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

The insured used to live in the home, which is why they wereinsured under an HO-3. However, the policyholder bought alarger home and moved into it a couple of years ago, and they neverchanged the policy over to a DP3.

The insured recently filed a claim for a small fire in the kitchen. The fire damage isnot big at all, but there is some smell of smoke throughout thehome.

The claims adjuster for the insurer realizedfairly quickly that this was a rental property and stated that theyhad the wrong policy. The adjuster stated that technically theycould deny the claim, but that they were going to go ahead and payto repair the damage from the fire and wipe down the home for thesmoke.

However, the adjuster did state that they would not bewilling to clean the renters belongings of the smoke odor or pay tomove them around (contents manipulation) while the work was beingdone to the structure.

We have several questions:

1. Could the insurer deny the entire claim since it wasinsured under a homeowners' policy rather than a dwelling policy?
2. When insured under a DP3, we routinely see insurers makingpayment to move around the belongings of the renters so thatrepairs can be made to the structure. Why would this not be coveredon this claim?
3. If an insurer owes to move the contents around to make wayfor the repairs to the structure, it would seem that they shouldalso pay to remove the smoke odor from the contents as they wouldonly re-pollute the interior with smoke odor – or cause the smokeodor from the structure to never be successful in beingremoved

— Hawaii Subscriber

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

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

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

As the named insured does not live in the house, it is not hisresidence premises, and therefore coverage does not apply, eventhough he is the named insured. The carrier is fully within itsright to deny the claim outright — unless the ResidencePremises Definition endorsement, HO 06 48 10 15, whichprovides coverage after the insured moves out of the home is on thepolicy, there is no coverage.

The tenant and his contents have absolutely no coveragewhatsoever, unless he has his own tenants policy. Tenant propertyis 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 notpay for tenants contents.

Generally, manipulation of contents is covered because theproperty 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'dpush.

Insured travels extensively for business

Question: My client owns a house inPinehurst, North Carolina. The home is insured on a HomeownersEnhanced Form HE-7 with the HE-3221 Extended EnhancementEndorsement.

The client works for a military consulting company, andhis work takes him away from Pinehurst much moreoften than he is there. He is gone for such long periods oftime that he actually rents a residence where he goes eachtime.

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

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

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

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

Is this client covered for liability at hisrented locations out of state? The policy defines “insuredlocation,” among other things, as “any part of a premises not ownedby an insured; and where the insured is temporarilyresiding.”

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 histemporary residence on the declarations page?

— North CarolinaSubscriber

Answer: As long as the insured pays taxes inNorth Carolina, maintains a North Carolina drivers license, titleshis car in North Carolina, and all his mail goes to North Carolina,then that is his permanent residence. Any other residence, even ifhe is there for a year or more, is indeed temporary. However,because of the frequency with which he is away, it might not hurtto ask underwriting how they want you to handle the otherlocations. 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 haveinsured for 9 years, which was sold (about two years ago). The insured did not notify us about selling the risk, and wecontinued to insure the property and collect premiums.

The insured had purchased another property in October of2008, which he was renovating. When he sold the home we insured, hemoved all the property to the new risk, which we do not insure andwhich is the insured's new primary residence.

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

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

— Arizona Subscriber

Answer: The policy clearly defines insuredlocation to include:

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

(1) which is shown inthe Declarations; or

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

The new property is not shown in the declarations, and wasacquired during a previous, not the current, policy period. Theinsured is not temporarily residing in the new dwelling, it's hispermanent home. Likewise the definition of residence premisesrequires the property to be shown in the declarations. Thisproperty is not.

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

Tenant relatives are not insureds

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

Would the insured's mother-in-law be considered an insuredunder his policy? Would the actions of the tenant be covered underhis homeowner's policy?

— MassachusettsSubscriber

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

Named insured does not occupy residence premises

Question: Our agent placed a homeownerspolicy with our company. The named insured has never occupied theresidence, and the tenant pays her a monthly rent. We now have asubstantial fire loss. Do we owe our insured the monthly rent shehas lost?

— Idaho Subscriber

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

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

See also:

Top 15 homeowners' insurance carriers for 2017, asranked by NAIC

Home remodeling time: 9 things to know aboutinsurance coverage