Most home owner policies have a potential coverage defense for “increase of hazard.” An increase of hazard clause generally allows a carrier to disclaim coverage when “a new use is made of the insured property, or when its physical condition is changed from that which existed when the policy was written, and the new use or changed condition increases the risk assumed by the insurer.”1
New Jersey’s Standard Policy Forms for fire insurance policies, codified at N.J.S.A. 17:36-5.20, lists the conditions suspending or restricting insurance. It states:
“Unless otherwise provided in writing added hereto, this company shall not be liable for loss occurring (a) while the hazard is increased by any means within the control or knowledge of the insured; or (b) while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days; or (c) as a result of explosion or riot, unless fire ensure, and in that event for loss by fire only.”
Recently, I was reading through a New Jersey Home Owner’s policy of insurance and discovered a “permission granted” clause appearing in the Section 1, Conditions form of the policy. The clause, as its title suggests, allows a policy holder certain allowances which might otherwise be excluded. Generally, a permission granted clause will provide the insured a defense against a charge that a policy holder has increased the hazard of a covered property.
The ‘permissions granted’ in the above mentioned policy were “The residence premises may be vacant or unoccupied for any length of time, except where a time limit is indicated in this policy for specific perils”. This extends the time in which a property can be vacant or unoccupied from the 60 day limit stated in N.J.S.A. 17:36-5.20 (depending on the type of loss and any limits regarding a specific peril).
It is so important to read the entire policy when making a determination whether an event will be covered under your policy of insurance. Sometimes language in one clause will be negated by language in another clause, which in New Jersey will be interpreted in favor of the insured.
1 Dev. Ass’n v. Commercial Union Surplus Lines Ins. Co., 222 N.J. Super. 281, 536 A.2d 787 (App.Div. 1988).