A recent decision from the Northern District of Georgia highlights the uncertainties that often exist when an insurer relies on the “residence premises”
A recent decision from the Northern District of Georgia highlights the uncertainties that often exist when an insurer relies on the “residence premises” requirement to bar coverage for a loss. In Cain v. Hanover Ins. Co., 2011 U.S. Dist. LEXIS 105188 (N.D. Ga. 2011), the court ruled that the fact that the insured’s home was deemed uninhabitable after official inspection did not establish as a matter of law that the home was not the insured’s residence premises. Cain demonstrates the importance and focused scrutiny that the court places on the unique facts of each case, when evaluating whether a property was an insured’s residence premises at the time of a loss.
In Cain, the insured experienced a fire at his home that destroyed the house and all personal belongings, and filed a claim with his insurance company, The Hanover Insurance Company (“Hanover”). Hanover denied the insured’s claim on numerous grounds, including that (1) the property was not the insured’s “residence premises” as defined by the policy; (2) the insured made material misrepresentations regarding his claim; and (3) the insured was involved in setting the fire at his home. The insured filed suit against Hanover, which was removed to federal court, and following discovery Hanover moved for summary judgment on all claims. The court thus examined whether each of the three potential forfeitures would preclude coverage, and whether the insured’s bad faith claim could be disposed of as a matter of law. Far and away the bulk of Judge Julie Carnes’ opinion is dedicated to the analysis of whether the facts established as a matter of law that the insured was not residing at the property, and thus whether the residence premises defense would support a finding of no coverage for the loss.
The facts show that the insured purchased the home in 1990 and resided there with his wife until 2003, when the wife began travelling out of state to assist in caring for a daughter suffering from cancer; the wife eventually ceased returning to the home and had not visited the property for several years before the fire. The court noted that the home had been in a state of disrepair since the time when the wife ceased returning, due in part to water damage from a leaking roof that the insured could not afford to repair.
In November 2007 the local county’s Code Enforcement Division received a complaint that the home was dilapidated and a request that the division check for zoning and code violations. Following an inspection, the division found violations including “ (1) a dilapidated structure unfit for human habitation and/or in such an unsanitary condition that it is a menace to the health of the people residing in the vicinity; (2) an accumulation of rubbish, trash, refuse and junk; (3) obnoxious vegetation (tall grass and weeds); and (4) conditions that provide harborage for rats, mice, snakes, insects and vermin,” and the division wrote the insured to advise of the complaints and code violations. A second inspection five months later, on March 24, 2008, revealed that the roof had caved in, water could freely enter the structure through the hole in the roof, the sheetrock had fallen, the structure was infested with termites, mold and mildew were rampant, doors and windows were missing, and the house was littered with large amounts of debris. The division determined that the residence was unsafe and beyond repair.
Five days after this inspection, on March 29, 2008, Hanover issued a homeowners policy to the insured effective immediately, which provided coverage for his dwelling on the residences premises shown on the declarations page, which was the address of the property. Within two weeks of the policy’s issuance, on April 10, 2008, the Code Enforcement Division wrote the insured to notify him that the home had been in violation of local zoning ordinances and county codes since November 2007, and that the county’s Building Department had declared the structure unsafe.
The condition of the property continued to deteriorate and worsen throughout 2008, as observed by county officials. A Code Enforcement official returned to the home in October 2008, finding that the residence remained in poor condition with an overgrown and unkempt yard and numerous hazards that made the property unfit for human habitation. Another inspection in December 2008 revealed deteriorated roof shingles, rotted plywood underneath, large gaps throughout the roof area and exposed rafters, dangling light fixtures, boarded up or missing doors, damaged floors, and the home sagging in the front. The county filed nuisance abatement proceedings against the property, and a hearing was held on January 8, 2009, in which the county gave the insured ninety days to repair the property to bring it up to Code, otherwise the county would demolish the structure. The following day, the county terminated power to the house, and the insured stopped sleeping at the property; he stayed at a friend’s camper nearby, where apparently he had been staying for some unknown time prior to the power being terminated. Nine days later the home was destroyed by a fire that all parties agree was intentionally set.
Hanover argued that that the property was not the insured’s residence premises at the time of the loss, as he was not living in the home at the time of the fire, and the insured countered by arguing that the term “residence premises” was unclear and by arguing that the evidence was equivocal as to the extent of his occupation of the premises. In her analysis of the argument that the term “residence premises” was unclear, the Judge noted that the Hanover policy did not define or otherwise explain the term, and observed that the meaning of the term “residence premises” has been the subject of not infrequent litigation in Georgia without the distillation of a clear principle to aid the Court in determining the definition of the term. Judge Carnes cited both cases holding that an absent owner was not barred from recovery and cases holding that the residence premises requirement defeated an absent owner’s claim.
Turning to the facts at hand, the court noted that the record was unclear how much time the insured spent at the home before the power was terminated, but that he clearly ceased sleeping at the property after that point, approximately one week before the fire. After noting that the insured owned the house as his only residence for almost twenty years, consistently maintained insurance on the property, and maintained power at the house until the county terminated it, the court concluded that the facts as presented did not compel a ruling that, as a matter of law, the home was not the insured’s residence premises, and summary judgment was denied on this ground. The court specifically stated that the fact “that the house was uninhabitable by any reasonable standard does not necessarily mean that one can conclude, as a matter of law, that it was uninhabited, as the plaintiff had long demonstrated a tolerance for living in squalid conditions.” Following her conclusion, Judge Carnes noted that the standard for ruling on a motion for summary judgment (taking the facts in the light most favorable to the non-moving party, here the insured) will not carry over to the jury, and resolved that the parties will be required to submit a jury instruction on the residence premises issue tailored to the facts of the case, and ambiguities in the policy’s terms will be construed against Hartford.
The court disposed of the Hartford’s other two grounds for summary judgment – material misrepresentations and intentional act of arson – on grounds that there existed disputed issues of material facts, so that those issues would survive summary judgment and be decided by a jury. The court granted Hartford’s motion for summary judgment on the insured’s bad faith claim, finding as a matter of law that the insurance company had numerous reasonable grounds to deny the claim.
Cain illustrates the difficulties that can arise in moving for summary judgment on a factually-intense issue such as application of the term “residence premises.” It is unclear whether Hanover was able to precisely determine through discovery specific facts surrounding the insured’s occupation and vacation of his house, but the court’s order indicates that as a matter of law the evidence did not establish as a matter of law that the home was no longer the insured’s residence. One conclusion that may be drawn from this case is that it is beneficial whenever possible for insurers to issue policies that define the term “residence premises,” as was apparently not the case here, to aid the judge in explaining and understanding the term and why the particular insured has not met its requirements. Additionally, there is no discussion in Cain of any alleged application misrepresentations, however some homeowners applications will question the insured about the condition of the property, and under the circumstances of this case it appears the insured would have been forced to either admit the sorry condition of the home – possibly prompting an inspection of the property – or else make a misrepresentation. Ultimately, this case serves as a reminder that, at least at the summary judgment phase, potentially ambiguous policy language can undermine a powerful set of facts.