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Is The Dwelling The Insured's Residence?

September 04, 2007 BY Karen Karabinos

            The Court of Appeals recently rejected a couple’s attempt to have damage to a dwelling covered under their homeowner’s policy based on their intent to use the dwelling as their residence despite the fact that the couple never resided in the dwelling.

            In Varsalona v. Auto-Owners Insurance Company, 281 App. 644, 637 S.E.2d 64 (2006), the insureds purchased a home in in 2002 and obtained a homeowner’s policy with Auto-Owners.  At that time, the insureds intended to use the property as their residence and were trying to sell the home they were currently living in. Subsequently, the insureds were unable to sale their current home quickly, they decided not to move into the property and their daughter and grandchild moved to that property instead.  When a portion of the slab under the property collapsed, Auto-Owners denied their claim on the ground that the dwelling did not constitute the insureds’ “residence premises.”

            The Auto-Owners’ policy is similar to most homeowners’ policies issued here in Georgia and states the “insured premises means . . . the residence premises . . . any structures or grounds you use in connection with your residence premises . . . (and) any other premises you acquire during the policy term and which you intend to use as a residence premises.” at 65.  The policy also defined “residence premises” as “the one or two family dwelling where you reside” and the coverage for the dwelling specifically provided coverage for “your dwelling located at the residence premises including structures attached to that dwelling.  This dwelling must be used principally as your private residence.”  

            The insureds argued that coverage should be afforded because at the time they purchased the property and applied for insurance they intended to use the property as their “residence premises” and such intended use is contained in the definition of “insured premises.”   The insureds also relied on the provision providing coverage for “other structures which you own and you use in connection with the residence premises that are located at an insured premises other than the residence premises.”  The Court of Appeals, however, rejected the insureds’ position based on the clear language of the policy that clearly stated that “insured premises” means “residence premises,” which at the time the policy was issued, the “residence premises” was undisputedly the property. 

            The Court of Appeals gave no weight to the insureds’ intended use of the property as their residence premises.  Rather, the Court of Appeals focused on the undisputed evidence that the insureds never used the property as a residence.  Because the plain language of the policy “unambiguously required as a condition of coverage the insureds under the residence premises principally at their private residence,” the Court of Appeals upheld the trial court’s decision that the policy did not provide coverage for the insureds’ loss.

            The Court’s holding in Varsalona is consistent with the Court’s previous holding in Epps v. Nicholson, 187 Ga. App. 2465, 247, 370 S.E.2d 13 (1988).  In Epps, the insureds sought coverage for a rental home located at , which was insured under a homeowner’s policy.  The policy at issue in Epps defined "residence premises" as "the one or two family dwelling, other structures, and grounds or that part of any other building where you reside and which is shown as the 'residence premises' in the Declarations."   The Declarations portion of the policy stated that "[t]his policy insures . . . ."  The Court of Appeals held that those clauses set forth two requirements for coverage: “first, the dwelling must be the place where the insured resides;  and second, the dwelling must be shown as the "residence premises" in the declarations.”  While the rental house met the second requirement of being, the Court held the rental home “it clearly does not meet the first.”   The same analysis would apply to the property at issue in Varsalona.

            Therefore, following the Court of Appeals’ opinion in Varsalona, in order to be covered under a homeowner’s policy, the insured premises must be the place where the insureds actually reside and the insured premises must be listed as the residence premises in the declarations, regardless of the intent of the insureds for the use of the property at the time of its purchase.

The Journal is a publication for the clients of Drew Eckl & Farnham, LLP. It is written in a general format and is not intended to be legal advice to any specific circumstance. Legal Opinions may vary when based upon subtle factual differences. All rights reserved. 

Editorial Board:

H. Michael Bagley