You obtain a new job which requires you to relocate, but in this economy it takes a while to sell your house so you decide to rent it. You think you are doing all the right things by checking the references of the tenant(s), getting a lawyer to draft a proper residential lease, and continuing to pay your homeowner’s insurance on the property so that your coverage will take care of any casualty loss (theft, fire, etc.) or liabilities (personal injury claims) related to the property. Your tenant is injured on the property and sues you. Thereafter you put your homeowner’s insurer on notice and you find it denies coverage. How can they do that? The answer is generally homeowner’s insurance does not provide coverage for parts of the property in which you, as the insured, do not reside or for any portion of the property that is for business.
This was the lesson learned by a homeowner in a New Hampshire federal court case of Young v. The Hartford Insurance Company on March 16, 2012 where the judge granted judgment without trial (called a summary judgment) in favor of The Hartford Insurance Company citing that there was no coverage under the homeowner’s policy because the insured no longer resided there. Young owned a North Hampton, New Hampshire home and moved out that home after purchasing a home in Wisconsin. The homeowners obtained driver’s licenses and voter registrations in that state. They rented out their New Hampshire home to a tenant for all of 2009 and into 2010. The Court found that since the homeowners were no longer residing in the premises, The Hartford Insurance Company had no obligation to provide liability coverage for personal injury to the tenant involving a tree. The net effect is that the Youngs will have to defend the personal injury lawsuit of the tenant and be liable for any damages, if any, awarded against them. Had the Youngs approached their insurance carrier prior to moving to Wisconsin and renting the premises, they could have obtained insurance to cover this risk; albeit at probably a higher premium. Insurers generally offer lower premiums for homeowners under the basic premise that the homeowner will take care of their property more so than a tenant. Likewise, insurers do not anticipate a homeowner’s insurance will cover property no longer occupied by the homeowner because this vacant property can be considered a higher risk than properties occupied by the homeowner.
Therefore, if there is a change in your circumstances where you are no longer living in the premises for an extended period of time, you should speak with your insurance agent to determine what the right insurance is for the property. The homeowner’s savings on a premium for a homeowner’s policy, rather than what should be paid possibly for a vacant property or a rented property, is of little use when you need the coverage only to find out that you do not have it such as the Youngs found in the foregoing case.
J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at [email protected].