Thank you for your responses. Let me clarify that I am interested in knowing what I should do (according to the law) not what I could do (like not return the deposit and hope I don't get sued).

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If the unit is uninhabitable for reasons that were not caused by the tenant, the landlord may very well have a duty to provide a rent abatement or alternate premises pending repair.
That sounds reasonable to me, but in this case I believe the tenant caused the damage. I can prove they clogged the toilet but I can't prove they were aware of the faulty valve. So in this specific case can I reasonably deny rent abatement?

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If I were the landlord I would wait and see what the tenant requested and then pass any request along to the insurance company.
The tenant is requesting I return rent for the two weeks the residence was uninhabitable. I have already submitted everything to the insurance which has covered repair of the residence but not unclogging/fixing the toilet/drain (>$1000). My approach was I'll swallow the repair but the tenant will swallow the fact he had to live with a friend for two weeks. Initially the tenant was ok with that but now is requesting the rent refund.