COVID-19 And The Vacancy Exclusion In Homeowner Insurance Policies

COVID-19 And The Vacancy Exclusion In Homeowner Insurance Policies

The excerpted article was written by Meera Jain, Raman Johal and Samantha Ip

Clark Wilson LLP

The COVID-19 global pandemic poses an unprecedented risk to public health and safety and has already had a tremendous impact on our economy, forcing businesses to close, projects to shut down, and creating new liability exposures. Consequently, businesses and insurers have many questions regarding policy wording and insurance coverage relating to COVID-19. Will a commercial policy respond to cover business interruption losses? Will a builders’ risk policy respond to inevitable losses from project closure and delay? Will an employment practices liability policy cover potential lawsuits commenced by an employee alleging negligence for exposing the employee to COVID-19? Will a directors and officers policy respond to potential claims against senior management by shareholders or investors arising from corporate decisions made in response to COVID-19?

To answer these questions, the Clark Wilson Insurance Group is presenting a series of articles through its COVID-19 INSURANCE SERIES. In this article, we address whether the “unoccupied exclusion” contained in most homeowner insurance policies will be triggered if a homeowner is caught somewhere due to travel restrictions or other circumstances and his or her home ends up being unoccupied for more than thirty days.

Will the Vacancy Exclusion Operate to Exclude Coverage in the Context of COVID-19?

The COVID-19 global pandemic has resulted in serious restrictions on how we go about our day-to-day lives has led homeowners and insurers to raise questions about policy wording and insurance coverage related to COVID-19. What if a homeowner is unable to travel home from Peru or must have treatment in hospital due to COVID-19, resulting in an unoccupied home for more than 30 days?

The Unoccupied/Vacancy Exclusion

An insurer is entitled to know how a premise is being used. A vacant or unoccupied home presents a different risk than one that is being occupied. To put it simply, if a home is not occupied, there is higher risk that property damage can occur from an insured peril such as fire, flood of theft. As such homeowner policies will contain what has been coined as the “vacancy exclusion” to allow an insurer to deny a claim if the claim occurred during more than a certain number of days of vacancy.

Most homeowner policies will differentiate between a vacant and an unoccupied home. A vacant home is one where the dwelling is not furnished for normal habitation or the occupants have moved out with no intention to return. An unoccupied home is one that has not been lived in for thirty consecutive days. Most insurers will require that a homeowner notify them if the home is being unoccupied or vacant to allow the insurer to amend the terms and condition of the insurance policy if necessary. A failure to comply with this notice condition may result in an insurer denying coverage for a claim or voiding the policy altogether.

The COVID-19 travel restrictions and, in some countries, travel bans, may have made it difficult or impossible for homeowners to return to their homes. Worse yet, a homeowner may have to undergo treatment in hospital for more than 30 days, leaving a home unoccupied. A homeowner is required to notify its insurer if they are unable to return to their home after being away for more than thirty days, or if they may be in treatment for that amount of time, even if that absence was the result of a COVID-19 factors. A failure to notify their insurer may result in the insurer denying coverage for a claim that occurs during their absence.

Failure to Report an Unoccupied Home is Not a Material Change in Risk

Statutory Condition #4 of the Insurance Act requires that insureds report any material change in risk to their insurer, failing which an insurer can void the policy ab initio (as if it never existed). The statutory condition is in all homeowner policies. Consideration of the occupancy exclusion is separate from a consideration of material change in risk which would allow underwriters to void a policy ab initio. Change in the state of occupancy is likely a material change in risk but requires knowledge and control on the part of the insured, such as renting the home to tenants when it was stated to be occupied by the homeowner. However, failing to report that a home is unoccupied during the 30-day period has been deemed not to be a breach of the requirement to report a material change in risk.

