Many New Jersey residents, particularly on the Jersey Shore, who suffered property damage after Superstorm Sandy, are likely in the process of pursuing claims under homeowners’ insurance policies. While you may think that coverage for damage to a “home” is guaranteed under a “homeowners insurance” policy, coverage depends upon the exclusions contained in the particular policy.
Many homeowners’ policies contain a provision requiring homeowner to “reside” in the residential premises at the time of the incident, to recover for resulting damages. The issue however, is in no way black and white. When lawsuits are brought challenging coverage denial relating to residency exclusions, courts are not always quick to side with the insurance companies simply because a homeowner may not be physically residing in the residential premises. Before making a decision, courts strictly scrutinize not only the circumstances at the time of the claim, but also how the term “reside” is defined and used in the policy.
Courts place great emphasis on homeowners’ “intent” to live in the residential premises when not physically present at the time of the incident. For example, if a homeowner purchases a home with the intention of having other family members reside therein without him, even if he intends to move in later, denial will likely be upheld unless the residency exclusion is truly ambiguous. Similarly, if residential premises are purchased as an investment, a homeowners’ insurance policy including a residency exclusion may also prevent coverage as well.
In situations where a homeowner may have the intent of moving in the residential premises at a later time, denial of coverage may be upheld, but it will depend upon the reasons why the homeowner is not living there currently. For example, just recently the highest court in New York affirmed the finding that denial of coverage based on the homeowners’ lack of “physical residency” in the home at the time of the incident was improper. Dean v. Tower Ins. Co. of New York, 2012 NY Slip Op 07142 (N.Y. October 25, 2012). In that case, the homeowners were prevented from moving into the residential premises after closing, due to severe termite infestation requiring drastic remediation. Before the homeowners were able to move back in, a fire broke out destroying the residential premises. Coverage was denied because the homeowners’ policy contained a residency requirement and the homeowners did not “reside” in the residential premises at the time of the incident. The Court found that the term “reside” was not defined in the policy and thus ambiguous. This finding coupled with the homeowners’ proofs that they were regularly at the residential premises to conduct remediation, at times sleeping and having meals there, all with the intention of ultimately moving in on a permanent basis, led the court to conclude that denial of coverage was improper under the circumstances.
For those of you who may be seeking coverage on residences that you own but in which you do not reside permanently, it is important that you review your policies thoroughly to determine whether such residency exclusion applies. Further, even if the policy does include such exclusion, the policy must not be ambiguous in its definition of “reside”. If it is ambiguous, it is possible that you may be successful in a challenge to the denial of coverage.