Carrier Compelled to Cover Loss on Empty House

October 30, 2013

After closing on their house, plaintiffs Douglas and Joanna Dean found extensive termite damage. At that time, a home owner's policy was in place. The Deans spent the next year or so renovating the house. Their insurance policy renewed in March 2006. As the renovations were being completed, a fire destroyed the house, in May 2006. In June 2006, the carrier refused to cover, claiming that the house was unoccupied and thus not a "'residence premises' [sic]" and ineligible for coverage. The carrier also alleged that the Deans lied about their intended use of the property-that they would live there.

Remarkably, the trial court granted the carrier's request to dismiss the case. The Appellate Divisions reversed, finding ambiguity in how the term "residence" was defined. The Court of Appeals, New York's highest court, agreed with that finding.

The court questioned how the word residence should, or could, be defined. Mr. Dean stated that he was at the house regularly to work on it, and that he sometimes ate and slept there. Therefore, Mr. Dean could be seen as residing in the house. The court further held that just because the house contained no furniture did not mean that the house was not occupied (which the carrier also used as its basis to deny coverage). Because of this confusion, the Appellate Division's decision was confirmed and the dismissal was reversed.

Surprisingly, to me at least, this was 4-3 split decision. The dissent would have allowed the carrier to disavow coverage because the Deans's presence was not permanent in nature. The dissent claims not to understand how the majority can define "reside" even though the Deans did not live there. I, however, do not understand how a family living elsewhere, due to construction, is not residing in that house-and certainly given these facts. Can residing mean only in the actual, physical sense? The majority decision addressed this, stating that residency for these purposes requires at least some degree of an "'intention to remain.'" The court found that Mr. Dean's regular visits to the property and obvious intention to live there may be sufficient to trigger coverage. Would that change if Mr. Dean had hired workers to make the repairs in his place? What if the Deans owned multiple homes?

The dissent seems not be concerned with the Deans's obvious expectations. The dissent held that despite this clear intention to move in, and regular presence, the Deans did not "reside" in the house.

The court also addressed occupancy vs. residency, but the outcome of that issue is not clear. Can one occupy but not reside?

Dean v. Tower Ins. Co. of New York