4 + 2 ≠ "Residence Premises"

Last week I received a favorable decision and order for one of my insurer clients from the United States District Court for the Southern District of New York in a number-of-families homeowners policy application misrepresentation case. My client had denied coverage for the Brooklyn, NY fire loss based, in part, on the application misrepresentation but did not rescind the homeowners policy (that's a thing). I conducted the policyholder's EUO and defended the policyholder's subsequent breach of contract action.

The Decision & Order begins:

The material facts, which cannot be disputed, are simple: In his insurance application, plaintiff stated that his property had three units, with three families living in them. The policy that Nationwide issued to him covered "one, two, three or four-family" dwellings. In fact, plaintiff's building had at least six units, rented to unrelated tenants. After the fire, Nationwide discovered the additional units and denied coverage. As explained below, Nationwide was entitled to do so and consequently will be granted summary judgment.

And adds:

Plaintiff contends that the language of the Policy is ambiguous, preventing the Court from granting summary judgment. * * * He argues that because the Policy uses the term “one, two, three, or four family dwelling” rather than “one, two, three, or four unit building,” it is irrelevant that there were at least six separate residential units in the Subject Premises. ***

Neither logic nor precedent supports plaintiff's hair-splitting argument. To the contrary: the New York courts have repeatedly explained that terms like “four family dwelling” are unambiguous. 

The Court granted summary judgment to Nationwide based solely on the uncontroverted fact that at the time of the fire, the dwelling did not meet the policy's definition of a "residence premises" (because it was MORE than a four-family dwelling).

The Court also rejected plaintiff's negligence argument (viz, that Nationwide could've and should've discovered the extra, illegal apartments before the fire) and, given its ruling on the residence premises issue, did not reach Nationwide's alternative argument that the Policy was void because plaintiff intentionally misrepresented the material fact or circumstance of how many families lived within and how many units comprised the Subject Premises at the time he filled out his application.

You can read the decision by clicking the image below:

Jury Verdict Finding Named Insured Was Residing in Insured Premises Affirmed

PROPERTY – HOMEOWNERS – RESIDENCY REQUIREMENT – POLLUTION EXCLUSION – ASBESTOS CONTROL COSTS – LOSS OF RENTS

Cotillis v. New York Cent. Mut. Fire Ins. Co.
(3rd Dept., 2/22/2018)

Last month I blogged about a Third Department case in which summary judgment was denied on the issue of the residency requirement of a homeowners insurance policy.  Last week, the Third Department affirmed a jury verdict against a homeowners insurer on the same issue.

In September 2013, a fire damaged plaintiff's two-family house, where plaintiff claimed to lived in the top-floor unit and rent the first-floor unit. NYCM disclaimed coverage on the basis that plaintiff did not reside at the insured premises on the date of loss. Following a trial, the jury found that plaintiff was a resident of the insured premises and awarded damages of $163,938.94 for the dwelling, $7,873,02 for personal property and $39,600 for additional living expenses (loss of rents).  After unsuccessfully moving to set aside the verdict, NYCM appealed.

In AFFIRMING the jury's verdict on the dwelling, the Third Department rejected NYCM's argument that the evidence was legally insufficient for the jury to conclude that plaintiff was a resident of the insured premises at the time of the loss and reiterated the relevant legal principles:

The insurance policy at issue provides coverage to a dwelling on the "residence premises." As relevant here, "residence premises" is defined as "[t]he two, three or four family dwelling where you reside in at least one of the family units." The policy, however, does not define "reside" and, therefore, "[t]he standard for determining residency for purposes of insurance coverage requires something more than temporary or physical presence and requires at least some degree of permanence and intention to remain" (Dean v Tower Ins. Co. of N.Y., 19 NY3d 704, 708 [2012]; see Sosenko v Allstate Ins. Co., 155 AD3d 1482, 1482 [2017]; Fiore v Excelsior Ins., 276 AD2d 895, 896 [2000], lv dismissed [96 NY2d 755 [2001]). Whether a person resides in any particular location is generally a fact-based determination (see Yaniveth R. v LTD Realty Co., 27 NY3d 186, 194 [2016]). 

