Court of Appeals Finds That Policy Language For "Residence Premises" Is Ambiguous

On September 9, we wrote in advance of oral arguments in the Court of Appeals for the matter of Dean v. Tower Insurance Co. of New York, an insurance coverage action in which the controversy involved the loss of alleged “residence premises” where such premises were defined for the insured as “where you reside.”  In the decision released October 25, the Court of Appeals concluded that the word “reside” was undefined in the policy, making “residence premises” ambiguous under the facts here.  The Court thus affirmed the denial of summary judgment to Tower in a 4-3 decision.

The Deans’ home insurance policy at issue was to become effective at the time they closed on their house.  But, the Deans could not move in as they discovered extensive termite damage.  As a result, the Deans continued to live at their old home while they performed substantial repairs over the next 12 months.  This included performing repairs at the new home at least five days a week after work and often eating meals and staying late into the night or early morning, but not sleeping over.  The house was then destroyed by fire approximately one year after the closing, when the renovations were substantially complete.

The majority of the Court of Appeals quoted language from earlier Appellate Division cases which indicate that residency requires “something more than temporary or physical presence and requires at least some degree of permanence and intention to remain.”  Through this lens, the majority found that issues of fact remained as to whether the Deans satisfied the insurance policy’s “residence premises” language.  The majority further noted that the ambiguity makes it arguable whether the “reasonable expectations of an average insured” would be that mere “occupancy” of the premises was sufficient to satisfy the policy requirements, and that Mr. Dean's presence in the home for working purposes could be considered such an "occupancy."  

In dissent, three Judges argued that the term “reside” should simply be given its plain definition or plain meaning and would grant summary judgment for Tower.  The dissent argued that the Deans failed to “reside” at their new home because they continued to live at their old home while they performed the repairs.  Consequently, although they may have shown “recurrent presence for the purpose of renovation,” the dissent argued that the Deans did not show “the necessary ‘degree of permanence’ to establish a residence.”