Insurance challenges may arise from vandalized property

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Question: We have an insured with the DP 00 03 12 02 policy form.  It had appliances hooked up to the home, and a renter was going to move in sometime in the next couple of weeks. The unit had not had a renter since January, though, so it had been more than 60 days since someone lived there.

They had a vandal throw a firebomb through a window. The home suffered minor fire damage and moderate smoke damage.

In reading the policy, it states ( on page 6) that there is no vandalism coverage if vacant for more than 60 days. I have two questions for coverage on this one:

1. Would this even be considered vacant?

2. If it were considered vacant, would the resulting fire damage be excluded as a result of the vandalism?

— Indiana Subscriber

Answer: You have two good questions there.

Vacancy and occupancy are often confused, but they are not the same things.

Vacancy is not defined in the policy, so we turn to a dictionary. According to Merriam Webster Online, vacant is: “when something is without content or occupant.”

So you need to determine, was the property truly vacant, without any belongings, or was it unoccupied? Appliances are a start, but without any furniture, clothing or bedding, we would consider the property vacant.

As far as vandalism/malicious mischief, back to the dictionary. According to Webster’s Collegiate Dictionary, 10th ed., vandalism is: “the willful or malicious destruction or defacement of public or private property.”

A firebomb is willful with the intent to cause destruction. It’s hard to construe that as accidental and not intending harm.

So if your property is truly vacant, and not just unoccupied, then the loss is excluded. If, however, the property was full of furniture and able to be moved into and lived in, then I’d say the property was more unoccupied than vacant, and the loss would be covered.

However, the carrier is going to wonder if the property was regularly checked on, etc.

Negotiating the vacancy clause after a theft

Question: Our insured owns a large, free-standing office/warehouse building. The tenant vacated the property in July 2012. The insured’s property form contains vacancy clause conditions.

A theft of copper wiring took place, and the carrier invoked the “vacant for more than sixty consecutive days” clause to deny the coverage, stating that the building lacked sufficient business personal property to conduct customary operations.

The insured contended that the office portion of the building contains enough business personal property to conduct customary operations of an office and represents more than 31% of the total square footage. The insured’s position is that the customary operation of the risk is now a furnished office building and warehouse for lease. 

The second issue is there is no record of when the loss occurred; it may very well have taken place within the required 60-day period. The loss was recently discovered by a real estate broker showing the property.

— California Subscriber

Answer: Whether the office contained enough business personal property to conduct customary operations could be a question of fact. It seems that having the property furnished as an office building/warehouse for lease would not be considered customary operations. It is just a building with no operations waiting for a tenant, as the building owner’s intent likely would not be to maintain unrented buildings as its customary operations.

The insured would need to show that the building was not vacant for more than 60 days when the loss occurred. This may be difficult to do, but if the loss was just recently reported, and the tenant vacated the property in July 2012, it seems reasonable to assume that the theft occurred when no one was using the building and there was no one on site to report it. It could have occurred within 60 days after the tenant vacated, but the insured would have to prove that. It would be difficult to show that the theft occurred within the sixty-day window if someone was not regularly checking in on the building.

Arson and a newly-purchased property

Question: My question involves a dwelling fire policy with basic coverage.

The client purchased a home with the intent to renovate the home. The home had been vacant almost a year before the client purchased the property. The client obtained a dwelling fire policy on the newly purchased home.

Ten days after closing on the property and before actual renovations began, the home was set on fire (arson). The insurance company is taking the position that since the fires were set in four separate locations, the fires qualify as vandalism, and since the property was vacant for over 60 days, there is no coverage for the loss. We are of the opinion that since the insured only owned the property for 10 days, he shouldn’t be penalized for the property being vacant for an extended period of time prior to his interest in the property. Further, we question if the arson is in fact vandalism. We look forward to your opinion.

— Pennsylvania Subscriber

Question: To answer your second question first, the arson is indeed vandalism.

The policy doesn’t define vandalism, so standard practice is to refer to a desk dictionary. Webster’s Collegiate Dictionary, 10th ed., defines vandalism as “the willful or malicious destruction or defacement of public or private property.” Arson is certainly willful or malicious destruction of property.

Your first question is the difficult one. The policy excludes vandalism if the property has been vacant for more than 60 consecutive days immediately before the loss; no mention is made of who owned the property at the time. However the coverage is for the described location as of the effective date of the policy; in your situation, that is ten days before the date of loss and the same time as when the insured became owner of the property.

Couch on Insurance 148:73 states: “…the vacancy period runs from the issuance of the policy so that any period of vacancy before the issuance does not count toward the 60-day period allowed by the policy, which view may be supported by statute to that effect.” This is supported by Pappas Enterprises, Inc. v. Commerce and Industry Ins. Co., 661 N.E.2d (1996) in which the court stated that the 60-day vacancy provision does not apply in case where part of 60 days of vacancy occurred prior to the day the policy came into force. The same ruling was made in Thomas v. Industrial Fire & Cas. Co. 255 So.2d 486 La.App., (1971) that the exclusion for vacancy over 60 days does not apply if the loss occurs 41 days after the issue date even though the property had been vacant for 76 days.

Therefore, in your situation, the dwelling had been vacant only 10 days, and arson is indeed vandalism.

See also:

How to determine coverage for asbestos losses

Additional Living Expenses: Just how much is covered

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