The Third Department then recapped the trial evidence supporting the jury's residency finding:

At trial, plaintiff's daughter-in-law testified that she and her husband, plaintiff's son, approached plaintiff to see if she could watch their daughter, plaintiff's granddaughter, during the day. The daughter-in-law stated that plaintiff agreed to so "as long as it was temporary." As such, starting in April 2013, plaintiff stayed at her son's house and babysat her granddaughter in the morning. Aside from a bed and a dresser, plaintiff did not bring other household furnishings from the insured premises to her son's house. Approximately two or three times a week, when the daughter-in-law returned early from work, she would take plaintiff to the insured premises where plaintiff would check the mail and perform household chores. Plaintiff testified that she ate meals at the insured premises, stayed at the insured premises during some weekends, did not change her mailing address from the insured premises and planned to return there after her son stopped working. Plaintiff also testified that she considered the insured premises her home. Furthermore, the fire investigator who testified on behalf of defendant stated that his inspection of the unit where plaintiff lived contained items and furnishings indicative of a person living there. In our view, the foregoing proof was sufficient to establish that plaintiff's stay at her son's house was temporary in nature (see New York Cent. Mut. Fire Ins. Co. v Kowalski, 222 AD2d 859, 861 [1995]) and that she was a resident of the insured premises at the time of the loss. 

Homeowners insurers considering denying dwelling coverage based on the named insured's lack of residency would be wise to review what this jury found to be sufficient evidence of such residency:

• the insured was staying with her son and daughter-in-law temporarily; 
• she had moved only a bed and dresser to her son's house; all other household furnishings remained behind; 
• she would return to the dwelling 2-3 times a week to check mail and perform household chores; 
• she ate some meals at the insured dwelling; 
• she stayed at the insured dwelling during some weekends; 
• she had not changed her mailing address; and
• she considered the insured premises her home.  

NYCM also argued that the amount awarded for the demolition of the insured premises should have been $16,400 and not $28,900, because the latter figure, as testified to by an insurance adjuster, included asbestos control, which NYCM contended was excluded by the policy's pollution exclusion.  That exclusion negated coverage for a loss "caused directly or indirectly" by an ordinance or law requiring an insured "to test for, monitor, clean up, remove, contain, treat, detoxify or neutralize, or in any way respond to, or assess the effects of, pollutants." In rejecting that argument, the Third Department held that "[e]ven assuming that 'pollutants' in the policy at issue encompassed asbestos, the record does not demonstrate that asbestos directly or indirectly caused the loss."

The Third Department did agree, however, with NYCM that the loss of rents award was double what it should have been, modifying the judgment to reduce it by $19,800.  The trial evidence established that plaintiff intended to derive rental income from only the downstairs unit.  Moreover, to the extent that the jury awarded this amount for monies expended by plaintiff for alternative housing, plaintiff failed to establish that she "incurred" any such expenses as required under the policy.

The HOME in HOMEowner's Insurance -- Questions of Fact on Policyholder's Residence Preclude Summary Judgment

PROPERTY – HOMEOWNERS – RESIDENCY REQUIREMENT
Sosenko v. Allstate Ins. Co.
(3rd Dept., decided 11/30/2017)

No, not HOME as in four-fifths of the Greats Lakes.  The home or residence question again, as it bears on structure coverage under a homeowner's insurance policy.

Core Holding:  Contradictory statements of the policyholder regarding the extent of her own physical presence at the premises are alone sufficient to create an issue of fact that may not be resolved by summary judgment.

Homeowner's insurance is written and intended to insure the policyholder's home -- where the named insured resides.  Many homeowner's insurance policies limit structure coverage to the "insured premises", which includes the "residence premises", which are, in turn, defined as the single-family building structure "where you [the named insured] reside."  Residency reduces certain risks of loss, and premium rates for HO policies are based, in part, on the presumption that the named insured resides in the insured premises.  Seems logical and reasonable, don't it?

