it, so the property remained vacant while
renovations were being completed. During that time, the heat pump was stolen.
Again, the subscriber’s opinion differed
from that of the carrier. The subscriber
thought that the exception for theft in or
to a dwelling under construction would
apply. However, the carrier held that the
property was not under construction,
but that it was being renovated, and the
vacancy exclusion applied. We at FC&S
sided with the carrier because, as we have
already detailed, construction is vastly
different from renovation.
A Complicated Framework
But what about renovations where entire rooms are being added? That is considered new construction, and it could
be argued that a room being built onto
the back of the house is under construction. However, the home must be looked
at as a whole. The rest of the house is
already standing; it exists. While part
of a foundation must be poured and
framing, plumbing, and wiring must be
A BLUEPRINT FOR BURGLARIES
Whether a home is being constructed from the ground up or simply undergoing renovations,
the property may be screaming “come steal from me!” if left vacant for any period of
time. In light of the current economy, many homeowners have left properties behind for
smaller, cheaper options, and landlords are having more and more trouble filling countless
apartments. Because of this, many see it as an opportunity to invest in worn-out properties
in hopes of turning them into their dream home.
While these buildings are renovated and others are torn down and reconstructed, they
remain unoccupied. Homeowner vacancy rates in the U.S. have increased dramatically
over the past few decades, with this just being one of the many reasons. In 1981, 5 percent
of rental properties were vacant. As of last year, 10. 2 percent of those properties stood
unoccupied. In 1760, a mere 1 percent of homeowner units were unoccupied, while 2. 6
percent remained vacant in 2010.
The majority of these vacancies are within principal cities. The region that has seen the most
vacancies, including both owned units and rentals, is the South. Florida in particular had the
highest vacancy rate in 2010 with 24 percent, while close behind were Maine ( 23. 7 percent),
Alaska ( 21. 9 percent), Vermont ( 21. 4 percent), and West Virginia ( 21. 3 percent).
Though some areas have been hit harder by the economic downturn, regions across the U.S.
suffer from vacant properties. Whether construction is being completed on a home, there is
always the risk of unwanted visitors and the need for insurers to be ready for action.
added to the extension, the remainder
of the house is still livable. Therefore,
even though in one sense adding a room
is new construction, it really is just the
renovation of an existing dwelling.
This especially impacts those with Chinese drywall issues. If they vacate the premises so the drywall can be removed and replaced, then that is considered renovation
rather than construction. Now, issues surrounding vacancy versus unoccupancy will
rear their ugly heads, but let’s reserve that
discussion is for another article.
Part of the renovation-versus-con-struction problem arises from the use
of the terms interchangeably, even
though they have different meanings.
This is a situation where semantics is
critically important. Had the writers of
the policy wanted to include an exception for renovation as well as construction, they would have worded the policy
that way. However, only an exception
for construction exists. It does not help
that building materials are often loosely
referred to as construction materials,
as they are indeed used to construct
things. No one talks about renovation
materials, thus leading to the idea that
if you are using such materials, then the
property is under construction, not just
being renovated. There is a solid distinction between the two, and that is what
determines whether coverage applies. K
Christine G. Barlow, CPCU, is an assistant
editor with FC&S. She has an extensive
background in insurance underwriting. She
may be reached at firstname.lastname@example.org.