Vacant Duplex, Burst Toilet Line, and Mold Remediation
A landlord insures a tenant-occupied duplex under a DP-3 with $300,000 dwelling coverage, a $1,000 deductible, and a $10,000 limited fungi endorsement. The last tenant moved out on May 1. The landlord planned a 90-day renovation, shut off the water on June 1, but did not drain the pipes. On July 3-63 days after the tenant left-a neighbor reports water pouring from the upstairs unit. A supply line to a second-floor toilet failed, and water ran for several days, saturating drywall, subfloor, and the downstairs ceiling. Mold is visible on framing. The landlord files an $84,000 claim, including $22,000 for mold remediation. He says the unit was “not vacant” because he visited weekly, kept tools there, and had a signed lease starting September 1. The policy has no vacancy endorsement and follows the standard DP-3 vacancy condition. The adjuster must decide whether the water damage and mold are covered.
1. Was the dwelling “vacant” or “unoccupied” for purposes of the DP-3 vacancy condition, and what difference does it make?
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The DP-3 uses 'vacant' and 'unoccupied' differently. 'Unoccupied' means no people are living there but furnishings remain. 'Vacant' means the dwelling is empty of both occupants and personal property. The tenant moved out on May 1. The landlord's weekly visits and tools do not make the unit occupied. A signed future lease does not either. The unit was vacant.
The loss occurred on July 3, 63 days after the tenant left. The standard DP-3 vacancy condition applies after 60 consecutive days of vacancy. It suspends or excludes certain perils, including water damage. Because the loss was 63 days into vacancy, the water damage from the failed toilet line is excluded unless the policy wording says otherwise. The adjuster must read the actual form, but the facts point to vacancy.
2. Assume the vacancy condition applies. How should the adjuster respond to the $22,000 mold claim and the landlord’s argument that mold is a separate loss?
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The mold claim follows the water damage. If the water damage is excluded by the vacancy condition, mold that resulted from that excluded water loss is also not covered. Mold is not a separate occurrence merely because it appears later. The landlord cannot avoid the vacancy condition by calling the mold a separate loss.
Even if the water damage were covered, the limited fungi endorsement caps mold remediation at $10,000. The $22,000 claim would be reduced to $10,000, subject to the deductible and any sublimit allocation. The adjuster should document the cause and timeline, obtain a mold protocol, and explain the vacancy and fungi provisions in writing. Do not pay the mold invoice as a separate covered claim.
3. What if the tenant had moved out 45 days before the loss and the landlord had left furniture? Would the result change?
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If the tenant had moved out 45 days before the loss, the vacancy condition would not apply because the dwelling was vacant for fewer than 60 consecutive days. Leaving furniture would make the unit unoccupied rather than vacant. In that case, the water damage from the failed supply line would be analyzed under the DP-3's water damage and freezing provisions, not the vacancy condition.
Coverage would likely apply if the line failed suddenly and the landlord took reasonable care to maintain heat. The mold claim would still be capped at $10,000 under the fungi endorsement, and the $1,000 deductible would apply. The adjuster should still investigate cause and documentation, but the vacancy defense would be unavailable.