HO policies that require residency, however, do not define "reside", causing the New York Court of Appeals in 2012 to conclude that the policy term "residence premises", without a definition of "reside", is ambiguous.  In the seminal case of Dean v. Tower Ins. Co. of NY, the Court of Appeals instructed that "[t]he standard for determining residency for purposes of insurance coverage requires something more than temporary or physical presence and requires at least some degree of permanence and intention to remain[.]"

Something more than temporary or physical presence.  Some degree of permanence and intention to remain.

On January 15, 2014 plaintiff purchased a single-family home and acquired a homeowner's insurance policy from Allstate.  After closing, plaintiff's father started renovating the home, which was destroyed by fire on February 16, 2014.  Allstate disclaimed coverage on the basis that plaintiff was not residing at the premises at the time of the loss.  Plaintiff sued for breach of contract and, after completion of discovery, moved for summary judgment.  The motion record included the following:

• the premises had been unoccupied for at least two years prior to its acquisition by plaintiff and had no electrical service, running water or a functioning furnace; 
• following the closing plaintiff's father did renovation work at the premises nearly every day and had succeeded in stripping the interior walls on both floors of the two-story house and removing much of the existing wiring; 
• in doing the renovation work, plaintiff's father obtained electricity from a gasoline-powered generator, heated the premises with a wood stove located on the first floor and brought water to the premises that he stored in a tank
• when she acquired the premises, plaintiff was residing with her father and, shortly before the fire, she had relocated to an apartment;
• plaintiff testified that she had slept at the premises on several occasions, an average of two to four nights per week, and that she had intended for the premises to be her permanent residence once renovations were completed;
• Allstate's investigator testified that in a statement he obtained from plaintiff shortly after the fire plaintiff stated that she was not living at the premises; and 
• in an affidavit submitted in opposition to plaintiff's motion, Allstate's investigator also averred that when he interviewed plaintiff by telephone eight days after the fire, she stated that at the time of the fire she was in the process of relocating from her father's home to the apartment and, notably, that she had not been to the premises during the two weeks immediately preceding the fire and had stayed overnight at the premises only once.

Supreme Court denied plaintiff's motion and plaintiff appealed.

In AFFIRMING the denial of plaintiff's motion for summary judgment, the Appellate Division, Third Department, held:

On this record, plaintiff's summary judgment motion was properly denied. The Court of Appeals has held that evidence similar to the record in this case presented issues of fact regarding residency that precluded the grant of summary judgment (see Dean v Tower Ins. Co. of N.Y., 19 NY3d at 708-709). Moreover, as Supreme Court correctly held, the contradictory statements that plaintiff made regarding the extent of her own physical presence at the premises are alone sufficient to create an issue of fact that may not be resolved by summary judgment.

And predictions on what the jury will find?  Was plaintiff "residing" in the insured premise at the time of the fire or not?

What Does It Mean To "Reside" for Insurance Purposes?

PROPERTY – RESIDENCY REQUIREMENT – CHANGE IN OCCUPANCY – AGENT LIABILITY
Harrison v. Allstate Indemnity Co.
(Sup. Ct., Steuben Co., decided 3/3/2017)

In 2009 plaintiffs moved 5-6 miles from the insured dwelling, their home of more than 15 years, to live with and care for Mrs. Insured's ill mother.  They both changed the address on their drivers licenses and used their new address on their income tax returns. In July of 2010, Mr. Insured spoke with his Allstate agent to inform them that plaintiffs were living at the new address.  As a result of that contact, the billing address for policy renewals was changed to the new address, but no other changes were made to the policy itself.

