On August 18, 2010, Insurance Commissioner Steve Poizner issued a press release encouraging California homeowners to review their homeowners’ policies and to consider their options regarding vacancy protection. His reasoning: As the U.S. housing market struggles to rebound, many homeowners are stuck with hard-to-sell properties. Frustrated home owners who must relocate for a new job opportunity, want to downsize, or simply want to buy a new place, have left homes empty. Vacant or unoccupied homes can leave the homeowner exposed to loss and liability that may not be covered by their insurance.
Two years later, it is evident that in California, property claims are on the rise and property insurance claim denials based upon vacancy or occupancy are also on the rise. Many policies provide that if a property is vacant or unoccupied, then a loss may be excluded.
If a loss occurs at a property which has a vacancy or occupancy exclusion, an insurer can deny coverage if the property is without contents or is no longer habited. A house is unoccupied when "it has ceased to be a customary place of habitation or abode, and no one is living or residing in it."1 Generally, courts have defined vacancy as "generally empty or deprived of contents" while unoccupied has been construed to mean "that no one was living in the dwelling or had actual use or possession of the dwelling at the time of the loss.”
Deciding whether a property is unoccupied may be easier than figuring out if the property is vacant. However, the interpretation of the words vacant and unoccupied in an insurance policy is a question of law. Whether the property was vacant or unoccupied at the time of a loss is a question of fact. In the event of a contested denial on vacancy or occupancy grounds, it is often up to a court to interpret the insurance policy. Normally, a court would look to the policy to see if it defines occupancy or vacancy.
If a homeowner knows that a property will remain vacant of unoccupied for an extended period of time, there may be coverage available by endorsement. Such endorsements come at an additional cost.
Courts look at the intent of the insured and weighs many factors to determine whether a true vacancy or lack of occupancy exists when a denial is litigated. As in all circumstances, planning ahead and talking to your broker regarding what coverage exists may help in planning and obtaining the appropriate policy for your needs.
1 4 Am.Jur.2d Insurance § 1220 (1982).