The carrier can and often will deny the claim. The adjuster needs to gather the facts (obtain evidence) and submit it to the company for consideration. The insured is required to notify the carrier when he turns his primary residence into a rental. The insurance company did not agree to insure a rental. The carrier might pay the claim if it has only been a short time that the insured moved out. If the insured never lived in the house, but claimed he did on the application (fraud), there will more likely be a denial. The carrier can deny the claim and return the premiums that were paid. Each state has different case law regarding these issues, but just based on the written contract the carrier can deny the claim.
Some examples of evidence the adjuster can gather:
copy of lease
photograph of rent check
statement from neighbor
photograph of utility bill with tenants name on it
recorded interview with insured
recorded interview with tenant
photograph of tenant's driver's license with the address
photograph of mailbox with tenant's name on it.
etc.
The easiest time to gather evidence is the first inspection/first phone call. The adjuster should gather evidence so that the carrier can make an informed decision that can be defended by the evidence if necessary.
Here is an article for a Michigan attorney regarding this issue:
http://smythelawgroup.com/home/the-...-concerns/