Many homeowners and their insurance agents are unaware that most homeowners insurance policies contain a residency requirement. That is, several state courts have ruled that the insurance applies to a home only if the insureds reside in it. Homeowners who have been denied coverage because they did not reside in the home have sued their carriers and their agents.
A Michigan couple emigrated to the U.S. from Egypt and maintained dual citizenship. They bought a home in Michigan while maintaining an apartment in Egypt. When they first applied for home insurance, they informed their agent that they would live in Michigan most of the year but return to Egypt one or twice a year for short visits. Apparently, they stuck to this routine while their children were still in school.
Once the kids had graduated from high school, things changed. The husband’s health made midwestern winters difficult for him, so he began spending only the summers at the Michigan home. His wife made trips back and forth for varying amounts of time.
In 2015, six years after the first policy was issued, the couple unsuccessfully tried to sell the Michigan home, then decided to rent it. The following month, an agency employee exchanged email messages with their son, as there were discrepancies about the father’s last name and the address on his driver’s license. The son replied that “my dad is overseas” and that his mail was being sent to his sister’s address while he was away.
The couple subsequently leased the home to an individual for six months, though they testified that they intended to reside in it upon their return to the States after the lease ended. They did not inform their insurance agent of this. The lease ended, the couple remained in Egypt, and the tenant remained in the house on a month-to-month basis with no deadline for vacating. During this extended period, a fire damaged the home.
The homeowners insurer denied coverage for the loss because the policy stated that it insured the dwelling “identified as the insured property on the coverage summary, where the person listed under Named Insured(s) on the coverage summary as the insured resides …” The insurer concluded that the couple did not reside in a house that was leased to a tenant for an indeterminate period of time.
The insureds then sued the insurer, the agency and the tenant. The trial court ruled in favor of all three defendants. The couple accepted the ruling in favor of the tenant but appealed the judgments favoring the insurer and agency.
The appellate court agreed that the couple had ceased residing in the Michigan home. It also found that the terms of the policy were not ambiguous and therefore the claim denial was valid.
The agency did not have any responsibility to the couple, either, based on the information it had, the judges wrote. They found no evidence that the couple ever informed the agency that they would be living away from the property and leasing it to a tenant for more than half the policy period. The email exchange with the son did not inform the agency of the lengthy absence, and the son did not request a coverage change. Accordingly, the court agreed that the agency was not liable.
This case again shows the importance of documentation when an agency is trying to defeat an errors and omissions claim. The agency had the applications and emails they had exchanged with the son. Agencies are not obligated to obtain new coverage for insureds unless the insureds make a request. Because the agency could show that there was no request, it won this case.