Unjust Contract Provision May Prevent Insurers from Relying on Vacancy Exclusion

Section 32 of the Insurance Act contains an unjust contract provision which would likely prohibit an insurer from excluding coverage or voiding a policy ab initio if the underlying reason for triggering the unoccupied exclusion or the statutory condition related to material change in risk were caused by COVID-19. Section 32 provides that:

  1. if a contract contains any term or condition… that is or may be material to the risk, including, but not restricted to, a provision in respect of the use, condition, location or maintenance of the insured property, the term or condition is not binding on the insured if it is held to be unjust or unreasonable by the court before which a question relating to it is tried.

If a homeowner is forced to go to court to enforce coverage against an insurer that has denied coverage due to the occupancy exclusion, the homeowner may rely on s. 32 to argue that it would be unjust or unreasonable for the insurer to enforce the occupancy condition given the COVID-19 travel restrictions. The application of s. 32 has not been tested in the context of a global pandemic such as COVID-19 but we expect that a court will afford a homeowner some leniency in failing to comply with the strict notice requirements under a policy if they are prevented from returning to their home due to the COVID-19 travel bans. With that said, homeowners should take precautions when leaving their home unoccupied for an extended period of time to avoid a potential loss, such as asking a friend or neighbor to visit the home every few days.

Our Recommendation

We do not recommend that insurers make any blanket policy changes or broad communications about the enforcement of the “unoccupied exclusion”. Rather, each claim should be considered on its own as coverage depends on the circumstances of each case and the specific policy wording. Any blanket policy change or broad communication may have the unintended consequence of estopping insurers from relying on the vacancy exclusion as it can be regarded as having waived its right to do so.

Commercial insurance policies may also contain similarly worded vacancy exclusion clauses. The above analysis would equally apply to any species of policy containing similar clauses.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Source: Mondaq

#DriveSmartBC: Perpetuating Mediocrity

New Driver SignsI once stopped a vehicle being driven at 96 km/h in a posted 50 km/h construction zone. Approaching the passenger side, I spoke with the woman in the front seat and the young lady driving. When I explained why I stopped them, the woman suggested that she was unable to get the driver to slow down, and maybe I could do something about it.

The driver produced a learner driver’s license and no L sign was displayed on the vehicle.

To me, the solution was simple. The woman should have denied her daughter access to the vehicle unless she was willing to follow the traffic rules. The conversation told me that this was a known issue rather than a one time lapse on the part of the driver.

After they had departed and I sat doing the notes for the violation ticket I had issued, I wondered to myself if maybe it wasn’t so simple. Perhaps this woman should not have been given the privilege of teaching her daughter to drive. If the teacher is ill equipped to teach, the new driver will not learn what is necessary to drive correctly and safely.

Do parents read the Tuning Up for Drivers guide that their teen receives in the package with their new learner’s licence? The book contains 20 lessons to prepare for the class 7 road test presented in order for good skill development.

We all tend to think that we are better than average drivers, but I occasionally find myself in conversations with parents who tell me that their teen taught them about things that they were doing wrong when driving.

Yes, ICBC does test the new driver to see if they meet standards as they progress through the Graduated Licensing Program. These standards are much more stringent than they were when I took my driver’s test 30 years ago. The trouble is, attitude can easily be hidden for the duration of a test, but put back on as soon as the driver hits the highway alone.

Perhaps this young lady would be better off taking the complete GLP package at a driving school. She will receive instruction in both the mechanics and the ethics of being a good driver that she might not be getting at home.

Currently Nova Scotia, Quebec and Saskatchewan require a new driver to take formal training in order to get a full privilege driver’s licence. Given the level of complexity facing a learner driver today presented by both the vehicle and the driving environment, perhaps formal training should be mandatory in all provinces.

Resource Links:

Regulatory and Advisory Signs

Speed SignDrivers are often confused about the difference between a regulatory sign and an advisory sign. A regulatory sign generally has black characters or symbols on a white background and an advisory sign has black characters or symbols on a yellow background. So, what’s the difference?

