Hurricane Ian Shoreline Loss: Four Policies, Oh Joy!
October 19, 2023
Residency has long been the touchstone of insurability when it comes to homeowners insurance. Courts applying Pennsylvania law have held that residency is a condition precedent to insurance coverage under a policy insuring a “residence premises.” For insured homeowners, this means that the insured actually needs to live in their home in order for it to be considered a residence covered by their homeowners policy. Unfortunately, several recent decisions from federal courts in Pennsylvania have construed this requirement very loosely, resulting in unintended consequences for insurers.
The model homeowners insurance policy—the Insurance Services Office’s HO 00 03 10 00 (the “HO-3”)—captures this concept through the following policy language:
SECTION I – PROPERTY COVERAGES
* * *
“Residence premises” means:
* * *
In this policy, “you” and “your” refer to the “named insured” shown in the Declarations . . . .
A critical issue over which there has been much litigation is whether the insured actually “resides” at the insured property. Recent cases from federal courts in Pennsylvania have dealt with this exact issue.
In Bobbi-Jo Isenberg v. State Farm Fire and Casualty Company, No. 21cv1147, 2022 WL 1720334 (W.D. Pa. May 27, 2022), the policy was issued to plaintiff in 2018 when she purchased a fixer-upper home located in New Castle, Pennsylvania for $30,000. At the time of the purchase, plaintiff was living in an apartment 2.1 miles away. Plaintiff continued to rent her apartment through 2021 while she engaged in unexpected and extensive renovations on the home.
On May 13, 2020, a fire destroyed the home, prompting plaintiff to file a claim under her homeowners insurance policy with State Farm. During the course of its investigation, State Farm rescinded the policy because it believed that plaintiff was not residing at the property, but was still living at the apartment with her family. Subsequently, plaintiff filed suit in the Pennsylvania Court of Common Pleas, Philadelphia County, and State Farm removed the case to federal court. State Farm eventually filed a motion for summary judgment, contending that because Plaintiff was not using the home as a residence, she could not avail herself of the coverage under the policy. Plaintiff argued that her actions in relationship to the home qualified the home as a resident and that she resided both at the home and at the apartment. The court sided with the plaintiff.
Surveying the existing case law concerning the terms, “residence premises” and “resident,” the court noted the following:
“Pursuant to Pennsylvania law, construction of the term ‘resident’ in an insurance policy is a matter of law.” Mu’Min v. Allstate Prop. & Cas. Ins. Co., Civil Action No. 10-7006, 2011 WL 3664301, at *9 (E.D. Pa. Aug. 17, 2011). Pennsylvania courts have held that the word “resident” in an insurance policy, even if undefined, is unambiguous. Wall Rose Mut. Ins. Co. v. Manross, 939 A.2d 958, 964 (Pa. Super. Ct. 2007). “Residence” refers to “a factual place of abode evidenced by a person’s physical presence in a particular place.” In re Residence Hearing Before the Bd. of Sch. Dirs., Cumberland Valley Sch. Dist., 560 Pa. 366, 744 A.2d 1272, 1275 (2000) (citations and internal quotations omitted). The term “requires, ‘at the minimum, some measure of permanency or habitual repetition.’ ” Wall Rose, 939 A.2d at 965 (quoting Erie Ins. Exch. v. Weryha, 931 A.2d 739 (Pa. Super. Ct. 2007)). “Also, ‘[s]ince resident status is a question of physical fact,’ intention is not a relevant consideration.” Id. (citing Amica Mut. Ins. Co. v. Donegal Mut. Ins. Co., 376 Pa.Super. 109, 545 A.2d 343, 348 (1988)); see also Campbell, 2018 WL 3468214, at *1 (“Plaintiff’s reliance on her intention to return to the dwelling at a future date … does not establish ‘residence.’ ”).
When inquiring into residency, courts look at objective indicators “such as where an individual sleeps, takes her meals, receives mail, and stores personal possessions.” Allstate Ins. Co. v. Naskidashvili, Civil Action No. 07-4282, 2009 WL 399793, at *3 (E.D. Pa. Feb. 16, 2009); see Chen, 2012 WL 460416, at *6; Mu’Min, 2011 WL 3664301, at *9. “[W]hen a person actually lives in one location, and sporadically visits, or keeps certain personal items at, another location, it is the location where he lives that is his residence,” not the location he sporadically visits. Gardner, 544 F.3d at 560.
