September 12th, 2018
A recent Pennsylvania Superior Court decision should raise flags for executors and administrators of estates where real estate is transferred to beneficiaries under a will or through intestacy laws. In Kantz v. Everett Cash Mutual Insurance Co. , the Superior Court held that where title to a parcel of real estate was transferred from an estate to beneficiaries, the decedent’s homeowner’s policy no longer provided coverage for damage to the premises.

In Kantz , over two years passed from the time of the decedent’s death to when title was transferred to the beneficiaries. During that time, the insurance company was never notified of decedent’s death, and they were also never notified thereafter of the new ownership. Therefore, when a pipe burst, causing substantial water damage, after the transfer to the beneficiaries the insurance company denied coverage despite premiums having been paid in the name of the decedent since her death.
           The Superior Court held that even though the new owners of the property had an “insurable interest” to be able to secure insurance to protect their interest in the home, the failure of the new owners to inform the insurance company of the change of title rendered the insurance policy ineffective.

           Consequently, it is critical that where an estate transfers real estate to a new owner, the insurance company should be promptly notified of the new ownership and the policy adjusted accordingly. Otherwise, the mere act of paying premiums will not properly insure the property, and hazard to the real estate could result in a significant loss to the new owners.

           Keep in mind, real estate is not always transferred immediately after a decedent’s death or the opening of a decedent’s estate. This process can take anywhere from a couple months to a year or more. During that time, it will be crucial for the executor or administrator to determine the status of the property pending transfer. Important considerations are whether the property will be unoccupied or vacant, as standard homeowner’s policies generally have limitations for unoccupied or vacant status. The best course of action is for the executor or administrator to notify the insurance company promptly upon an owner’s passing, and to clearly inform new owners of the real estate to immediately notify the insurance carrier of their ownership. This will allow proper coverage to be in place, even before a transfer, and eliminate the risk of loss that occurred in Kantz .
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