At some point after the plaintiffs had moved, plaintiffs' two sons, a cousin, and a friend began staying at the insured dwelling at different times and for various amounts of time. The house was destroyed by a fire on August 30, 2012. After plaintiffs filed a claim for insurance coverage, Allstate disclaimed liability on the ground that, as plaintiffs had not resided in the home for nearly three years, the home did not meet the policy's definition of a covered "dwelling".

Plaintiffs sued Allstate and their agent and, after discovery, Allstate and plaintiffs moved for summary judgment.  In denying summary judgment to both sides, Steuben County Supreme Court Justice Marianne Furfure held:

In this case, the term "reside" is not defined in the policy and, therefore, it is possible that under the circumstances of this case, plaintiffs may be found to have resided at Pine Hill for insurance policy purposes even while they were caring for Mrs. Harrison's mother on Dodge Avenue for an extended period of time. While residency does require some temporary or physical presence, a degree of permanence and intention to remain at the property is a necessary component (Government Empls. Ins. Co. v. Paolicelli, id.; Yaniveth R. v. LTD Realty Co., Id.; Dean v. Tower Ins. Co. of NY, Id. at 708-709; Auerbach v. Otsego Mut. Fire Ins. Co., Id.). It is possible that, despite the length of time plaintiffs spent at the Dodge Avenue home, the average person might assume that regular maintenance and visits to the Pine Hill property during that time satisfied the policy's requirements (Dean v. Tower Ins. Co. of NY, Id. at 708-709). Plaintiffs' evidence that they had always intended that their absence from Pine Hill to be temporary and that they planned to return as soon as possible, coupled with the fact that they left all of their possessions at Pine Hill, continued to pay the taxes and make improvements to the property raises a question of fact whether, under these circumstances, plaintiffs have satisfied the insurance policy requirement that they reside in the insured premises. This question of fact precludes a grant of summary judgment to both parties (Dean v. Tower Ins. Co. of NY, Id.; cf. Vela v. Tower Ins. Co. of NY, 83 AD3d 1050 [2nd Dept. 2011]; New York Cent. Mut. Fire Ins. Co. v. Kowalski, 222 AD2d 859, 860 [3rd Dept. 1995]).  (Bold added.)

In rejecting Allstate's argument that there was a undisclosed change in occupancy to the home in breach of the policy's condition requiring notice of same, Supreme Court further held:

The term "occupancy", like the term "reside", is also not defined in the contract. Under the circumstances of this case, it is fair to assume that the average insured person may reasonable believe that notification is not necessary if the insureds, while residing at the property, have friends and family stay over for an extended and indefinite time. Before an insurance company is permitted to avoid policy coverage, it must satisfy the burden which it bears of establishing that the exclusions or exemption apply in the particular case, and that they are subject to no other reasonable interpretation (Dean v. Tower Ins. Co. of NY, Id.; citing Seaboard Sur. Co. v. Gillette Co., Id.). The burden is on the insurance company to show that there is no material question of fact that the notification requirement applies in this case. Allstate has not met that burden because there is a question of fact, in the first instance, whether plaintiffs met the insurance policy requirement of residence and whether the presence of their sons, a cousin, and a family friend constitutes a change in the occupancy of the residence sufficient to trigger the notification obligation (Dean v. Tower Ins. Co. of NY, Id.). Therefore, Allstate's motion for summary judgment dismissing the complaint on the grounds that plaintiffs breached the insurance contract is denied.

Finally, the court declined to grant summary judgment dismissing the agent from the action. Allstate's records indicated that normal protocol when a mailing address change was made was to "question insured about use of property and if they were aware of insured not living there or letting others live there they would have changed to [landlords package] policy or discussed second residence".  In the court's opinion, this was sufficient to raise a question of fact regarding what plaintiffs advised the agent and whether there was a failure by Allstate's agent to follow company protocol or notify Allstate of the change in use, given their move to the in-laws' residence for that prolonged period of time.

Note:  This is a lower court decision.  I'll monitor for appellate treatment.

