Last week, the Seventh Circuit found that the term “residence premises” in an Illinois homeowner’s policy was ambiguous because it could describe more than just one structure on the property.
In Schuchman v. State Auto Prop. & Cas. Ins. Co., the plaintiffs owned land that had a frame house and several mobile homes located on the property. The homeowner’s policy listed the mailing address of the frame house as the insured address, but the policy’s definition of “residence premises” included not only the house but also “other structures and grounds at that location.” The “special provisions” part of the policy also required that “the residence premises is the only premises where you maintain a residence other than business or farm properties.” The frame house burned down, and State Auto denied coverage because the insureds–who were living in one of the mobile homes at the time of the fire–were not living in the frame house, which State Auto said was the “residence premises.” The district court adopted State Auto’s position and granted summary judgment in its favor.
On appeal, the Seventh Circuit framed the issue this way:
The critical question, then, is whether “residence premises,” as defined by the policy, encompasses those mobile homes. If “residence premises” includes the mobile homes, the Schuchmans were residing on the “residence premises” at the time of the fire, and the damage to the house is covered by the policy. If “residence premises” excludes the mobile homes, however, the Schuchmans were not only residing somewhere other than the “residence premises,” but also maintaining a residence other than at the “residence premises” in violation of the Special Provisions. In that case, the policy would not cover the fire damage to the house.
Examining the policy’s definition of “residence premises,” the court found that the definition “tells us that ‘the residence premises’ is not a building, but a ‘location’ on which there may be multiple buildings, and that the insured may ‘reside’ in any such building that is included within the ‘residence premises’ shown in the policy Declarations.” So the insureds could satisfy the policy’s requirements by living in any building on the residence premises, including the mobile homes.
The court then identified a problem with the practice of identifying insured premises by reference to only a mailing address:
As this case illustrates, a mailing address is ill-suited to the role of defining property lines. Consider two neighbors who have mailing addresses of 101 and 103 Oak Street,
respectively. The postal carrier knows at which structure to leave mail using these respective addresses, but standing alone, those addresses would not tell a utility worker
through what property to run a new line when responding to a service request at one of the homes. Perhaps there would be a fence around the perimeter of the property, or a
survey of the lot on which the house is located, or other information that would reveal the boundaries of the respective properties, but the point is that the mailing address alone would not provide sufficient guidance. It does not suffice here, either.
As a result, the policy was ambiguous and the court reversed and entered judgment in the insured’s favor as to coverage under the policy.
The takeaway here is that it’s important to specifically define what is insured. As the court noted,
That should not be difficult; legal descriptions of properties are readily available. Moreover, a legal description is not required; the policy merely needs to define the boundaries of the premises by terms that can be readily understood and applied. Defining the “residence premises” solely by reference to a postal address where the insured dwelling sits on an undivided parcel of land that has multiple postal addresses associated with it, however, falls short of this mark.
Legal descriptions are great, but you know what else could help here? Graphics. I’m a big fan of graphics. If only there were some way to easily illustrate property boundaries in a homeowner’s policy. Some way to maybe get a picture of property and then draw lines on it… Man, if only such technology was readily available for free to anyone on the Internet and required little more than minutes of effort and was so easy a lawyer could do it…