Is Coverage Possible When You Accidentally Burn Down Your House?

In the category of you can’t make this stuff up, a December article on Insurance Journal caught my eye, especially when a coworker asked me if this could be covered by their homeowners’ insurance. If you haven’t read about the couple that accidentally burned down their house trying to smoke out a snake infestation, you should read that story. We’ll wait for you.

The short version of the story is that this house had a history of issues with snakes getting in and taking up residence like they owned the place (the article calls it a snake infestation, which doesn’t tell us how many snakes there were, but if there’s more than zero, I’m good with the term infestation.) In response, the couple decided that it would be a good idea to use smoke from burning coals to encourage the snakes to leave. While the couple was out of the house, the smoldering embers caught something flammable nearby on fire, and in the end, the 10,000 square foot house was a total loss (or at least the picture I saw made it look like one).

So, would this likely be covered by their homeowners’ insurance company? The short answer is probably and here’s why. We start by recognizing the best possible reason someone buys insurance and it’s not because the mortgage company says so. The best reason to buy insurance is that you cannot afford the financial consequences of a loss without it. In truth, if you could write a check and rebuild a house after it’s a total loss, such as when you try to smoke the snakes out of our basement, then you don’t need insurance.

For the rest of us that are not among the 0.01%, we need to buy the insurance.

Insurance is there to handle the results when something unforeseen happens. You might think to yourself that if you put live coals in your basement, you might be able to foresee that your house might burn down. That’s a fair thought. However, how might the policy read? Since we don’t have the specific homeowners’ policy that this family purchased, we can’t tell for certain. We can tell that they likely don’t have insurance through one of the companies that advertise that they are the cheapest in town. Several stories describe the house as a mansion, and they recently spent $1.8 million to buy it.

Yet, we must look at an insurance policy to determine whether or not this could be a covered loss. So we look at the current ISO HO-3 Homeowners 3 – Special Form (05 11 edition). Here’s where we start.

We cover the dwelling on the “residence premises” shown in the Declarations, including structures attached to the dwelling; and…

Since the fire happened at the house that should be listed on the policy, we’ll concede that it’s the dwelling that is being referenced here. Then we have to look at the perils insured against to find out if fires are covered.

We insure against direct physical loss to property described in Coverages A and B.

We do not insure, however, for loss excluded under Section I – Exclusions;…

Caused by any of the following: … nesting or infestation, or discharge or release of waste products or secretions, by any animals; or…

Let’s look and see if there is anything in Section I – Exclusions that might also cause us to wonder if there is coverage. Without listing all of the exclusions, there is one that looks like it might apply.

Intentional Loss: Intentional Loss means any loss arising out of any act an “insured” commits or conspires to commit with the intent to cause a loss. In the event of such loss, no “insured” is entitled to coverage, even “insureds” who did not commit or conspire to commit the act causing the loss.

So what have we learned so far?

• There is coverage for the dwelling on the residence premises. It appears that there has been damage to the dwelling. We’re starting well.
• There is coverage for direct physical loss to that property. The dwelling did burn and did suffer direct physical loss. Still looks good for the couple.
• Was the loss caused by nesting or infestation? The couple said that they wanted to smoke out the snakes that they thought of as an infestation. That’s true, but did the infestation itself cause the loss? The snakes did not burn the house down. They were too happy living there. It still looks good for the couple’s claim.
• Was this an intentional loss as it was defined in what we read before? They intentionally got coals burning to create smoke, but was their intent to cause a loss? No. They intended to get rid of the snakes. They didn’t want to burn their house down (according to the available stories). Since they didn’t plan to burn the house down to cause a loss, this isn’t an intentional loss. Still looking good.

Keep in mind that we used an ISO HO-3 without endorsements or other modifications for our analysis. Their policy might include a “don’t burn your house down while getting rid of pests” exclusion. We haven’t read it, so we don’t know for certain.

We do know for certain that insurance policies are generally written to provide coverage for things that happen that the people involved didn’t reasonably see coming. Insurance people call it coverage for fortuitous events. We mean fortuitous in the way that we mean that a surprise visit from your strange uncle is a surprise unless your uncle is Doctor Strange, but that’s another story.

This means that an insurance policy is there for something that happens accidentally. It generally doesn’t matter if the accident happens because of a gas leak that the homeowner didn’t know about. It doesn’t matter if the accident happens because the homeowner got distracted while they were cooking and that caused a kitchen fire.

That means that even though the homeowners made a bad decision and probably should have known better, like when they decided to try and smoke out snakes rather than calling animal control in their county, a nearby zoo, or Steve Erwin’s family. When you read that news story one thing that you wonder about is what are they thinking? Understand that people in stressful situations don’t think like the people who read the news articles later.

Just to remind you one more time, we haven’t read the specific policy, but based on what we know from certain readily available policies, there should be coverage for this loss. Even though it’s possible that they should have foreseen what happened.