Farmers Insurance Exchange v. Greene

In Farmers Insurance Exchange v. Greene, Appellee-Greene maintained a homeowner’s insurance policy with Famers Insurance Exchange (“FIE”).  Among other things, the Policy contained a vacancy provision which suspended coverage for any damage to the dwelling that occurred 60 days after the dwelling becomes vacant.  As luck would have it, Greene moved out of the covered residence 4 months before a fire destroyed it.  Greene notified FIE of the damage, but FIE denied her claim based on the vacancy provision.  She sued and the trial court granted summary judgment in Greene’s favor, finding that her violaiton of the vacancy clause did not contribute to the loss, and thus did not prevent her from recovering under the Policy.

The Court of Appeals reversed, holding that the vacancy clause was clear and unambiguous in that it suspends coverage sixty days after the residence becomes vacant.  It also noted that “the vacancy clause functions as an exclusion; it excepts a specific condition (vacancy) from coverage.”  Further, the Court found that Section 862.054 of the Insurance Code—which provides that an insured’s breach of a provision or condition in a policy does not constitute a defense to a suit for loss unless the violation contributed to the destruction of the property—was inapplicable.   The vacancy of the home increased the risk of insuring it, and the Court felt that, under such circumstances, “we are loathe to engraft by judicial fiat additional terms requiring FIE to assume liability for a risk the Policy specifically excluded.