Homeowners Insurance Coverage

Just about every homeowner carries insurance for losses from fire and other causes. But many insured homeowners don’t realize that their insurance policies include “vacancy clauses.” Such clauses suspend or restrict some insurance coverage if the home is vacant or unoccupied for 60 or more consecutive days before the occurrence of the loss. Pennsylvania’s “snow birds,” who winter in warmer climates, are at distinct risk for denial of their homeowners insurance coverage due to the operation of vacancy clauses.

If a homeowner takes an extended trip, temporarily relocates, or even dies, a vacancy may exist under the terms of the policy. If fire damage occurs, pipes freeze, or other insured losses occur during such a vacancy, the insurance company may be entitled to deny all coverage, even if the homeowner made the premium payments on time.

In a recent case, a Pennsylvania woman’s heirs challenged an insurance company’s denial of fire insurance coverage. The heirs had paid the annual premium on the woman’s existing homeowners insurance shortly after her death. But before the heirs could sell the house and settle the estate, the house was damaged by a fire that occurred 36 days after they had paid the annual fire insurance premium.

In the course of investigating the claim, the insurance company discovered that the house had been vacant for more than 60 days before the fire. The heirs argued that their premium payment marked a renewal of the policy and that only 36 days had run on the new policy before the fire. The court acknowledged the renewal of the policy but noted that the vacancy clause was in both the old and the new policies, Since the house had actually been unoccupied for more than 60 days before the fire, the court upheld the insurance company’s denial of the claim, “tacking the vacancy period under the old policy onto the 36 days that elapsed after the heirs’ renewal of the policy.

An unoccupied house poses higher risks of loss to an insurance carrier. Vacant properties not only attract vandalism, they also suffer more extensive damage in the event of an accidental fire or water leak. The occupants of an inhabited house can stop a small fire or water leak or can call for assistance from emergency responders. When no one is home, fire and water damage is often much more extensive.

Homeowners who take long vacations or extended business trips and adult children who are managing their deceased parents’ homes have various options to assure that their coverage will not be denied. Policies are available, at an added expense, to insure vacant homes. Entrusting a home to a house sitter or short-term tenant may prevent the occurrence of a vacancy.

Care should be taken to understand the precise terms of a policy’s vacancy clause: Is occupation by the homeowner himself or herself required by the policy? Is a house sitter acceptable but a paying tenant a trigger for denial of coverage? Reading your policy and communicating clearly with your agent or insurance company is an essential element in establishing adequate and appropriate homeowners insurance coverage.

For an excellent overview of how your homeowners insurance policy works, go to www.insurance.statepa.us where the Pennsylvania Insurance Commissioner maintains a collection of consumer brochures on insurance issues, including the brochure You Guide to Homeowners Insurance.

Resolution of legal issues depends upon many factors, including variations of facts and interpretations of Pennsylvania law. This newsletter is not intended to provide legal advice on specific subjects, but rather to provide insight into legal developments and issues. The reader should always consult with legal counsel before taking action on matters covered by this newsletter.