Court Upholds Liability Coverage Denial for Accident at Insured Dwelling Where Named Insured Did Not Reside

HOMEOWNERS LIABILITY – "INSURED LOCATION" – "RESIDENCE PREMISES"
Tower Ins. Co. of New York v. Monroy
(Sup. Ct., New York Co., decided 12/24/2008)

Most dwelling or homeowners policies exclude liability coverage for bodily injury or property damage "arising out of a premises:

a.  Owned by an 'insured';

b.  Rented to an 'insured'; or

c.  Rented to others by an 'insured';

that is not an 'insured location'[.]"

One would think that the "insured location" is simply that location shown in the policy declarations, but such dwelling and homeowners policies define "insured location" primarily to mean the "residence premises", which itself is defined as the 1-4 family dwelling or other building where the named insured resides and which is shown in the policy declarations as the "residence premises".  So if the residence premises shown in a policy's declarations is owned by or rented to/by the named insured but is not where the named insured resides, will there be liability coverage for injuries or damage that arises from such premises?  No, not if the insurer issues a timely disclaimer based on this premises other than an insured location exclusion.

And such was the outcome in this case.  Fifteen years earlier, Monroy had purchased a home in Brooklyn for his brother who had bad credit.  Although he was the deed owner, Monroy never visited or lived at that home; his brother and brother's family lived there.  Monroy had never performed any maintenance at the property, paid any taxes on the property, made any mortgage payments on the property, or made any insurance payments on the property.  Although all bills relating to the property were in Monroy's name, they went to the Brooklyn home and Monroy relied on his brother to do everything in conjunction with that property.

A woman fell in front of the home and sued Monroy and the City of New York for her injuries.  At the time of that accident, Tower insured the home under a Dwelling Fire Policy that had been transferred to Tower from Empire/All City Insurance, which went into liquidation at the end of 2001.  Tower denied liability coverage to Monroy based on the premises other than an insured location exclusion  and commenced this declaratory judgment action to validate its denial.  Tower and Monroy moved and cross-moved for summary judgment.

In granting Tower's motion, declaring that Tower was not obligated to defend or indemnify Monroy in relation to the underlying personal injury action, New York County Supreme Court Justice Michael Stallman noted the similarity of this case to the facts and decision in Marshall v Tower Ins. Co. of New York (44 AD3d 1014 [2d Dept 2007]), and held:

Defendant‘s argument that the policy covers the address specified in the instrument regardless of whether or not the insured resided there is in direct contravention of the clear statement in the policy. As discussed above, the policy excludes coverage for “bodily injury” and “property damage’’ arising out of an insured’s owned premises that is not an “insured location."  Because Monroy admits that he does not reside at the subject property at issue, it is not an “insured location.”

“Unambiguous terms in a policy of insurance must be given their plain and ordinary meaning and courts may not make or vary the contract of insurance to accomplish their notion of abstract justice or moral obligation [citation omitted] .“

Metropolitan Property & Casualty Ins. Co. v Pulido, 211 AD2d 57, 61 (2d Dept 2000) (interpreting a provision identical to the one in question).

In opposition to Tower's motion, Monroy also argued that Tower could not rely on the premises exclusion because he never received a copy of the policy.  Justice Stallman rejected that argument as both conclusory and illogical, holding:

Defendant’s final argument, that plaintiff cannot deny coverage because defendant never received a copy of the policy, is without merit. Defendant asserts that he would never have agreed to a policy that did not provide coverage. Not only is this statement conclusory on the part of defendant, but the logical outcome of this theory would be that, since defendant never saw the contract, he could not be bound thereby. This would mean that there was no meeting of the minds, so no contract of insurance exists between the parties, defeating defendant's position. See generally Yenom Corp. v 155 Wooster St. Inc., 23 AD3d 259 (lst Dept 2005).

In other words, claiming that certain policy provisions cannot apply because I never received the policy would mean that the entire policy shouldn't apply, in which case there wouldn't be coverage in the first place.