Dean v. Tower Insurance Co. of N.Y., 19 N.Y.3d 704 (2012)

When the term “residence premises” in a homeowners insurance policy is undefined and ambiguous, particularly in situations where the insured has purchased the policy but has not yet fully moved into the property due to necessary repairs, the policy should be interpreted in favor of the insured’s reasonable expectations.

Summary

Douglas and Joanna Dean purchased a homeowners’ insurance policy from Tower Insurance for a house they bought in Irvington. Due to extensive termite damage discovered after the closing, they couldn’t immediately move in and began renovations. A fire destroyed the house after renovations were substantially complete. Tower denied coverage, claiming the house was unoccupied and thus not a “residence premises” as defined by the policy. The New York Court of Appeals held that the term “residence premises” was ambiguous under the circumstances, precluding summary judgment for the insurer, and that it was an issue of fact as to whether the insured’s actions were sufficient to satisfy the requirements of the insurance policy.

Facts

The Deans contracted to buy a house in February 2005, with a closing initially set for March 31, 2005. They obtained a homeowners’ insurance policy from Tower Insurance effective that date. The closing was delayed until May 20, 2005. After closing, extensive termite damage was discovered, prompting significant renovations. The policy was renewed in March 2006. A fire completely destroyed the house on May 15, 2006, after renovations were substantially completed. Douglas Dean spent a considerable amount of time at the property doing repairs, eating meals, and occasionally sleeping there.

Procedural History

The Deans sued Tower for breach of contract after Tower denied coverage. The Supreme Court granted Tower’s summary judgment motion, dismissing the complaint. The Appellate Division modified the order, finding that Tower failed to meet its initial burden for summary judgment. The Appellate Division certified a question to the Court of Appeals, which affirmed the Appellate Division’s order.

Issue(s)

Whether the term “residence premises” in the insurance contract is ambiguous when the insured purchased a homeowners’ policy in advance of a closing but was unable to move in immediately due to the need for major repairs?

Holding

Yes, because the term “reside” is not defined in the contract, making “residence premises” ambiguous, and because there were issues of fact as to whether the insured’s actions were sufficient to satisfy the policy requirements.

Court’s Reasoning

The court reasoned that insurance contracts must be interpreted according to common speech and the reasonable expectations of an average insured. Any ambiguities in an insurance policy are construed against the insurer. The court noted that the standard for determining residency requires more than temporary presence, including some degree of permanence and intent to remain. The court emphasized that Douglas Dean’s daily presence at the house for repairs, coupled with his intent to move in with his family, created a question of fact. Because the term “reside” was undefined, the average insured could reasonably expect that occupancy, as demonstrated by Dean’s repair work and presence, would satisfy the policy’s requirements. Referencing Insurance Law § 3404, the court noted the standard fire policy speaks in terms of occupancy, further suggesting that occupancy could be a reasonable expectation for coverage. The court also quoted Page v Nationwide Mut. Fire Ins. Co., stating that a householder need not have conventional furniture to occupy a house; presence for sleeping, eating, and working can constitute occupancy. This reasoning emphasizes that the factual circumstances surrounding the insured’s use of the property created ambiguity, thus preventing summary judgment for the insurer.