the owners: An owner went to the house to have a chat with the tenant, the tenant told them where their new restaurant was and stop by anytime, they proceeded to also make a visit to the restuaraunt, where they talked horribly about the neighbor and what a "nutcase:" she was.

@Wade Garrett A locksmith is overkill for most incidents of this nature.

You should be documenting each incident of smoking, and any other incidents which violate the lease.