Tenants Occupying Insured Property Not Entitled to Coverage for Loss of Home by Fire Where Insured Did Not Reside In Premises – Court of Appeals Issues 2-1 Decision Holding Insurer Did Not Owe Coverage for Claim

This is an interesting insurance coverage decision issued by the Court of Appeals involving a claim for coverage involving a residential property destroyed by fire, which was not occupied by the insured.

In Null v. Auto Owners, et al.COA.Opinion.10.22.2013, a 2-1 decision (Judges Fitzgerald and O’Connell, Shapiro, J. dissenting), the Court of Appeals holds an insurer did not owe coverage on the basis of the “residency clause” in the policy.  The owner and insured of the house was not living in the house; in fact, he was living in Indiana.  The insurer had an Indiana address to which it was sending bills for the premiums.

The Plaintiffs in the underlying lawsuit occupied the house under a land contract.  The insurer paid two prior minor claims for damage due to a leaking roof in the past, even though the land contract arrangement had already been executed and the insured was not occupying the premises.  Thus, Plaintiffs argued the policy provided coverage and, in any event, even if the residency clause applied, the insurer had waived and/or was equitably estopped from denying coverage due to its apparent knowledge the home was not actually occupied by the insured and because it had paid the two prior minor claims during the time the plaintiffs were living in the home.  The trial court initially denied the insurer’s motion for summary disposition, but after holding a bench trial granted judgment in its favor.

This is a 2-1 decision with a notable dissent from Judge Shapiro.  The majority cites well-established Supreme Court precedent demonstrating the residency requirement in such a clause is mandatory and that an insured will not be entitled to coverage for lost, damaged or destroyed property due to fire if he or she does not actually occupy the insured premises.  The majority also notes ambiguity in the record as to whether the insurer actually had notice of the insured’s residency status and ruled that ambiguity favored the insurer.  The majority also ruled equitable estoppel could not apply to the claim because the elements had not been established.

Judge Shapiro dissents.  He argues there were questions of fact concerning whether Auto Owners knew or should have known the insured was not residing in the premises.  The fact it paid two prior claims and sent the bills to an out-of-state address was significant to establish the plaintiff’s waiver and estoppel arguments and those should have been addressed.  (Note, the trial court did not address the equitable estoppel argument even though it was raised by plaintiff below).

The fact this is a 2-1 decision (albeit unpublished), I would anticipate the plaintiffs will at least attempt to file an Application for Leave to Appeal in the Supreme Court.  The only possible avenue plaintiffs have for a consideration by the Supreme Court is the extent to which there were facts that might lead a trier of fact to assess the equitable estoppel argument.  Recall the issue was presented to the trial court but never thoroughly addressed; the trial court first ruled in plaintiff’s favor and denied the insurer’s motion for summary judgment, but then, ultimately granted the insurer judgment after holding a full bench trial.  There was no opinion or analysis of the plaintiff’s equitable estoppel argument.  The plaintiffs’ attorney filed a motion for reconsideration bringing this to the trial court’s attention (obviously intending to appeal), but the trial court simply denied reconsideration without addressing the argument.  Thus, although the majority gets the law right, Judge Shapiro at least has a tangible point about having a court of first instance(the trial court) at least analyze the claim.

For more information about this and other similar cases contact Carson J. Tucker, Chair of the Appeals and Legal Research Group at Lacey & Jones, LLP, a Birmingham law firm serving clients since 1912.  Mr. Tucker can be reached at (248) 283-0763.

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