Sounds like you have One 3-way valve on cold inlet line.
Valve handle parallel to cold inlet allows water to go into water heater tank (and out hot line when faucet is opened).
Valve handle perpendicular to cold water inlet stops water from going into water heater---bypasses the water to hot outlet line and a check valve in nipple on tank at hot out stops water from going back into tank
Here is a One 3-way valve set up for 'Normal' operation (water into water heater for heating)
Your title states SW6P :H
I'm surprised that a 2016 Model would use a 'pilot'