Rental Cabin Falls Outside Wisconsin’s Valued Policy Statute

March 1, 2008

Wisconsin Statute § 632.05(2), commonly called the “valued policy law,” provides that when insured real property is wholly destroyed, the amount of the loss shall be the policy limits, not the actual amount of the loss, even if the policy provides otherwise. However, this law only applies if the “real property is owned and occupied by the insured primarily as a dwelling.”

In Cambier v. Integrity Mutual Insurance Company, the Wisconsin Court of Appeals clarified the terms “occupied” and “primarily as a dwelling.” Cambier owned a cabin in northern Wisconsin. The cabin was destroyed by fire. Although the cabin was his actual residence in the past, in the 14 months preceding the fire, Cambier had rented the cabin to four different tenants. Cambier had personally stayed in the cabin only 10 days in those 14 months. The fire occurred on the last such day, when he arrived to remove a tenant.

For the valued policy law to apply: (1) a covered dwelling need not be the insured’s primary residence; (2) the dwelling must be occupied by the insured as a dwelling; and (3) the building must be used primarily as a residence. Accordingly, “an insured is not using a building primarily as a residence while someone else is renting it for a residence.” Because Cambier’s primary cabin use was rental property, the valued policy law did not apply.
Wisconsin is experiencing a large and ever-increasing number of vacation homes. Many owners may seek to rent those homes for a period of a week, a month, or longer. When evaluating fire claims, insurance carriers should carefully assess the owner’s use of the home, as the amount of liability may be limited to the actual loss.

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