May 2009

In a case of first impression in the Commonwealth of Pennsylvania, Judge Blewitt of the United States District Court for the Middle District of Pennsylvania, granted American Western Home’s motion for summary judgment enforcing the vacancy and secured premises warranties to defeat a claim for coverage. American Western Home issued a residential property insurance policy to Albert Hankinson for a vacant building. The policy was endorsed as a single family frame vacant dwelling and contained two warranties, one for vacancy and another for secured premises. The vacancy warranty stated that the building was not vacant if any portion of it was used for any activity whatsoever and that the insured, as a condition of the insurance, agreed that property would remain vacant. Under the secured premises warranty, the insured agreed that the vacant building was to be locked and secured and that all of the openings would be secured. Both warranties contained a clause stating that the insurance would be suspended if the insured failed to maintain those conditions.

Unknown to the insured, his former partner rented out the property. While the renters were living there, a fire occurred and a tenant was seriously injured and later brought a personal injury claim. After American Western Home denied coverage, a declaratory action was filed with the insured demanding a defense and indemnity and bad faith damages.

Finding in favor of American Western Home, Judge Blewitt held that the warranties were an integral part of the insurance contract which required, as a condition for insurance, that the insured’s property remained vacant and secured during the policy term. The insured’s lack of knowledge as to whether the property was vacant was irrelevant as he warranted the condition of the property and once the condition changed, regardless of his knowledge, the policy was suspended. Therefore, the policy was not in force at the time of the fire.