When claims arise from relocated homeowners

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Question: We have a claim where the client has an HO-3 policy, but turned the property into a rental 2 years ago.

The insured used to live in the home, which is why they were insured under an HO-3.  However, the policyholder bought a larger home and moved into it a couple of years ago, and they never changed the policy over to a DP3.

The insured recently filed a claim for a small fire in the kitchen. The fire damage is not big at all, but there is some smell of smoke throughout the home.

The claims adjuster for the insurer realized fairly quickly that this was a rental property and stated that they had the wrong policy. The adjuster stated that technically they could deny the claim, but that they were going to go ahead and pay to repair the damage from the fire and wipe down the home for the smoke.

However, the adjuster did state that they would not be willing to clean the renters belongings of the smoke odor or pay to move them around (contents manipulation) while the work was being done to the structure.

We have several questions:

1. Could the insurer deny the entire claim since it was insured under a homeowners’ policy rather than a dwelling policy?
2. When insured under a DP3, we routinely see insurers making payment to move around the belongings of the renters so that repairs can be made to the structure. Why would this not be covered on this claim?
3. If an insurer owes to move the contents around to make way for the repairs to the structure, it would seem that they should also pay to remove the smoke odor from the contents as they would only re-pollute the interior with smoke odor – or cause the smoke odor from the structure to never be successful in being removed

— Hawaii Subscriber

Answer: The homeowners policy clearly states that coverage is for the named insured and the spouse, if a resident of the same household.

An insured is “you” and residents of the household.

“Residence premises” is defined as the one family dwelling where you reside.

As the named insured does not live in the house, it is not his residence premises, and therefore coverage does not apply, even though he is the named insured. The carrier is fully within its right to deny the claim outright — unless the Residence Premises Definition endorsement, HO 06 48 10 15,  which provides coverage after the insured moves out of the home is on the policy, there is no coverage.

The tenant and his contents have absolutely no coverage whatsoever, unless he has his own tenants policy. Tenant property is not covered under an HO 03. If the tenant has a tenant’s policy, he needs to look there for coverage. The homeowner policy does not pay for tenants contents.

Generally, manipulation of contents is covered because the property has to be moved for the repairs to be made. However, since they’re paying for a claim they do not owe, I’m not sure I’d push.

Insured travels extensively for business

Question: My client owns a house in Pinehurst, North Carolina. The home is insured on a Homeowners Enhanced Form HE-7 with the HE-3221 Extended Enhancement Endorsement.

The client works for a military consulting company, and his work takes him away from Pinehurst much more often than he is there. He is gone for such long periods of time that he actually rents a residence where he goes each time.

A couple of years ago, he had a couple of rented residences in Georgia for about three months each.

After that, he moved to a rented residence in Louisiana for over a year.

This week, he informed me that he is moving to a different town in Louisiana.

Meanwhile, the house he owns in Pinehurst sits full of his stuff. He goes there from time to time to visit and check on the place.

Is this client covered for liability at his rented locations out of state? The policy defines “insured location,” among other things, as “any part of a premises not owned by an insured; and where the insured is temporarily residing.”

Is a stay in Louisiana that lasts for over a year temporary? Or should I endorse his HO policy each time he moves and list his temporary residence on the declarations page?

— North Carolina Subscriber

Answer: As long as the insured pays taxes in North Carolina, maintains a North Carolina drivers license, titles his car in North Carolina, and all his mail goes to North Carolina, then that is his permanent residence. Any other residence, even if he is there for a year or more, is indeed temporary. However, because of the frequency with which he is away, it might not hurt to ask underwriting how they want you to handle the other locations. Remember too that there is no coverage for damage to the rented property.

Insured residence sold without carrier notifcation

Question: We have a risk that we have insured for 9 years, which was sold (about two years ago).  The insured did not notify us about selling the risk, and we continued to insure the property and collect premiums.

The insured had purchased another property in October of 2008, which he was renovating. When he sold the home we insured, he moved all the property to the new risk, which we do not insure and which is the insured’s new primary residence.

The insured has now reported a theft claim of personal property from his new risk, which he has owned for 4 years. He has had the personal property from the old insured risk for 2 years.

Since the risk we insure was sold 2 years ago and the insured never notified us, we feel he had no interest and thus no coverage for the theft of personal property.  The other question that comes into play is that the policy does provide coverage up to 10% for personal property off premise, usually situated at an insured location.  As you can see above, the property had not been at an insured location for 2 years.  

— Arizona Subscriber

Answer: The policy clearly defines insured location to include:

1. the part of any other premises, other structures, and grounds used by you as a residence and:

(1)        which is shown in the Declarations; or

(2)        which is acquired by you during the policy period for your use as a residence;

The new property is not shown in the declarations, and was acquired during a previous, not the current, policy period. The insured is not temporarily residing in the new dwelling, it’s his permanent home. Likewise the definition of residence premises requires the property to be shown in the declarations. This property is not.

While coverage C provides 10% or $1,000 for property at the insured’s residence other than the residence premises, coverage C is not a stand-alone contract, it is tied to coverage A and the rest of the policy. Since the insured is no longer at the original premises and hasn’t been for two years, we say there is no coverage. A premium refund may be in order however the insured did not fulfill the terms of the contract.

Tenant relatives are not insureds

Question: Our insured has an HO6 policy and owns a second floor condo that he rents out to his in-laws at a reduced rate. The insured’s mother-in-law left the bathroom sink running and it overflowed causing damage to the unit below.

Would the insured’s mother-in-law be considered an insured under his policy? Would the actions of the tenant be covered under his homeowner’s policy?

— Massachusetts Subscriber

Answer: The mother-in-law is not an insured because the insured does not live there, he is renting the premises to them so they are tenants, not resident relatives. Therefore they are not members of his household; his household is where he is living. The homeowners policy provides coverage for the insured, not for tenants. The in-laws should have a tenants policy that would provide coverage for their liability.

Named insured does not occupy residence premises

Question: Our agent placed a homeowners policy with our company. The named insured has never occupied the residence, and the tenant pays her a monthly rent. We now have a substantial fire loss. Do we owe our insured the monthly rent she has lost?

— Idaho Subscriber

Answer: The ISO homeowners policy HO 00 03 10 00 states that coverage is available if that part of the “residence premises” rented to others or held for rental is not fit to live in. “Residence premises” is defined as the “one [or two, three, or four] family dwelling where you reside [in at least one of the units], or that part of any other building where you reside.”

The definition is not met, so, no coverage for loss of rents.

See also:

Top 15 homeowners’ insurance carriers for 2017, as ranked by NAIC

Home remodeling time: 9 things to know about insurance coverage