The New York Court of Appeals recently decided a certified question from the First Department concerning a homeowners policy requirement that the insured reside at the premises. Douglas Dean v. Tower Insurance Company of New York, 2012 N.Y. Lexis 3088 (October 25, 2012).
Plaintiffs purchased a home in Irvington, New York, and obtained a homeowners policy from Tower. The closing was delayed, and plaintiffs were prevented from moving into the home because of termite damage which required extensive remediation extending over a period of one year, and which was still not completed when a fire damaged the premises on May 15, 2006.
Douglas Dean claimed that he was at the property at least five days a week performing repairs, and frequently stayed late into the night. He ate at the house every day, and slept there on several occasions.
The Tower policy provides as follows:
We cover: 1. The Dwelling on the 'residence premises' shown in the Declarations, including structures attached to the dwelling.
In the definitions section, 'residence premises' is defined as: 'The one family dwelling"¦where you reside.'
Tower denied the claim, and plaintiffs brought suit for breach of contract. After discovery, both parties moved for summary judgment. Supreme Court granted Tower's motion, and denied the plaintiffs' motion. The lower court found that the term "reside" was clear and unambiguous, and that plaintiffs had not established residency at the premises.
On Appeal, the Appellate Division, First Department, modified the order, finding that Tower had failed to define the term "resides", and that the policy was, therefore, ambiguous "in the circumstances of the case." The Appellate Division granted Tower leave to appeal to the Court of Appeals on a certified question.
The Court of Appeals affirmed. The Court noted that on the facts before it, "there are 'issues of fact as to whether Douglas' daily presence in the house, coupled with his intent to eventually move in with his family, is sufficient to satisfy the insurance policy's requirements***. Further, because the term 'reside' is not defined in the contract making the term 'residence premises' ambiguous, it is arguable that the reasonable expectations of an average insured***is that occupancy of the premises would satisfy the policy's requirements.*** Notably, the standard fire policy, as provided in Insurance Law §3404(e), speaks in terms of occupancy, and Insurance Law §3404(f)(1)(A), states that a policy 'with respect to the peril of fire' cannot contain provisions 'less favorable to the insured than those contained in the standard fire policy.'"
This decision addresses the issue of whether the term "reside" is ambiguous in a homeowners insurance policy where it is not defined, which resulted in a conflict between the First and Second Departments. See, Marshall v. Tower Ins. Co. of N.Y., 44 A.D.3d 1014 (2nd Dep't. 2007); Vela v. Tower Ins. Co. of N.Y., 83 A.D.3d 1050 (2nd Dep't. 2011), appeal withdrawn, 18 N.Y.3d 881 (2012); and Dean v. Tower Ins. Co. of N.Y., 84 A.D.3d 499 (1st Dep't. 2011). The absence of a policy definition of the term "reside" creates an ambiguity which will be construed against the insurer.
A more complete analysis of this issue was recently published in the New York Law Journal on November 5, 2012, by John R. Casey, a partner in Hiscock & Barclay's Insurance Coverage & Regulation Practice Area. If you require further information regarding the information presented in this Legal Alert and its impact on your organization, please contact any of the members of the Insurance Coverage & Regulation Practice Area.