Maine Legislature Votes Down Vacant Property Insurance Bill

The Maine Legislature last week voted down a bill that sought to place stricter requirements on home insurers’ use of exclusions for losses on vacant homes.

The bill LD 1413 (“An Act to Clarify Limitations on Homeowner’s Insurance Policies Regarding Claims on Vacant Properties”) was introduced by state Sen. Margaret Craven, D-Lewiston.

It would have required a homeowners insurer — upon receiving information that the insured property is vacant — to send a statement to the insured explaining the policy regarding vacant property and specifically defining the term “vacant.” Further, the bill would have prohibited the insurer from denying coverage on a vacant property until at least 60 days have passed from the day the insurer sends the notification statement to the insured.

A public hearing was held on May 9 and a number of attendees spoke out against the proposal. Those who expressed opposition to the bill included Eric Cioppa, the superintendent of the Maine Bureau of Insurance, and Dan Bernier, a representative from the Maine Insurance Agent Association. The Legislature’s Committee on Insurance and Financial Services voted on May 17 that the bill “ought not to pass” — a move that will likely kill the bill for this session for all intents and purposes.

Sen. Craven’s office said the senator introduced the bill because there have been robberies of late that targeted vacant houses in Maine, “and people would find out that homeowners insurance didn’t cover what was stolen or the damage that was done.”

One of the cases that got the senator’s attention was the robbery of a home whose owner was visiting a nursing home for rehabilitation. “The owner’s children didn’t realize that the house wasn’t insured if there was nobody living in it,” according to a spokesperson from the senator’s office. “So they were just letting it stay vacant until their mother would return from the nursing home after a rehab, but before that could happen, the house got broken into, $10,000 worth of damage was done, and all the copper pipes were stolen.”

“People just didn’t know that their insurance didn’t cover it. They would have made other arrangements had they realized that they were going to be uninsured by leaving it vacant but they didn’t know,” according to the spokesperson.

But speaking at the May 17 hearing, Superintendent Cioppa opposed the bill, saying that the measure would establish a unique process for claims involving residential properties that is vacant.

“LD 1413 would allow an insurer to refuse coverage due to the properties being vacant only for a claim that occurs more than 60 days after the insurer has information that the property is vacant and sends the insured a plain language notice detailing the policy regarding vacant property and defining what ‘vacant’ means,” Cioppa testified.

“For well over a century, insurers have built into their rates the costs associated with covering the vacancy risk, but this risk is relatively definite because it is limited in duration and is tied to a clear standard,” Cioppa said. “LD 1413 would cause insurers to have to take on the burden of continuous investigation of their entire books of business for properties to find those that have become vacant in order for the standard exclusion to apply.”

Bernier from the Maine Insurance Agent Association testified at the hearing that insureds are sent a copy of their policy each year and that the policy contains the exclusions. “LD 1413 would start us down the road of saying exclusions do not apply unless additional notices are sent. Are we going to go down this road for every exclusion?” he said.

Timothy Vernon, a vice president with MMG Insurance in Maine, testified at the hearing that the bill would pose a challenge for insurers. “Most insurers have no way of knowing when a property becomes vacant, and in my 26 years with MMG Insurance, mostly all as a claims manager, I have found that most often we learn that the property is vacant only when we are informed that a claim has occurred,” he said. “Insurers have no way to keep track of properties that are vacant and rely on either the policyholder or the mortgagee to notify us of the change in occupancy.”