A common scenario that arises when people are in the process of selling their home after purchasing a new residence involves allowing another person to live in one of the homes until the old home sells. The short-term use might include short-term executive housing, a vacation rental, or interim housing for family members. Our Miami-Dade homeowners insurance attorneys recognize that the situation can get complicated and financially risky when the new home is damaged before the new owners take possession. An appellate decision out of another state raises the specter of problems associated with this scenario, especially if the people temporarily residing in the home are paying rent.
In Scura Supreme Insurance Co. v. Johnson, the court reversed summary judgment granted by the trial court because of an issue of material fact regarding whether the person residing in the insured’s home was a “resident of the household” or a “tenant.” This question was critical because the policy defined the “insured as “you and residents of your household.” The O’Briens owned the home and rented it on a short-term basis to a sister and her husband while they were waited for a home sale to be finalized. Dogs belonging to the in-laws living in the home dug under the fence and attacked a neighbor and her dogs.
The dog attack victim sued the O’Briens and their in-laws and filed a separate lawsuit seeking a declaratory judgment, indicating the in-laws fell within the category of “insured” individuals under the policy. The neighbor injured in the dog attack contended that the in-laws were members of the household because they paid rent, resided in the O’Briens’ home, and used the address to register their kids for the school district.
The appellate court noted that prior decisions in the state (Illinois) had specifically avoided imposing a “single, exclusive definition of the word ‘household.’” Rather, the courts had deferred to the language of the policies to determine the meaning of the term. The court conceded that the in-laws could be considered members of the household because they lived in the home and used the address for purposes of their children’s school district. The insurance carrier contended that the in-laws living in the home were not members of the “household” because the in-laws were not dependents of the policyholders.
While the trial court granted summary judgment and found that the claim was covered, the appellate court reversed. The appellate court reasoned that both parties’ interpretations were reasonable. The court also acknowledged that ambiguity in the policy, which leaves conflicting interpretations with one supporting coverage and one justifying denial, must be construed in favor of the policyholder. However, the court indicated that the ambiguity arose from extrinsic facts not terminology within the policy. Based on this analysis, the court indicated a question of fact existed for the jury to decide on remand.
Although this blog has previously discussed the general rule that ambiguous language in a policy regarding the issue of coverage must be construed in favor of the insured, the insurer used a common strategy to confront such a claim. The insurer often contends that the language of a policy is not inherently ambiguous, but extrinsic situations or facts make application of the term ambiguous. In this situation, the policyholder does not benefit from this presumption of coverage.
This case also serves as a cautionary tale for property owners who are purchasing a new home. Homeowners frequently allow others to reside in either the new or old home during the process of completing the sale of the current home. However, individuals involved in a pending sale should carefully review their insurance policy and talk with their insurance agent to ascertain that their policy is appropriate to guard against the risk of loss in the event of a fire, vandalism, storm, or other peril during the period the sale is pending. Policyholders might need to secure a rider on the policy to cover damage caused by renters.
Greenberg, Stone, & Urbano: Seeking Maximum Recovery for Policyholders from Homeowners Insurance Companies
Our Miami homeowners insurance attorneys at Greenberg, Stone & Urbano will tenaciously pursue the full compensation our clients are entitled to under the law. For over 130 collective years, our firm has assisted homeowners with damage claims across South Florida. We seek to obtain compensation for your tangible and intangible damages. Our skill and dedication have earned us an AV rating from Martindale-Hubbell and recognition as one of South Florida’s top firms by the Miami Herald. Call us at (888) 499-9700 or (305) 595-2400 or visit our website to schedule your initial consultation.