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In Pennsylvania, a standard statutory condition in fire insurance policies suspends coverage for losses that occur during a period of vacancy that lasts for at least 60 consecutive days. However, what happens if a vacancy is more than 60 days but the loss occurs only 36 days after the effective date of a renewed policy? That was the question that the Pennsylvania Superior Court labeled one of first impression in Pennsylvania in Estate of Higgins v. Washington Mutual Fire Insurance Co. of Lawrence County. In effect, the court held that in computing the period of vacancy to bar the claim, the insurer can tack on the vacancy period that occurred before the date of the renewed policy. The homeowner, Barbara Higgins, had been covered under a five-year fire insurance policy running from Nov. 13, 1996, to Nov. 13, 2001. After she died, her estate renewed the policy for the same terms and the same amount of coverage as the original policy. There was no gap in coverage from the earlier policy, but 36 days after the effective date of the renewed policy, the home was destroyed by fire, and, as of the date of the fire, the home had been unoccupied for more than 60 consecutive days. The insurer denied coverage, citing the “vacancy clause” in the policy, which suspends or restricts coverage if the dwelling is vacant or unoccupied for 60 or more consecutive days before the date of the fire. The material facts were undisputed, but the court had to decide whether the 60-day period should include days of vacancy that accrued at the end of the original policy period. Precedent While the court found no Pennsylvania case on this issue, it adopted the reasoning of a Massachusetts case with similar facts and held that the insurance company did not have to pay the loss. In reaching this conclusion, the court was persuaded by the following language in the Massachusetts decision: “No reasonable insured would believe, in those circumstances, with the uncontestable periods of non-coverage defined above, that the vacant premises would annually be provided coverage during the first 60 days of each renewal period. There is no sensible reason why that result should be reached or expected. The insurer agreed to assume the increased risk during a 60-day period and not during a period of a vacancy lasting more than 60 days. [Thus], a period of a vacancy during a prior policy period should be tacked on to the vacancy continuing during the next subsequent policy period, assuming that there was no significant change in the coverage of the premises.” The court went on to say that it would be absurd to assume that each subsequent renewal of essentially the same policy, providing the same coverage and issued by the same insurer, would provide for a 60-day grace period at the beginning of each renewed term for a property that remained consistently unoccupied or vacant for a prolonged period. In addition, the court determined that that interpretation would be contrary to the legislature’s intent to decrease the risk of loss from fire created by properties that remained unoccupied or vacant for prolonged periods of time. That was the rationale behind the legislative requirement that the standard fire insurance policy contain the 60-day vacancy clause. One may question the wisdom of that rationale. It’s true that vandalism or water damage are increased risks of vacancy. Also, perhaps the concern about fires is they are more likely when squatters may move in; or that arson is more likely when occupants have vacated. In addition, if a house is occupied, people can stop a small fire before it spreads, or they can sound the alarm. But fires are sometimes caused by careless smokers, cooking mishaps or misused space heaters and other appliances, uses which don’t occur in vacant homes. And, how much does the risk of fire lessen if a house is occupied for one day, or 10 days, of the 60-day statutory period? The Higgins estate argued that it was unfair for an insurer to accept the premium for the renewed policy when it did not intend to provide coverage. The court responded that, absent any showing that the company knew at the time of renewal that Higgins had died, that her property had been vacant and that her estate was renewing the policy, it could find no indication of bad faith on the part of the company. It rejected the estate’s argument that the renewed policy should stand on its own and that events occurring under an earlier policy should not apply to the new one. While the court didn’t discuss this issue, it seems that if at the time of renewal the vacancy had already lasted 60 days and the fire occurred on the very next day after renewal, the court would have made the same decision. Therefore, the estate, which paid a premium for the renewed insurance, would effectively have no coverage unless someone immediately occupied the property. One-Night StayIn the opinion, the court accepted the company’s argument that the estate could have “avoided the suspension or restriction of coverage simply by interrupting the period of vacancy.” Therefore, if someone had simply stayed overnight at the home, thereby alleviating the concern of the legislature regarding the safety of property left unoccupied for prolonged periods, the company would have had to pay the loss. The court agreed with the company that “it is not unreasonable to require that a property be occupied once every two months.” It’s not even clear that an overnight stay is necessary to break the vacancy streak. Solutions and Ironies This case highlights a problem that homeowners may have who travel for long periods of time. For example, so-called “snowbirds” that winter in Florida for more than two months may not realize that the standard policy will not cover them. They may be leaving their home under various circumstances with a false sense of security. These types of travelers would be well advised to contact their agents and confirm that the insurance company will waive the vacancy clause for those types of vacancies. Of course, some will question how frequently the insurance company will be able to invoke the vacancy clause by being able to prove that no one stayed at the home for even one night during the applicable 60-day period. The vacancy clause also highlights a problem that some have on the insurance coverage for their vacation home. What happens if the vacation home is not occupied during the winter or summer season? Will those owners be covered against a loss? One irony about the case is that if the estate had placed the insurance with a different company instead of renewing with the same company, the fire would have been a covered loss. In that case, the insurance company would not have been able to take the position that the earlier vacancy could be tacked on to the 36-day vacancy which occurred after placement of the policy. Therefore, for the same premium that could purchase a policy with the very same terms, the estate would have been better served to have given its business to a rival company, rather than being loyal to the company to which it had been paying premiums for the previous five years. Also, some insurance companies may provide policies without a strict vacancy clause. Owners who may be vulnerable to a vacancy defense should consider that type of policy. HARRIS OMINSKY is with Blank Rome, which has offices in Pennsylvania, New York, New Jersey, Delaware, the District of Columbia, Maryland, Florida and Ohio. He is a past president of the Pennsylvania Bar Institute. (Copies of the 16-page opinion in Estate of Higgins v. Washington Mutual Fire Insurance Co. of Lawrence County, PICS No. 03-1925, are available from The Legal Intelligencer . Please refer to the order form on Page 12.)

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