No Cover Unless an Insured Resides or Intends to Reside In the “Residence Premises”
First party property insurance policies insure people against the risk of loss of certain described property. It does not insure the property. When an insurance policy states that it insures the Insured against the risk of loss only of a “Residence Premises” occupied by the insured or where the insured intends to reside there within 60 days of the inception of the policy.
In American Risk Insurance Company, Inc. v. Serpikova, Court of Appeals of Texas, — S.W.3d —-, 2016 WL 7108240 (12/6/16) Appellee/plaintiff Veronika Serpikova purchased a house located on certain real property on Lillian Street in Houston, Texas (the “Property”). Serpikova purchased a homeowner’s insurance policy from appellant/defendant American Risk Insurance Company, Inc. (the “Insurer”). At first, Serpikova and her husband lived in the house on the Property, but in May 2012, they moved to another location. They then leased the Property to two tenants, and did not move back into the house on the Property nor did they intend to return to live at the property.
Several months later, on September 6, 2012, a renewal homeowner’s insurance policy (the “Policy”) became effective. The Insurer issued the Policy, and Serpikova was the named insured on it.
In November 2012, while the Policy was in effect, a fire severely damaged the house on the Property. Serpikova made a claim under the Policy. The Insurer denied coverage, stating that because Serpikova did not reside at the Property at the time of the loss, the Property did not fall within the Policy’s definition of “residence premises” and therefore the house was not a dwelling on the residence premises, a requirement for dwelling coverage under the Policy.
The Insured’s Claims
Serpikova filed suit against the Insurer, asserting claims for breach of the Policy, violations of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act, breach of the duty of good faith and fair dealing, and violations of the Prompt Payment of Claims Act. She also sought a declaratory judgment that her house was within the definition of “residence premises” in the Policy and that the fire loss is covered under the Policy.
The Parties’ Motions for Summary Judgment
Serpikova filed a motion seeking a partial summary judgment as to liability on her breach-of-contract claim as well as a declaratory judgment that her loss is covered under the Policy.
The Insurer filed a cross-motion for summary judgment asserting numerous grounds against Serpikova’s claims. The trial court granted Serpikova’s summary-judgment motion and denied the Insurer’s motion, reserving for trial the amount of Serpikova’s damages, the remaining claims, and the requests for attorney’s fees.
The Trial Court’s Judgment
Following a bench trial, the trial court rendered judgment awarding Serpikova actual damages, eighteen-percent interest as damages under Insurance Code section 542.060(a), and amounts the trial court found to be reasonable and necessary attorney’s fees through trial and on appeal. The trial court also declared that the Property is within the definition of “residence premises” in the Policy and that the fire loss to the Property is a covered loss under the Policy.
ISSUES AND ANALYSIS
The appellate court must, when reviewing a summary judgment, consider all the evidence in the light most favorable to the nonmovant, crediting evidence favorable to the nonmovant if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not. The evidence raises a genuine issue of fact if reasonable and fair-minded jurors could differ in their conclusions in light of all of the summary-judgment evidence.
The appellate court must, in this case, decide whether, as a matter of law, whether the Property falls within the Policy’s definition of “residence premises” so that the house is a dwelling on the residence premises?
Under “Coverage A (Dwelling),” the Insurer covers: “the dwelling on the residence premises shown on the declarations page including structures attached to the dwelling.” (emphasis in the original). The policy defines “residence premises” as “the residence premises shown on the declarations page. This includes the one or two family dwelling, including other structures, and grounds where an insured resides or intends to reside within 60 days after the effective date of this policy [September 6, 2012].” (emphasis in the original).
Applying the ordinary rules of contract construction to insurance policies, the reviewing court ascertains the parties’ intent by looking only to the four corners of the policy to see what is actually stated and does not consider what allegedly was meant.
If a court can ascertain only one reasonable meaning of the policy provision, the insurance contract is not ambiguous, and the court will enforce it as written. But, when words in a policy are susceptible to more than one reasonable interpretation, the contract is deemed ambiguous.
Serpikova asserted that the Property is the residence premises under the first sentence of the definition because the Property is the “residence premises” shown on the declarations page. Serpikova also argues that based on the use of the term “includes,” the second sentence of the definition can only enlarge the scope of the definition beyond the parameters of the first sentence. The declarations page does not contain the term “residence premises,” but the address for the Property is listed on the declarations page as the “Location of Property Insured.” The Insurer asserted that, under the second sentence of the definition, the Property cannot be the residence premises because Serpikova never resided on the Property during the term of the Policy nor did she intend to reside on the Property during the 60 days after the effective date of the Policy.
The Policy only provides dwelling coverage for a dwelling and other structures set apart from the dwelling by clear space “where an insured resides or intends to reside within 60 days after the effective date of th[e] [P]olicy.”
The court of appeal concluded that, under the Policy’s unambiguous language, the Property does not fall within the definition of “residence premises”. There was no coverage for Serpikova’s loss; therefore, the trial court erred in impliedly granting summary-judgment as to Serpikova’s first, third, and fourth grounds.
The Supreme Court of Texas, in Greene v. Farmers Insurance Exchange, 446 S.W.3d 761 (Tex. 2014) held that a circumstance that leads to a lack of coverage under an insurance policy is not a breach or violation that triggers application of the insurance code’s bad faith requirements. Thus, under the clear wording of the statute and under Greene, the statue does not apply to the coverage issues and cannot prohibit the Insurer from denying coverage under the Policy.
Under the applicable standard of review, the Greene court’s construction of the definition of “residence premises” in the Policy, the other provisions of the Policy, and the Greene court’s construction of Texas Insurance Code section 862.054, the Policy does not provide coverage as a matter of law. The trial court erred in granting Serpikova’s summary-judgment motion. Accordingly, the court of appeal sustained the Insurer’s two appellate issues, reversed the trial court’s judgment, and remanded the case to the trial court for further proceedings consistent with the opinion.
This case should be read by every insured, insurance agent and insurance broker in Texas so that they understand that under the strict definition of the term “residence premises” an insured must actually reside in the property for coverage to exist to indemnify the insured if that property is damaged. The language of the policy is clear and unambiguous. If you don’t live on the “residence premises” you have no coverage for its loss. Policies of coverage for property rented to others is easily and inexpensively available and once the agent or broker learns the insured does not live on the premises he or she must advise the insured to obtain a rental property cover.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide
The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=214624, or 800-285-2221 which is presently available and “Diminution of Value Damages” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972
The author and publisher disclaim any liability, loss, or risk incurred as a consequence, directly or indirectly, of the use and application of any of the contents of this blog. The information provided is not a substitute for the advice of a competent insurance, legal, or other professional. The Information provided at this site should not be relied on as legal advice. Legal advice cannot be given without full consideration of all relevant information relating to an individual situation.