The regulatory sign must be obeyed exactly as it is read. Examples of regulatory signs include speed limits, turn restrictions, parking restrictions and directional instructions. Failure to obey these signs is an offence and the driver may be charged if they choose not to follow the instruction.

If there is not a specific offence such as speeding or failing to stop for the regulatory sign, a traffic ticket for disobeying a traffic control device may be issued to the driver.

An advisory sign gives advance notice of conditions on or adjacent to a highway that are potentially hazardous to traffic. A driver may choose whether or not to follow the suggestion given by the sign. Ignoring the advice is not an offence in itself, but anything that happens because the signs are not given consideration may be an offence.

A common advisory sign is the large diamond shaped sign shows a black arrow on a yellow background telling drivers of a curve ahead. Underneath it is a smaller square sign with black lettering on a yellow background showing a speed of 30 km/h.

The example of the curve was chosen to illustrate a point. We have often seen these signs and then travelled around the curve comfortably at speeds higher than that suggested. In those cases the shape of the curve and the road condition could accommodate the vehicle travelling at the higher speed.

So why was the speed warning there? Often it is because the driver’s line of sight is restricted. This would prevent the driver from seeing and reacting to a hazard in or just beyond the corner unless the speed was at or less than that suggested. Heavy trucks may also be required to slow for the corner to prevent tipping over.

A relatively new (since 2012) advisory sign is black on a pink background. These signs warn of an emergency incident ahead and tell drivers to expect responders on the roadway. Proceed with caution as full temporary traffic control may not yet have been established.

Failure to obey an advisory sign is only an offence if something happens as a result of ignoring the advice and the offence is generally for the misadventure that occurs.

Need a quick brush up on what road signs mean? Drop by your local Driver Service Center (where you renew your driver’s licence) and ask for a free copy of Learn to Drive Smart. The signs, signals and road markings are explained in Chapter 3.

Reference Links:

ICBC cancelling all road tests due to COVID-19

March 17, 2020

In response to the COVID-19 pandemic in British Columbia, ICBC is taking a number of measures to protect the health and safety of its customers, partners and employees. These measures include suspending all driver road tests effective today, March 17, 2020, in line with public health recommendations around social distancing.

All motorcycle, passenger, and commercial road tests are cancelled until further notice. ICBC will reassess the situation in two weeks, taking into account public health recommendations and other operational considerations at that time.

All impacted customers scheduled to take road tests over the next week are being notified by ICBC that their appointment has been cancelled. ICBC will do its best to accommodate those impacted in rescheduling once ICBC returns to full operations.

ICBC undertakes approximately 7,500 road tests a week across the province. The tests, in most cases, involve ICBC driver examiners conducting a driving examination in an individual’s vehicle, in addition to some interaction at the Driver Licensing Office front counter. The cancellation of all road tests for the next two weeks impacts approximately 15,000 road tests.

Customers with scheduled road tests are encouraged to visit icbc.com for more information or to call 1-800-950-1498.

Other precautionary measures ICBC is taking to ensure the health and safety of our customers and staff include:

At all ICBC offices:

  • Continuing to direct any customers who are sick or have travelled outside Canada (in the last 14 days) not to enter any of our offices, and turning away customers if needed

  • Requesting people to pay traffic tickets or other fines via phone or mail, not in person

  • Limiting the number of customers in office waiting areas

  • Increasing cleaning and sanitization in all our facilities and offices

At Driver Licensing Offices:

  • Asking COVID-19 screening questions

At claims centres:

  • Restricting appointments and drop-in visits to urgent transactions only

At head office:

  • Suspending walk-in service for vehicle insurance customers

ICBC continues to review our operations as the situation evolves to support the safety of our customers and employees, including reviewing of opportunities in which brokers can issue and renew insurance policies over the phone.  More information will be provided on any changes to our operations as soon as possible.

ICBC is committed to following the recommendations from federal and provincial public health agencies in consultation with government. Please visit the BC Centre for Disease Control website (bccdc.ca) for more information on COVID-19 including preventative measures and when to seek medical attention.

