Homeowners assume that once they have obtained insurance for their home, they are protected if a loss – such as damage to due to a fire or storm, stolen property, etc. – later occurs. Unfortunately, it is often only after having a claim denied by the insurance company that the homeowner realizes that the policy did not in fact provide the coverage that the insured homeowner thought she had paid for.

The gaps in coverage may result from one of the following common occurrences:

• The insurance policy defines the “residence” that is covered in specific terms but the home does not meet that definition. For example, if “residence” is defined as the location where the insured is currently living but the insured is temporarily living elsewhere, the insurer can deny coverage.
• The insurance policy covers losses for certain contents or personal property but the amount of coverage is much lower than the amount of losses suffered.
• The insurance policy excludes losses from certain types of events or arising under certain circumstances. For example, most basic policies do not include coverage for damage due to flooding; a separate policy would be required to cover this type of loss.

Courts in New Jersey and New York expect the homeowner to have read the policy and will allow an insurer to deny a claim if such a denial is clearly based on the policy’s terms. See Busker on the Roof P’Ship v. Warrington, 283 A.D. 2d 376, 377 (1st Dep’t 2001) (citing Metzger v. Aetna Ins. Co., 227 N.Y. 411, 416 (1920)); Martinez v. John Hancock Mut. Life Ins. Co., 145 N.J. Super. 301, 310 (App. Div. 1976), cert. denied, 74 N.J. 253 (1977).

To avoid being unpleasantly surprised to find that expected coverage does not pan out, it is essential to read and understand your policy. In particular:

• Review the definitions and the types of losses that are covered and those that are excluded. If there is a gap, consult your agent or broker to see if you can purchase additional coverage. For example, it may be possible to purchase additional flood insurance if the policy excludes this type of loss.
• Review the dollar amounts on any limits to the coverage offered and compare those limits to the value of your home and contents. If you think the proposed coverage may not be adequate, ask your broker what a higher level of coverage would cost in terms of the additional insurance premium so you can make an educated choice between lower coverage (with a lower premium) and higher coverage (with a higher premium).
• If you have a tenant occupying part or all of your residence (whether part-time or full-time), make sure you understand how your coverage is impacted by the tenant. If the tenant causes damage to your personal property, is the loss covered? If the tenant damages the premises she is renting, is the loss covered? If you are unable to rent the premises, does the policy cover lost rental income?
• Review any conditions imposed by the insurance company for changes in circumstances. For example, if you will be away from the home for more than 30 days, the home may be technically “abandoned” under the terms of the policy, in which case the insurer could deny coverage for losses that occur in your absence. Advance planning is essential, as it may be possible to maintain coverage if your provide notice or purchase additional coverage for the home while it is unoccupied. Similarly, if the insured property is unoccupied while substantial renovations are undertaken, check with your insurer to see if the home would be covered or if separate coverage can be purchased.

Trief & Olk represents homeowners (and businesses) in claims against insurance companies and brokers for denial of claims relating to fires, theft, and other losses. If you have suffered losses from an insurance company’s failure to pay a claim, please contact our attorneys, who are licensed in New York, New Jersey, and Massachusetts, for more information or to discuss your case.