The court ultimately determined that plaintiff resided at the property. The court found it compelling that plaintiff spent numerous nights at the home; she was present at the property every single day—or at least three to four days per week—working on the home to make it habitable; the home was filled with her personal belongings; plaintiff paid her property taxes and utility bills for the home; plaintiff’s pay stubs reflected the home as her address; and there was no evidence that plaintiff attempted to rent or sell the property (plaintiff was planning on moving into the home at the end of July 2020). Thus, the court concluded that the plaintiff had constant, habitual, daily contact with the home with the express purpose of completing renovations so that she could move into the home with her family on a full-time basis, such that the home should be considered one of Plaintiff’s residences under the terms of the homeowners insurance policy issued by State Farm.
But did the court get this right? There appears to be a number of issues that may have been overlooked.
First (and most obvious), is the fact that the plaintiff literally admitted that she did not “live” or “reside” at the home from 2018 to the fire in May of 2020. While the court chose to focus on other facts cited above—such as the plaintiff spending nights and working at the property—it is not clear how the court could have just brushed aside plaintiff’s own conclusion so casually.
Second, the court appears to have glossed over relevant facts concerning the home. Much of the evidence unearthed during this case seems to support State Farm’s position: the water was not turned on at the home; the electrical service was not fully functional; the utility bills at the apartment showed significant usage and were included in her monthly apartment rental; the apartment address was used on plaintiff’s tax returns (which were filed in 2020); her minor school age children attended school where the apartment address was located, not where the home was located; and the apartment address was used on her credit card and bank statements, health insurance information, vehicle registration, and even her dog licenses. Moreover, the renovations at the home were not even complete: there were no walls or ceilings in the main bedroom or the living room; the two other bedrooms in the home were not painted and the flooring was not complete; and the bathroom tile and vanity were not installed. Thus, plaintiff’s testimony at her deposition in January 2022 that she spent “97% of her time at the Property” including overnights seems suspect.
Finally, and most concerning, is the fact that the Court might have decided this case based on form over substance. The question of what it means for a person to actually reside at a property should not be viewed mechanically, with the Court keeping a tally on a scorecard to determine whether plaintiff can muster enough points in various categories like “physical presence in a particular place,” and “some measure of permanency or habitual repetition” to determine, in the abstract, whether the insured “resided” at a given property. Rather, the overarching theme should be whether the person actually lived at the home. See Bobbi-Jo Isenberg, 2022 WL 1720334, at *4 (citing Gerow v. State Auto Prop. & Cas. Co., 346 F. Supp. 769, 779 (W.D. Pa. 2018)) (“‘[w]hen a person actually lives in one location, and sporadically visits, or keeps certain personal items at, another location, it is the location where he lives that is his residence,’ not the location he sporadically visits.”). Moreover, while is possible to have more than one residence, normally a second residence is seasonal or for business purposes, not simply another location where one spends a large portion of time, like at work.
A similar result was reached in Marie Pierre v. Universal Property & Casualty Insurance Company, No. 20-6537, 2022 WL 911386 (E.D. Pa. March 29, 2022). Here, plaintiff maintained a homeowners insurance policy providing coverage for her home in Reading, Pennsylvania when a fire occurred on July 3, 2019, damaging her home and contents. Plaintiff reported the loss to the carrier, but it denied coverage because it determined that plaintiff was not “residing” at the home at the time of the loss.
In fact, Plaintiff had admitted that she had “moved out” of the insured property months before the fire. When asked if she was living at the insured property at the time of the fire she replied, “No. I was living at . . . my house,” referring to a different property that she called her “primary residen[ce].”
Coverage? According the court, possibly. Finding that this was a fact question for a jury, the court stated that the “record contains substantial conflicting evidence as to whether plaintiff was residing at the insured property at the time of the fire.” Despite the fact that the plaintiff admitted that she had “moved out” before the fire and was “primarily” residing at a different home, the court was persuaded by the fact that the plaintiff said “the insured property was a ‘family home’ where her daughter, son, grandchildren, and nephew lived, and she was ‘always’ there.” Indeed, “she had furniture, a television, internet, and received mail at both properties . . . was paying the insurance premium for the insured property,” shared paying the utilities with her daughter at the insured property, and still had her “own room” at the insured property.
Unfortunately, it seems that there is a trend developing with courts ignoring the best evidence of residency—the insured’s own admission that the property was not her “home” or that she did not “live” there. Courts should start reaching the same conclusion.