The post from yesterday, Developers, Commercial Owners, and Property Managers Need to Be Aware of Vacancy Clauses, had a response from insurance educator Bill Wilson. Wilson accurately noted the following:
Developers, Commercial Owners, and Property Managers Need to Be Aware of Vacancy Clauses
Economic downturns can cause an increase in vacancies, as I wrote about thirteen years ago in FC&S Warns Agents and Policyholders to Watch the Vacancy Exclusionary Clause. A lot of other reasons cause commercial buildings to become vacant and may adversely impact the amount of available insurance coverage if the building sustains a loss during that vacancy.
No Vacancy! Is a Good Thing When It Comes to Coverage for Your Property
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.
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Insurance Vacancy Clause: Tennessee Property Coverage Limitation
According to ATTOM Data Solutions, a property database curator, Tennessee is currently tied for the highest overall vacancy rates for all residential properties for the first quarter of 2021.1 This number is sure to increase should the currently moratorium on evictions expire on March 31, 2021, as per the present CDC and Department of Health Order.2 However, landlords and policyholders should be aware that leaving their property vacant for too long can result in limitation in insurance coverage.
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Can My Insurance Company Deny Coverage If I Vacate My House After an Earthquake?
In the last two weeks, Puerto Rico has experienced earthquakes that have caused significant damage to homes and buildings, especially in the southwest area of the island closest to the earthquake epicenters. Many of these properties have collapsed and others are under dangerous conditions. The government has asked the people to abandon homes that are not safe, and the Governor declared a State of Emergency due to the seismic activity continues in Puerto Rico.
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Arson of Vacant House: Covered Fire Loss or Excluded Vandalism?
In a recent case,1 a federal appeals court addressed the issue of whether fire damage to a vacant dwelling from an arsonist was considered distinct from vandalism, so as to not implicate an exclusion within a homeowners insurance policy. In that case, Wells Fargo Bank owned an insurance policy on an abandoned house that an arsonist set ablaze. The insured sued its insurer after the insurer refused to indemnify the insured for the loss, relying on a policy provision exclusion for damage caused by “vandalism or malicious mischief” after the property had been vacant for more than thirty consecutive days.
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What Constitutes a Dwelling or Building Under Construction or Renovation For Purposes of a Vacancy Exclusion?
The typical vacancy provision in a homeowners property insurance policy is patterned after the Insurance Services Office (ISO) Homeowners 3-Special Form (HO-3 form)1 and excludes coverage for damage caused by vandalism if the dwelling has been vacant for more than 60 consecutive days before the damage occurs.2
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The Standard Fire Policy 60-Day Vacancy/Unoccupancy Condition
Last November in my blogpost, Does the Standard Fire Policy Vacancy/Unoccupancy Condition Apply to a Fire Loss Occurring within Sixty Days of the Inception of Coverage, I discussed how courts have measured vacancy/unoccupancy when a loss occurs within sixty days of the inception of coverage; but, the insured property had been vacant or unoccupied for more than sixty days prior to the effective date of coverage.
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Don’t Unwittingly Abandon Your Property
Policyholders should take care not to unwittingly fall within their policy’s vacancy exclusion.
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Does the Standard Fire Policy Vacancy/Unoccupancy Condition Apply to a Fire Loss Occurring within Sixty Days of the Inception of Coverage?
I have handled many fire losses over the years involving vacant and/or unoccupied property.1 In some losses, the fire occurred within 60 days of the inception of coverage; but, the insured property had been vacant or unoccupied for more than 60 days prior to the effective date of coverage. Invariably, the insurers in those fire losses denied the claim, taking the position that vacancy/unoccupancy2 is measured from the inception of the vacancy/unoccupancy as opposed to the inception of coverage.
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