Homeowner / Landlord Claim Question.

[stevegonzales]

Hello everyone,

Any adjuster or experience agent can help me with this question please?

Case:
Home owner has purchased homeowner policy for a couple of years. They moved out, rented the house out without converting the homeowner policy to a landlord policy. A couple of year later, their tenants stop paying rent, and they realized that they still have a home owner policy. They changed it to a landlord policy while doing the eviction process. About a month later, the eviction process is finished, and they found out that the house is trashed by the tenants.

Question:
Do they have a valid claim?

Two things that come to my mind. 1 - Do they know of the damage before converting the policy? ( fraud!!!? ) 2 - The tenants might had damaged the house when the homeowner policy is in effect, and before the landlord policy is in effect. Both policies are from the same company. What do you guy think? Do their claim valid?

 

[entrep1776]

This might be a good starting point.

https://www.biggerpockets.com/forum...laim-for-damages-if-tenant-does-damage?page=2

 

[adjusterjack]

Question:
Do they have a valid claim?

Two things that come to my mind. 1 - Do they know of the damage before converting the policy? ( fraud!!!? ) 2 - The tenants might had damaged the house when the homeowner policy is in effect, and before the landlord policy is in effect. Both policies are from the same company. What do you guy think?

Well, there could be a fraud issue, depending on whether the insurance company wanted to play hard ball about not being notified about the change in occupancy when it occurred.

All homeowners policies have the following provision (or words to that effect):

Concealment Or Fraud
We do not provide coverage to an "insured" who, whether before or after a loss, has:
1. Intentionally concealed or misrepresented any material fact or circumstance;
2. Engaged in fraudulent conduct; or
3. Made false statements;
relating to this insurance.

Where I worked as a property claim rep any proposed denial or rescission based on that provision would have been submitted to our company attorney who, on real occasions, had advised that proving "intent" would have been problematic.

Besides, both policies cover vandalism, and I had the authority to not even raise the issue of concealment and wouldn't have in the case you describe.

What any other company would do is anybody's guess.

As for actually adjusting the damage I would first have to determine what was meant by "trashed." In other words, determine what was vandalism (willful and malicious damage) and what was just carelessness, negligence, or (what we call in the trade) "hard living."

Whatever turned out to be actually vandalism would require a police report and a copy to me before going any further.

I would inspect and photograph the damage and determine if all the vandalism was a single instance of vandalism or multiple instances of vandalism. Multiple instances of vandalism would require additional claim files and the deductible applied to each claim separately.

I adjusted many tenant vandalism claims and by the time I got through with them, very little ended up getting paid to the insured.

 

[entrep1776]

Well

I adjusted many tenant vandalism claims and by the time I got through with them, very little ended up getting paid to the insured.

I guess alot depends on value of the rental. If it's a million dollar or $20k. Where I'm at in Central IL I most likely wouldn't even consider a claim. Maybe if they took down all the drywall & stole all the cabinets & plumbing or something extreme.

If it is a "trashed" place that is roaches and & tenants were too lazy to take out trash for 8 months. Probably just bite the bullet consider it wear and tear. Get the trash out. Paint & carpet. No sense in a claim & insurance company raising my rates and me not getting any money.

 

[InsCommentary]

Check out this white paper and there are two free webinars:

Virtual University - Where You Reside

Some carriers and some courts have said if the named insureds don't reside there, coverage on the dwelling is effectively suspended.

 

[stevegonzales]

Well, there could be a fraud issue, depending on whether the insurance company wanted to play hard ball about not being notified about the change in occupancy when it occurred.

All homeowners policies have the following provision (or words to that effect):



Where I worked as a property claim rep any proposed denial or rescission based on that provision would have been submitted to our company attorney who, on real occasions, had advised that proving "intent" would have been problematic.

Besides, both policies cover vandalism, and I had the authority to not even raise the issue of concealment and wouldn't have in the case you describe.

What any other company would do is anybody's guess.

As for actually adjusting the damage I would first have to determine what was meant by "trashed." In other words, determine what was vandalism (willful and malicious damage) and what was just carelessness, negligence, or (what we call in the trade) "hard living."

Whatever turned out to be actually vandalism would require a police report and a copy to me before going any further.

I would inspect and photograph the damage and determine if all the vandalism was a single instance of vandalism or multiple instances of vandalism. Multiple instances of vandalism would require additional claim files and the deductible applied to each claim separately.

I adjusted many tenant vandalism claims and by the time I got through with them, very little ended up getting paid to the insured.

Thanks Jack. While the homeowner insurance does cover vandalism, isn't it an automatic deny if it caused by the tenant, and the house only have homeowner policy?

----------

Thank you guy. I don't want to give the homeowner the wrong answer, so your help is greatly appreciated.

Here is the timeline of the event:
Location: Sunnyvale, California
Insurance: Farmers

7/5: Tenant late in rent
7/15: Owner post 3 days notice to pay or quit
7/19: Owner file unlawful detainer action and serve the summon.
7/20: Owner found out he only has homeowner insurance, and converted it to landlord protection policy.
Tenant likely has disappeared, so notice was posted.
.... delay, delay, delay
8/29: They get the house back, drilled the lock, and found tenant has converted their house into a grow op to grow marijuana. The tenant cut into PG&E line to steal electricity. It seems like PG&E found out, cut the line, and the tenant disappeared. Damage estimate to be about 50K.

Their question for me is: To claim or not to claim? And will their claim be deny base on the fact that it was a home owner policy, converted only 1 month ago?

