I am a North Carolina subscriber with a question regarding Fair Rental Value. Our insured owns a single family dwelling insured under an HO 00 03 05 11. In December of 2023 he moved from the home to reside in a newly purchased dwelling . He contacted a management company and asked it to hold the dwelling our for rent. He also placed an ad on-line to rent the dwelling. In mid-January of 2024 the management company entered the dwelling to show it to a prospective tenant and found a burst pipe. The damage rendered the dwelling unfit to live in. The insured filed a claim for damage to the dwelling. The insurer accepted the claim and the insured and insurer reached agreement on the scope and cost. We submitted a claim for loss of rent. The insurer denied the claim stating the following:

"Rented or held for rental are both used in the past tense. This means the property is actively being rented, or there is a signed lease or hold on the home to prevent it from going to another renter. The policy language does not mean while being shown to potential renters.

This would be why there is no coverage for the loss of rent. If there is any information that we are not aware of, please let us know."

We believe the policy covers this loss because the plain meaning of the phrase "held for rental" means simply that the owner is offering the dwelling for rent. The policy does not require that the dwelling be under contract now or previous to the loss. What is your opinion?

North Carolina Subscriber

You are correct in that for a property to be "held for rental" means that the property has been offered for rent – it does not mean that there are any contracts in place or that a lease has been signed. Once an ad has been placed, the property has been offered, or held, for rental.

When something is held for sale that doesn't mean it has been sold, but that a buyer has the option of buying it. For example, the products on a car lot or in a grocery store are all held for sale – no one has committed to buying them, but the objects are available for purchase, they are held for sale since they have a price attached. Held for rental works the same way. The insured listed the property for rental and hired a management company to hold the dwelling out for rent – at that point the property was held for rental – it was available to be rented by someone. The policy does not require any lease or other agreements for the property to be considered to be "held for rental". To be held for rental is to be offered for rental, pure and simple.