Vacancy/Occupancy Clauses in Property Insurance

ADJUSTINGTODAY.COM

Once again, it is important to review the vacancy wording of the particular policy in question, as policy language can and does vary.

Vacancy Permit Endorsement

What is the recourse for building owners, tenants, or homeowners whose property will be vacant for longer than the typical 30 or 60 day limitation in the policy? For example, an individual might have moved into a new home while the former home is for sale and vacant, or someone takes an extended vacation or moves into a senior or assisted living facility while the home is vacant and for sale. Another example is a business owner who has moved the operation to a more central location while the previous location is vacant and for sale. The recourse for these insureds, if the insurer is willing, is a vacancy permit endorsement, which The term vacant has been defined by case law as an entire abandonment, deprived of contents, empty — that is, without contents of substantial utility. ordinarily requires an additional premium. The vacancy permit endorsement essentially suspends the exclusions noted on page 2 (vandalism, water damage, theft, etc.) and continues the insurance for a specified period of time. It also negates the 15 percent reduction in coverage for all other perils. In the standard ISO form (CP 04 50 07 88), two perils — vandalism and sprinkler leakage — can be excluded from the vacancy permit.

Court Cases

Most courts considering whether “vacant” and “unoccupied” are ambiguous terms and can mean different things hold that they are not ambiguous. 5 But in some cases, the facts surrounding the status of the structure at the time of loss are not conclusive enough to easily determine whether vacancy applies. A sampling of court decisions demonstrates how some courts have viewed the vacancy or unoccupancy provision.

In Vushaj v. Farm Bureau General Ins. Co. of Mich., 773 N.W. 2d 758 (Mich. App. 2009), a fire damaged the insured’s home. Coverage did not apply if the dwelling was vacant or unoccupied for more than 30 consecutive days. The insured argued that the dwelling was occupied because over the course of two years, his father usually spent one night every other week at the home. The court countered that the father slept somewhere else well over 600 times during that two-year period. The court concluded that the use of the dwelling roughly 52 times in two years did not constitute a dwelling characterized by the presence of human beings, which was what the court believed necessary to demonstrate that someone occupied the home. The court also was not persuaded by the insured’s position that the existence of furniture kept the dwelling from being vacant because it was not completely empty. Influencing the court in this case was its interpretation of the purpose of the vacancy provision, which was to protect the insurer from an increase in hazard that typically results when structures are vacant or unoccupied.


RkJQdWJsaXNoZXIy NjIxNjMz