Homeowners Coverage Where Insured Does Not Reside At The Described Premises At The Time Of Loss – Claims Magazine

Facts

Mr. Widower suffered fire loss to his fully insured single family home. At the time of the loss, Mr. Widower no longer lived in the home. His wife had passed away several months earlier and, not long after that, he rented out his home to a married couple and moved into an apartment condominium. The policy on the home was an HO 00 03 04 91. The policy covers the "dwelling on the 'residence premises' shown in the Declarations." The policy defines "residence premises" as the one family dwelling "where you [the insured] reside."

Question

Can Mr. Widower recover the loss to his former home although he no longer resided at the home at the time of loss?

Analysis

Possibly. Some courts have considered it sufficient that the insured lived in the home at the time of policy inception. These courts took the point of view that the phrase "where you reside," or similar language in non-standard forms, sets forth an affirmative warranty regarding the status of the property at the time of policy issuance. Other courts have held that a denial of coverage is in order where the insured no longer lives in the home at the time of the loss. These courts have read the phrase "where you reside," or similar language in non-standard forms, as language defining the scope of coverage, rather than as language expressing an affirmative warranty.

The two cases generally cited in support of the affirmative warranty theory are Reid v. Hardware Mut Ins. Co. of Carolinas, Inc., 166 S.E.2d 317 (S.C. 1969), and Insurance Co. of N. Am. v. Howard, 679 F.2d 147 (9th Cir. Or. 1982). In Reid, the policy described the insured premises as a "one story frame constructed, approved roof, owner occupied, one family dwelling." There, the South Carolina Supreme Court concluded that the term "owner-occupied" was only an affirmative warranty that the insureds occupied the home at the time of the policy issuance. In Howard, the policy covered "the described residence owned and occupied by the insured exclusively for residential purposes." After the death of her husband, the insured wife moved most of her personal property out of the home and began to rent the home. Two weeks after she rented the home it was destroyed by fire. Her insurer denied coverage contending that it was no longer owned and occupied by the insured. The appellate court held that the policy does not contain a condition requiring the insured to continue to live at the property.

In Farmers Ins. Co. v. Trutanich, 858 P.2d 1332 (Or. App. 1993), the court also considered a rental situation. It considered standard "where you reside" language. The Trutanich court relied on Howard and held the "where you reside" language to be even less clear than the language inHoward if the form writers intended to require an insured to continue to reside at the premises. In FBS Mortgage Corp. v. State Farm Fire & Cas. Co., 833 F. Supp 688 (N. D. Ill. 1993), "where you reside" was held ambiguous as to an insured who had been incarcerated for eight months.

On the other hand, some courts have held policy language to be sufficiently clear to require an insured to live in the insured dwelling at the time of loss. In Heniser v. Frankenmuth Mut. Ins. Co., 534 N.W.2d 502 (Mich. 1995), the insured husband and his wife owned a vacation home which they lived in at different times throughout their marriage. At the time of their divorce, the husband retained possession of the home. In September of 1988, the Homeowners policy on the home was renewed for a one-year period. In November of 1988 the home was sold on a land contract. In January of 1989 the home was destroyed by fire. The court distinguished Reid and Howard on the basis that the phrase "where you reside" was located in the definitions section of the form. It held the language was language of coverage, not of warranty. The court reasoned that if this were merely a warranty at the time of the policy issuance, coverage would be frozen at the time of issuance. The court found it unreasonable to assume that events which happen after policy issuance are irrelevant.

Other courts have denied recovery to an insured that no longer resided at the insured dwelling at the time of loss. InBryan v. United States Fire Ins. Co., 456 S.W.2d 702 (Tex. App. 1970), Doyle v. Members Mut. Ins. Co., 679 S.W.2d 774 (Tex. App. 1984), and Nancarrow v. Aetna Cas. & Sur Co., 932 F.2d 742 (8th Cir. Ark. 1991), the relevant language was "while occupied by the Insured principally for dwelling purposes" or "used principally as a private residence." Still other courts have denied coverage based on standard-type language, but other policy provisions were present. Georgia Farm Bureau Mut. Ins. Co. v. Kephart, 439 S.E.2d 682 (Ga. App. 1993) ("special provision": "the residence premises [must be] the only premises where the named insured or spouse maintains a residence other than business or farm properties"), cited with approval in Roland v. Georgia Farm Bureau, 462 S.E.2d 623 (Ga. 1995), and Grange Mut. Co. v. DeMoonie, 490 S.E.2d 451 (Ga. App. 1997) (the declarations referred to the insured home as "the owner-occupied primary residence").

A similar issue has been addressed by courts under circumstances where the insured never resided in the property, either because it was a rental property at policy inception or because it was simply unoccupied at policy inception. These courts have all upheld denials of coverage. Epps v. Nicholson, 370 S.E.2d 13 (Ga. App. 1988), Shepard v. Keystone, 743 F. Supp. 429 (D. Md. 1990), Underwriters at Lloyd's London, England v. Clark, 1998 Pers. & Com. Liab. Cas. (CCH) 1162 (E.D. Pa. 1998).

Conclusion

Given the varied approaches adopted by courts, it seems that each claim of this nature should be considered on an individual basis, with consideration given to the particular policy language, underwriting circumstances, and jurisdiction in which the claim arises.