Policy that applies as written | Zalma on insurance

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NO COVERAGE FOR INSURED PERSONS WHO DO NOT LIVE IN RESIDENCE

The appellants appealed the dismissal of their action against Farmers Automobile Insurance Association (Farmers). The appellants were insured by Farmers for a residence in St. Joseph which plaintiff Judy had inherited from her deceased brother. The plaintiff filed suit against the company after a fire destroyed the home. Farmer contested the claim because the claimants were not occupying the property at the time of the fire and were therefore not covered by the terms of the policy.

IN Judy Dardar and Ivan Dardar v. Farmers Automobile Insurance Association and Jason Sticklen, Farmers Automobile Insurance Associationno. 5-22-0357, 2023 IL App (5th) 220357-U, Court of Appeals of Illinois, Fifth District (June 2, 2023) Dardar’s claim was dismissed.

BACKGROUND

Before he died, David Jones, Judy’s brother, purchased a policy from Farmers through Sticklen for property and liability insurance for his residence in Champaign County. After David’s death, Judy was appointed as the independent legal representative of his estate.

Farmers issued a homeowner’s policy that amended declarations, that added the estate and Judy as additional insureds as well as a non-occupancy permit.

When the farm closed and the house was transferred to Judy, she began making renovations to the home. The plaintiffs were unsure whether to live in the house after the renovations were complete or sell it. Then, on July 4, 2018, firework pieces from an unidentified source ignited the house and it was destroyed.

The plaintiff has never lived in or occupied the residence. Judy had no knowledge that the policy was issued without the approval of the non-occupancy permit.

Farmers denied the claim on the basis that the policy covered their “residential premises”, which was defined as:

• the single-family home where you live;
• the two-, three- or four-family dwelling where you live in at least one of the units; or
• the part of any other building where you live.

Farmers determined that the plaintiffs did not live at St. Joseph property and therefore was not covered by the policy terms. Judy claimed that Sticklen failed to inform Farmers of her condition, and Farmers issued a new non-occupancy permit approval policy.

The court found that, based on the facts alleged, there was no sufficient basis for a breach of contract claim against Farmers and granted Farmers’ motion to dismiss. Based on the relevant facts, the plaintiffs could never plead that they ever lived at St. Joseph property.

ANALYSIS

The issue on appeal was whether the district court erred in granting Farmer’s motion to dismiss for breach of contract.

A court must interpret an insurance policy as a whole, taking into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract.

“Reside” is not ambiguous as it is used in the insurance contract language between Farmers and the plaintiffs. The record showed that the plaintiffs never lived on the property, did not live in it in any way, and had not decided whether they would move into the home once the renovations were done. The mere fact that “residence” has more than one definition does not make it ambiguous when, as here, there is no definition of the word that would apply to the plaintiffs. The Court of Appeal, like the district court, concluded that the term “resident” as used in the agricultural policy is not ambiguous.

There is nothing arcane or difficult to understand about a policy definition that provides “single-family dwelling where you live.” As the insured did not live in the home and had never lived in the premises, the unequivocal requirement for coverage was not met. They could easily have obtained fire insurance which insured the plaintiffs, as outsiders, against the risk of the house being lost by fire. Instead, they obtained a homeowner’s policy that required them to live in the house. They didn’t and they got nothing.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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