Important Considerations for Property Owners
— From the pages of FLL#37 • Content provided by Ross Insurance
“Vacancy” is a welcome sign when you’re traveling and haven’t made reservations to stay overnight. But it may not be such a friendly term when it comes to your homeowner’s policy or the insurance on your rental or investment property.
Once your property becomes “vacant,” some significant “gaps” appear in the coverage on most policy forms, and these gaps could result in your claim being denied. What makes this particular issue so interesting is that nowhere in the policy does the insurance company define exactly what “vacant” means.
So let’s take a look at the policy and shed some light on these potentially unpleasant surprises. In both the homeowner’s and what is called the Dwelling Fire Policy forms, there is a section titled “Perils Insured Against.”
Believe it or not, this is where they describe what is not covered. Right there, second on their list of things not covered is “Freezing… while the dwelling is vacant, unoccupied or being constructed…” (and here is where it gets good) “…unless you have used reasonable care to maintain heat in the building, or shut off the water and drained the system of water.”
Well, if you’ve shut off your water supply and drained all the water from the system, there certainly won’t be any water damage resulting from freezing, will there? So the issue really boils down to what are the definitions of Vacant and Unoccupied, and what is considered to be “reasonable care?”
Another vacancy clause shows up a few paragraphs later where it explains that the policy will not cover damage from “vandalism… theft or attempted theft if the dwelling has been vacant for more than 30 consecutive days immediately before the loss.”
Since “vacant” is not a term defined in the policy, we’re left to our own devices, or worse, to the court system to determine what the word means. Webster defines vacant as “when something is without content or occupant.” Going by this definition, a dwelling with furniture but no occupant is not vacant. It’s just unoccupied. That is an important difference.
Let’s look at a hypothetical, though very common, scenario: You decide to be a snowbird this year and spend the winter season in Florida. When you return, you find that not only have the pipes frozen and burst, but someone also broke in and vandalized your home. The good news is that the damage done by vandals should be covered. Why? Because your furniture remained in the house, and therefore the property was not vacant, just unoccupied.
Whether the water damage from freezing is covered remains to be seen, and the determining factor may be steps that you took or didn’t take. In this situation there is little question that the property was unoccupied, but did you take reasonable care to maintain heat in the building? Did you set the thermostat to 40 degrees, hoping to save on energy costs? Or did you run out of oil in the tank without setting up an automatic delivery?
The same scenario could play out in a tenant-occupied investment property where the tenant moved out and had the utilities shut off, and you didn’t have anyone checking the property. Any of these events could be reason enough for the insurance company to deny coverage, and what these hypothetical events really mean is that when any property that you own doesn’t have someone living in it, you’ll be wise to check it or to have someone you trust check on it regularly.
And after reading this, as well as past and future FLL Protect columns, you know that you will be better prepared and smarter about your insurance. So travel with confidence on the road to a secure financial future, knowing that “vacancy” is a good sign when you’re on the highway and a good reason for a “Ross Review” when it describes a property that you own.
1496 Lititz Pike, Lancaster PA