A. Coverage A—Dwelling

1. We cover:

a. The dwelling on the “residence premises” shown in the Declarations, including structures attached to the dwelling.

Consider the following claim, summarized from the facts of many cases:

Mom and Dad own a home. They have put down a substantial payment to procure space in a retirement community with a fixed “move-in” date. With plans to recover the payment via the sale proceeds of their current home, they contract with a real estate agent. Move-in time arrives, and still no sale. Adult daughter tells parents to relocate; she'll move into the house to keep it maintained and occupied until it sells.

A major fire severely damages the home. Adequate homeowner insurance in the name of Mom and Dad is in force, automatically renewed annually via direct bill/escrow.

The carrier denies the claim. The agent assures the daughter and parents there must be a simple misunderstanding over vacancy and unoccupancy. As a resident relative, the daughter is even an insured under the policy.

Unfortunately, the form language sides with the carrier. The carrier denies the claim under a policy provision, clear but seldom noticed once an agent leaves licensing school. Note the requirement for determining if a particular dwelling falls under coverage A: It must be located on the “residence premises,” which ISO defines as “The one-family dwelling where you reside” (emphasis mine). By point:

1. To be covered, dwelling must be on “residence premises.”

2. “Residence premises” is where “you” reside.

3. “You” includes named insured and resident spouse only.

4. Named insured on homeowners' policy is Mom and Dad; does not include daughter.

5. Mom and Dad reside at a retirement community, not in the damaged dwelling.

6. Because “you” does not reside at this specific dwelling, it is not a “residence premises” and does not fall under Coverage A.

7. Any claim is validly denied under this policy.

One hopes ISO will throw out this language. This is one turkey that needs to be stuffed.

Courts on Dwelling Property Policies

My friend Bill Wilson, head guru of the IIABA Virtual University, has documented court cases that have come down squarely on the carrier side in similar cases. Even if courts don't favor certain policy provisions, they are reluctant to overturn clear wording. There have been courts who ruled differently, on an “innocent insured” rationale. But if it were that clear that one set of courts is wrong while the others are right, I doubt Bill would have named this specific issue to be one of the top priority ISO forms changes needed.