Please correct me if I am wrong, but I believe the vandalism claim cause by the tenant would be denied if the landlord only has homeowner policy, and not landlord policy.

----------

Some carriers and some courts have said if the named insureds don't reside there, coverage on the dwelling is effectively suspended.

Thumb up. You nailed it. It's the "where you reside" issue. I have no experience in this, but I believe if he make a vandalism claim under his home owner insurance, it will be denied due to the fact that he has rented the house out for a couple of year.

Any of you guy have any experience with this issue, with Farmers & California location?

 

[adjusterjack]

I guess alot depends on value of the rental. If it's a million dollar or $20k.

What's covered by the policy is not determined by the value of the home. It's determined by the terms and conditions of the policy.

Maybe if they took down all the drywall & stole all the cabinets & plumbing or something extreme.

That would be obvious vandalism and theft and I paid many like that.

If it is a "trashed" place that is roaches and & tenants were too lazy to take out trash for 8 months. Probably just bite the bullet consider it wear and tear. Get the trash out. Paint & carpet. No sense in a claim & insurance company raising my rates and me not getting any money.

Roaches - No coverage.
Garbage - No coverage.
Paint - Wear and tear. No coverage.
Carpet - Wear and tear. No coverage.

You get the idea.

----------

Check out this white paper and there are two free webinars:

Virtual University - Where You Reside

Some carriers and some courts have said if the named insureds don't reside there, coverage on the dwelling is effectively suspended.

I hate articles that say things like:

According to some interpretations and courts, if ‘you’ no longer reside in the dwelling, coverage on that structure immediately terminates.

An absolutely useless piece of information without case citations.

 

[stevegonzales]

I hate articles that say things like:



An absolutely useless piece of information without case citations.

Hello Jack,

You seem to be an expert as this. What do you think I should tell the home owner? Claim or no claim? I'm tilling toward claim, but it would look really bad if they deny it, then he got his with increase premium.

 

[adjusterjack]

Thanks Jack. While the homeowner insurance does cover vandalism, isn't it an automatic deny if it caused by the tenant, and the house only have homeowner policy?

To claim or not to claim? And will their claim be deny base on the fact that it was a home owner policy, converted only 1 month ago?

Please correct me if I am wrong, but I believe the vandalism claim cause by the tenant would be denied if the landlord only has homeowner policy, and not landlord policy.

The additional information you posted established a couple of important facts.

1 - This is happening in California.
2 - The insured's rented out their house for a couple of years without notifying the insurance company of the change.
3 - A presumption can be made that the tenants damaged the property and disappeared before the new policy replaced the old one.

Issue Number 1 - Is the rental house covered on a homeowners policy? As best as I can make out, the answer is no. I'm looking at the ISO HO 3 form. You'll have to check the Farmers' policy to make sure the wording is the same.

SECTION I – PROPERTY COVERAGES
A. Coverage A – Dwelling
1. We cover:
a. The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling;

"Residence premises" means:
a. The one family dwelling where you reside;
and which is shown as the "residence premises" in the Declarations.
"Residence premises" also includes other structures and grounds at that location.

I think the definition of "residence premises" is enough to get the claim denied because they obviously didn't reside there at the time of the damage or for a number of years prior.

But if that isn't enough, we have

Issue number 2:

Concealment Or Fraud
We do not provide coverage to an "insured" who, whether before or after a loss, has:
1. Intentionally concealed or misrepresented any material fact or circumstance;
2. Engaged in fraudulent conduct; or
3. Made false statements;
relating to this insurance.

While that could be invoked by the insurance company, it gets a bit problematic if that section has to be interpreted.

I would think it would be more easily justified for the insurance company to rely on the definition of "residence premises."

However, playing devil's advocate for the moment, your insureds DISCOVERED the damage on 8/29 after having no access to the interior between the time they took out the new policy on 7/20. Is there any real evidence that the damage occurred prior to 7/20 or are we just assuming that?

One option is to make the claim on the new policy based on the date of discovery.

Unfortunately, that begs the question: What did the insured tell the insurance company as an inducement to write the new policy? Did the insured reveal that an unlawful detainer was filed the day before asking for the new policy?

Anyway, even with all the issues I suggest that YOU not be the one to tell the insured not to make the claim. You would be wise to report the claim on either or both policies and let the insurance company make the decision.

That protects you from being the bad guy for saying no coverage and, more importantly, protects you from an E&O claim if someday down the line your insureds talk to a lawyer who says the claim should have been covered.

 

[BADTROUT]

Hello Jack,

You seem to be an expert as this. What do you think I should tell the home owner? Claim or no claim? I'm tilling toward claim, but it would look really bad if they deny it, then he got his with increase premium.

Steve... I would absolutely defer to Jack on any claim or adjusting questions hands down... i just wanted to address the question about what to tell the client. I ALWAYS avoid directing the customer toward or away from filing a claim... I inform them of the potential for a subjective adjuster, and carrier interpretation of the policy... I also inform them of the deductible and potential for rate increases... but i ALWAYS remind them, that it is ALWAYS within their right to file a claim, and although there may be consequences, this is what insurance is for. If you are objective, and let them know your job is to recommend the coverage that will hopefully mitigate most losses, but ultimately the choice to file a claim is theirs...

Educate them of the pros and cons that YOU are the expert, and always remember they are the expert when it comes to their appetite for risk, and their ability to absorb the deductible, policy increases or potential loss.