The Standard Fire Policy 60-Day Vacancy/Unoccupancy Condition

Last November in my blogpost, Does the Standard Fire Policy Vacancy/Unoccupancy Condition Apply to a Fire Loss Occurring within Sixty Days of the Inception of Coverage, I discussed how courts have measured vacancy/unoccupancy when a loss occurs within sixty days of the inception of coverage; but, the insured property had been vacant or unoccupied for more than sixty days prior to the effective date of coverage.

In Ervin v. Travelers Personal Insurance Company,¹ which was my case, a federal district court in Illinois recently weighed in on the issue as it related to Illinois’ statutorily-mandated standard fire insurance policy (“the Standard Fire Policy”).² There, a fire damaged a two-unit residential rental dwelling thirty-two days after the policy went into effect. Travelers, which insured the dwelling at the time of the fire, denied the claim based on an exclusion in its policy for loss caused by any intentional and wrongful act committed in the course of vandalism and malicious mischief, if the dwelling has been vacant for more than thirty consecutive days immediately before the loss (“the vandalism exclusion”).

In contrast, Lines 28-35 of the Standard Fire Policy restrict coverage for a fire loss “while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days.”³ Travelers posited that its vandalism exclusion applied because the dwelling had been vacant for more than two years before the vandalism fire, a position based on measuring the vacancy period from the inception of the vacancy as opposed to the inception of coverage.

Following Travelers’ denial, the insured filed suit. Travelers raised its vandalism exclusion as an affirmative defense. The insured then moved for judgment on that defense, arguing that the exclusion violated the Standard Fire Policy’s 60-day vacancy condition. In response, Travelers asserted that if the Standard Fire Policy applies, then all it means is the vacancy period in its vandalism exclusion is amended from 30 days to 60 days. Because the dwelling had been vacant for more than 60 consecutive days immediately before the fire, Travelers contended that its vandalism exclusion nonetheless applied.

The district court rejected Travelers’ argument. The district court reasoned that even if it is amended to 60 days, the vacancy period in the Travelers vandalism exclusion still afforded the insured less fire coverage than provided in the Standard Fire Policy vacancy condition, as vacancy or unoccupancy is measured prospectively from the date of inception of coverage and not retrospectively from the date of inception of the vacancy or unoccupancy. The district court entered judgment against Travelers on its vandalism exclusion, finding it inconsistent and in conflict with the Standard Fire Policy vacancy condition which affords coverage for a fire loss occurring within sixty days of the inception of coverage.
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¹ Ervin v. Travelers Personal Ins. Co., No. 17-5492, 2018 WL 1635849 (N.D. Ill. April 5, 2018).
² Under the powers vested by sections 397 and 401 of the Illinois Insurance Code, the Director of Insurance has promulgated certain regulations which provide for a Standard Fire Policy. 215 ILCS 5/397 and 5/401(a); 50 Ill. Adm. Code § 2301 et. seq. Under the regulations, all fire insurance policies must “conform to such form of the Standard [Fire] Policy or, if another form is used, shall for the purpose of concurrence of contract be deemed to be the Standard [Fire] Policy.” 50 Ill. Adm. Code § 2301.30. In essence, the Standard Fire Policy guarantees a minimum level of coverage that supersedes any attempt to limit or to restrict coverage to less than the statutory minimum. Stated differently, fire insurance policies may not provide coverage less than that set forth in the Standard Fire Policy.
³ The Illinois Standard Fire Policy 165-line form is identical to the Standard Fire Policy 165-line form prescribed by the New York legislature in 1943. See Corday’s Dep’t Store, Inc. v. New York Fire and Mar. Underwriters, Inc., 442 F.2d 100, 104 (7th Cir. 1971).