Liability Policy Limited to Insured Residence Premises
Houses are often homes. Not all houses are homes. Not all properties with a house are residences or residence premises.
Insurance policies never cover every conceivable potential exposure the insured faces. By their terms the policy limits its exposure based on the requirements and needs of the insured and the willingness of an insurer to take on that risk.
In Shelley Lynn Yocom v. RAM Mutual Insurance Company, A18-1320, State of Minnesota in Court of Appeals (April 15, 2019) a person seeking indemnify from an insurer claimed that a motocross raceway was part of a residence premises entitling the owner of the property to liability protection although the injury occurred at Midway Recreation Park.
Yocum was struck from behind by a golf cart driven by Jamey Swanson. The property on which the raceway is located is jointly owned by Jack and Cynthia Stamschror, who also serve as officers of the raceway corporation. In addition to the raceway, there is a home on the Stamschrors’ 40-acre property.
At the time of the accident, Swanson had homeowner’s insurance with respondent RAM Mutual Insurance Company. The policy’s Incidental Liability Coverages include: “Motorized Vehicle Coverage. We pay for the bodily injury or property damage which: a. occurs on the insured premises and is a result of the ownership, operation, maintenance, use, loading or unloading of: (1) a motorized vehicle if it is not subject to motor vehicle registration because of its type or use; or (2) a recreational motor vehicle.”
The policy defines “insured premises” to include “that part of residential premises not owned by an insured while temporarily used by an insured.” “Recreational motor vehicle” is defined as “a motorized vehicle . . . , trailer or attached apparatus designed or used for recreation, vacation or leisure-time activities.”
Following the accident, Yocom sued Swanson, the Stamschrors, Midway Recreation Park, Inc., and the entity that leased Midway Recreation Park for the race. Yocom alleged various acts of negligence with regard to use, maintenance, and oversight of the raceway. She settled her claims against Swanson for his $300,000 liability limit pursuant to a Miller-Shugart agreement. She then sued the insurer to recover that amount from RAM Mutual.
Both parties moved for summary judgment on the issue whether the policy affords coverage to Swanson. In support of her motion, Yocom submitted a 2013 county property tax statement showing the Stamschrors’ property is classified as agricultural homestead and residential homestead for tax purposes.
The district court determined that the policy does not provide incidental-liability coverage because Midway Recreation Park is not a “residential premises . . . used by the insured.” Accordingly, the district court granted summary judgment to RAM Mutual.
The interpretation of an insurance policy is a question of law as applied to the facts presented. Insurance policies, like other contracts, are governed by the language used, which is given its usual and accepted meaning. Because insurers draft insurance policies, any ambiguity is construed in favor of the insured, but the court has no right to read an ambiguity into plain language of an insurance policy in order to construe it against the one who prepared the contract.
Yocom asserted that the district court erred by interpreting “residential premises” to exclude the property on which she was injured. She contended that the district court erred by “ignoring” evidence that the county classified the entire property as residential.
The Accident Did Not Occur on “Residential Premises.”
It is undisputed that the golf cart Swanson was driving at the time of the accident is a “recreational motor vehicle” for purposes of incidental-liability coverage. Accordingly, the sole coverage issue is whether Swanson was operating the golf cart on “that part of residential premises not owned by an insured while temporarily used by an insured.”
The policy does not define “residential premises.” But it defines “residence” as “a building used principally for family residential purposes.” When read together, “residential premises” refers to a building in which someone lives.
The policy generally defines “insured premises” as “the residence shown on the declarations as the described location” and “related private structures and grounds at that location.” The incidental liability coverages extend this definition to residential premises owned by someone other than the insured, but do not alter the general “insured premises” definition. In other words, the policy contemplates coverage for injuries that occur at private family homes.
Applying this meaning of “residential premises,” the Minnesota appellate court could only conclude that Swanson is not entitled to incidental liability coverage in connection with this accident. Yocom provides no evidence that the area Swanson was using—the raceway—was “part of residential premises.” She does not allege that the raceway area was residential in nature; the accident occurred while she and Swanson were attending a public motocross event. She offers no evidence that any person actually lived at the house located on the 40-acre property or the house’s proximity to the raceway. And in all of her submissions to the district court, Yocom fails to even suggest that Swanson used the property for residential purposes. Therefore, the court of appeals concluded the policy does not cover Yocom’s injuries.
County Tax Records Do Not Create Genuine Issues of Material Fact.
Yocom urged the court to treat county tax records as conclusive evidence that her injuries occurred while Swanson was temporarily using another’s residential premises. Alternatively, she asserted the records create a fact issue precluding summary judgment.
The county records do not purport to describe how any part of the property is actually used, let alone the raceway portion where the public motocross event took place. Merely creating a metaphysical doubt as to a factual issue is not sufficiently probative with respect to an essential element of the case to permit reasonable persons to draw different conclusions and will not defeat summary judgment.
The undisputed material facts show Swanson and Yocom were both at the raceway, for a public motocross race, when the accident occurred. There is no evidence that either party was at or near a house. And even if we credit Yocom’s argument that a property can simultaneously be used for both residential and non-residential purposes, she offers no evidence of such use by the Stamschrors. In sum, RAM Mutual’s policy does not cover Yocom’s claims against Swanson.
Only a lawyer would have the gall to argue that a raceway is a residence premises. Since the accident took place while both participants were attending a motocross event and were not in, on, upon or even near a house, the policy language defeated coverage. It is amazing that even after losing at trial the parties were willing to go forward with an appeal on such slim claims of coverage.
© 2019 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant 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 50 years in the insurance business. He is available at http://www.zalma.com and firstname.lastname@example.org.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
Insurance and the Law of Unintended Consequences Paperback
Insurance is, and always will be, a business of the utmost good faith. All parties to the insurance contract agree, in good faith and fair dealing, to do nothing to deprive the other the benefits of the contract. Insurance is, and always be, nothing more than a contract.
The insurer makes a promise to the insured that if a contingent or unknown loss occurs caused by a peril or risk insured against and not excluded, to pay the insured indemnity as promised by the contract up to the limits provided.
The insured promises to truthfully disclose the risks of loss faced by the insured, property owned by the insured, the business of the insured and/or the insured’s liability exposures. The insured also promises to honestly present a claim, prove the claim, and cooperate with the insurer in its investigation. If the parties to the insurance contract deal with each other fairly and in good faith the policy remains viable, claims are paid promptly and to the satisfaction of the insurer and the insured.
Only if a true tort occurs can the insured waive the contract action and sue in tort. Breach of contract, by centuries old tradition, is not a tort and cannot and should not be considered a tort. The Tort of Bad Faith has served its purpose and is now causing more problems than it solves. It is time the courts and state legislatures rescind the tort and return to common law contract damages.