Ignore Them, They’ll Go Away

delete keyLast September the Parents Advisory Committee (PAC) at the Ecole Oceanside Elementary School in Parksville asked me to help establishing a crossing guard program for what they considered to be a dangerous intersection at one corner of the school grounds. In past, the principal had raised the issue of liability concerns that needed to be looked into and that was the end of the conversation.

This year, with a little bit of research and advice from another school that had a crossing guard program this program was backed by the new principal. The request made it as far as school district’s Operations and Maintenance / Transportation manager according to the PAC, where it stalled yet again.

The head of the PAC has now stopped responding to requests for an update on the progress of their project.

The strategy of Ignore Them, They’ll Go Away seems to have been successfully adopted by many levels of government today. From the perspective of gathering information for this site, RoadSafetyBC is the worst, TranBC along with the RCMP are somewhere in the middle and ICBC has been the best, although they are now beginning to ignore e-mail requests as well.

In all cases, if you agenda matches theirs, information is forthcoming, often surprisingly quickly. The people at RoadSafetyBC spent a lot of effort assisting me in creating a unit on the Enhanced Road Assessment for my ElderCollege course. However, ask if there has been any follow up research on 2015’s B.C. Communities Road Safety Survey to see if there have been improvements and the e-mail enters a black hole.

At this point I would even be happy with an auto response telling me that my message has been received. It would be a simple matter to include information about how requests are triaged and what to do if a response is not received within a reasonable amount of time.

When I was working in traffic enforcement I was occasionally reminded by the driver I was dealing with that they were the ones that paid my wages. Yes, I did work for them but sometimes that work was not what they wanted me to be doing. Still, they had a point and I had an obligation. Government seems to forget this too.

On the other hand, I can imagine that with the ability to e-mail some government contacts being so simple, many of us do it. There must be a huge volume of e-mail to deal with and people do make mistakes.

To come full circle to the PAC request, if they considered their crossing guard program and decided that it was the best solution, they should be prepared to persist in the face of silence. The group should not quit until they are either successful or are shown that there is a better way to deal with the problem.

Canada’s largest airlines waiving fees to change flights because of coronavirus

By Ross Marowits

THE CANADIAN PRESS

TORONTO _ Canada’s largest airlines are waiving change fees in light of concerns about the novel coronavirus.

Air Canada says a one-time change is permitted for tickets purchased from the airline between March 4 and March 31 for travel within 12 months.

It also applies to Aeroplan flight reward bookings and Air Canada Vacations has implemented flexible booking policies.

WestJet Airlines Ltd. says the one-time change fee waiver applies to new bookings made between March 5 and March 31.

Air Transat has two policies, including one that applies to Venice, a hot spot for the virus called COVID-19. All customers who booked flights on or before March 2 for travel until June 30 can change their date or destination for a trip until Oct. 31.

Other passengers travelling outside the eco budget fare class can change their travel dates, destination or hotel at no charge for bookings made between March 4 and March 31 for travel through Oct. 31.

“Although almost all of our destinations are very safe and the government of Canada’s advisories currently affect only one of our destinations located in northern Italy, we are aware that the outbreak and progression of the coronavirus may raise questions and even concerns among some travellers,” Transat said in a news release.

“The situation is evolving rapidly, and in order to reassure travellers and enable our clients to carry out their travel plans, we are offering them peace of mind by deploying a highly advantageous flexibility policy.”

Most airlines will waive the fee for changes made at least 14 days before travel. However, Transat passengers can change their booking up to 24 hours before departure.

All airlines require passengers to pay any fare difference between the original and new flights.

Sunwing says its destinations have not been impacted to date but its waiver applies to all new bookings made March 4-19 for flights until June 24.

Sunwing passengers can purchase insurance starting at $50 per person that provides full cancellation coverage up until three hours before departure for any reason.

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