When Coverage Might Not Apply
the insured was completing while the
property stood uninhabited. Although
the insured was away from the premises,
the property was broken into and van-
dalized. The carrier, however, denied the
loss because the property was vacant. The
subscriber felt that since the property was
“under construction,” then the exception
should have applied. But does it?
With the housing market in its current state, there are more foreclosed homes up for grabs than usual. Some individuals are able to take ad- vantage of this situation and purchase a home for much less than what it is worth. While many of these houses are in good condition, some
are in need of extensive amounts of
repair, which brings us to the topic
of this month’s column: What is the
difference between construction of a
property and renovation of a property, and how is coverage affected?
I have received a number of questions at FC&S lately regarding the
difference between construction
and renovation. Many people feel
that if a house is being extensively
renovated, then the policy exception stating that a home being constructed is not vacant would apply, and that a home
under renovation would not be considered vacant. For example, a recent subscriber
asked about an insured who purchased a foreclosed home and took out a non-owner-occupied policy on the dwelling. The property needed significant framing work, which
part of the renovation-
problem arises from
using the terms inter-
changeably although they
have different meanings.
Stand By Me
The standard ISO homeowners’ policy
contains an exclusion for vandalism and
malicious mischief to any property that
is vacant for 60 days before the loss. The
exclusion’s exception states that “a dwelling being constructed is not considered
vacant;” the policy, however, does not define construction.
When terms are not defined in a policy, standard court practice is to refer to a
common desk reference.
Merriam-Web-ster online defines construct as: “to make
or form by combining or arranging parts
of elements: build.” To renovate is “to restore to a former better state (as by cleaning, repairing, or rebuilding).” Therefore,
a dwelling is under construction if it is
being built from scratch. There are no
standing elements. A foundation must be
laid, framing must be put up, and wiring,
plumbing, walls, floors, and ceilings all
must be installed.
When a building is being renovated, it
is being repaired or rebuilt. Buildings being renovated already exist; only certain
parts of the structure are being modified. Even if renovations are extensive,
the process is still completely different
than starting construction from scratch.
The foundation is laid, walls are present,
and wiring and plumbing are in place. So,
to answer the first subscriber’s question,
we explained that his property was under
renovation and not under construction,
thus the vacancy provision applied.
Another subscriber relayed a similar situation. The insured purchased a
property with the intention of flipping