Vacancy or occupancy provision in insurance policies are often not recognized by insureds until they incur some sort of loss and it is denied by the insurance company. This type of provision is the source of frequent litigation.
Many homeowner insurance policies have a provision that excludes all coverage if a building is vacant for a certain amount of time. Often, these policies will have their own definition of vacant, which can vary from the definition that we are all accustomed to. There will typically be a time frame of 30-60 days in order for the provision to be effective. Most of the provisions will say something about the property being without utilities or contents inside the dwelling. If it is not defined, which is also likely, policyholders need to look to the common dictionary meaning of the word. Even if the loss is covered, this provision can still reduce the amount a homeowner is able to recover by 10-15%.
Insurance companies rely on this provision because a vacant or unoccupied home increases the loss potential in their eyes. A vacant property is at a higher risk of loss from perils such as fire, vandalism, theft, water from leaking or broken pipes, mold, and weather-related damages, because nobody is present to tend to the dwelling. Damage in unoccupied or vacant dwellings can go undetected for long periods of time, increasing the damage.
Most courts in Texas have held that the term “vacant” is not an ambiguous term when it is not defined. They have also upheld the vacancy provision all the way up to the Texas Supreme Court in Greene v. Farmers Insurance Exchange.1 In its decision, the court found that, when the homeowner vacated the dwelling and no longer resided there, full coverage remained in place for 60 days after the vacancy date, after which there was no coverage for the home.
It is very important to review the vacancy wording in a particular policy. There are many situations that can trigger this provision into effect. An individual might have moved into a new home while the former home is for sale, someone could have a vacation home they don’t use for extended periods of time, or a homeowner could rent the home and the tenants move out, these are just a few examples of what insurance companies will lean on to deny coverage. Keep in mind that insurance companies don’t consider homes “under construction” to be vacant.2 There is some recourse though, there is a vacancy permit endorsement, which will suspend the vacancy exclusion. Unfortunately, this will require an additional premium.
It is always important to review your policy before there is a loss. If you have experienced a loss and fear that the home may have been vacant by the definition, it is important to hire an experienced property insurance attorney to help you with your claim.
1 Greene v. Farmers Ins. Exch., 446 S.W.3d 761, 2014 WL 4252271 (Tex. Aug. 29, 2014).
2 Columbia Lloyds Ins. Co v. Mao, 2011 WL 1103814 (Tex. App. Fort Worth, March 24, 2011 no pet.).