The Texas Supreme Court ruled in favor of Farmers Insurance in a case involving fire damage to a residence.  In Greene v. Farmers Insurance Exchange,[1] the Court clarified the effect of vacancy provisions that exclude coverage for property damage if a dwelling is vacant for a specified period of time.  In this case, LaWayne Greene, the policyholder, moved from her home in July of 2007 and notified Farmers that she intended to sell the property.  In November of 2007, a fire from a neighboring house spread and damaged Greene’s property.  Farmers denied coverage based on the vacancy provision that excluded coverage if the dwelling was vacant for more than sixty days.

Both parties moved for summary judgment on the breach of contract claim.  Greene based her argument on Texas Insurance Code Section 862.054 (the “anti-technicality statute”), which states that a policy will not be voided by the insured’s breach or violation of a warranty, condition, or provision of a fire insurance policy.  Greene reasoned that her triggering of the vacancy clause by moving was a “breach” within the meaning of the statute, which therefore left coverage intact.

The Court rejected this argument stating that the vacancy clause did not constitute a promise by Greene to occupy her house but was instead an agreement by Farmers to continue insuring the house for sixty days after it is no longer her residence.  The Court also rejected Greene’s argument that Farmers could not rely on the vacancy clause because the vacancy did not prejudice Farmers.  The Court cited several examples of the prejudice doctrine, which prevents an insured from losing the benefits of a policy if it commits an immaterial breach that does not prejudice the insurance company.  As with its rejection of Greene’s first point, however, the Court held that because Greene did not breach her obligations under the policy by vacating the property, the question of prejudice was irrelevant.

In another case addressing a similar vacancy clause provision, Judge David Godbey of the Northern District of Texas granted summary judgment in favor of Travelers Insurance.[2]  Bedford v. Travelers involved a claim for loss from theft on commercial property. The property owner and a new lessee contacted the police after they noticed that personal property had been stolen from the premises. The police investigation uncovered information that suggested that the property had been vacant for several months. 

After Bedford sued Travelers for denying the claim based on the vacancy exclusion, both parties moved for summary judgment on breach of contract.  The court first overruled Bedford’s objection that the police reports were inadmissible hearsay.  The court found these reports were admissible under the business records exception and were not based on inadmissible hearsay such as witness statements which could take them out of the exception.  The court then rejected Bedford’s argument that the vacancy provision did not apply because Travelers could not specify the exact date that the loss occurred.  The court noted that even though Bedford may be correct that the exact date of loss was unknown, Travelers introduced sufficient evidence that the property was vacant during any relevant sixty-day period.  Because the court found no breach of contract as a matter of law, it also granted summary judgment in favor of Travelers on all extra-contractual claims.

[1] Bob Greene v. Farmers Ins. Exchange, --S.W.3d--, 2014 WL 4252271 (Tex. Aug. 29, 2014).

[2] Bedford Internet Office Space, LLC v. Travelers Casualty Ins. Co., No. 3:12-cv-4322-N, 2014 WL 4230315 (N.D. Tex. Aug. 25, 2014).

Jump to Page

Necessary Cookies

Necessary cookies enable core functionality such as security, network management, and accessibility. You may disable these by changing your browser settings, but this may affect how the website functions.

Analytical Cookies

Analytical cookies help us improve our website by collecting and reporting information on its usage. We access and process information from these cookies at an aggregate level.