It is hornbook coverage law that ambiguities in an insurance policy are construed against the insurer. Like the concept of “beauty,” the line between a well understood and an ambiguous term is sometimes in the eye of the beholder.
In Dean v. Tower Insurance Company of New York, the insured purchased a homeowner’s policy with the intention of moving in after closing on the deal. Coverage was put in place to begin on the date of the closing for the “residence premises,” which was defined as “the one family dwelling … where you reside.” The term “reside” was not specifically defined in the policy.
After the closing, the homeowner discovered extensive termite damage throughout the premises and began a process of repair and renovation that continued through the first renewal of the policy. While he frequently worked and occasionally ate some meals at the premises, the homeowner continued to live in his residence of the prior seven years. After the policy renewed, a fire ensued and a claim was made for the damage. Tower disclaimed because the premises was unoccupied and therefore did not qualify as a “residence premises.”
In a closely decided opinion, the New York Court of Appeals, New York’s highest court, found an issue of fact on the issue of whether the premises qualified as a “residence premises.” In the opinion of 4 of the 7 justices, that key policy term was not defined and was ambiguous. Further, the reasonable expectation of an average insured would be that the occupation of the premises alone would satisfy the policy’s requirements.
In contrast, the 3 dissenting justices believed that the term “reside” was plain as day and precluded coverage as a matter of law. According to the dissent, the insured may have worked there; he may have eaten there; but he lacked the “physical permanence” necessary to establish that the premises was his residence.
New York has the reputation of a friendly state for insurers. The Dean case makes one wonder if a shift in interpreting insurance policies is underway.
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