This story is reprinted with permission from FC&&S Legal, the industry's only comprehensive digital resource designed for insurance coverage law professionals. Visit the website to subscribe.
A New York court has ruled that an insured's “passing comment” to his insurance agent that he might rent out his home when he moved to Ohio was insufficient to put the insurer on notice of a change in the property's use.
|The Case
Jerry and Linan Sun sued their homeowners' insurance carrier, Allstate Indemnity Company, alleging that Allstate had breached the policy when it failed to indemnify them for the loss they sustained from a fire on March 5, 2015 at the home they owned in Blauvelt, New York.
The Suns contended that from 2002 through November 4, 2014, Allstate made, renewed, and issued to the Suns a “Deluxe Plus Homeowners” insurance policy covering the property. They contended that, in May 2011, Mr. Sun had advised his Allstate agent that he and his family had moved from New York and were residing in Ohio. At this time, the Suns asserted, Mr. Sun requested that his automobile policy with Allstate be canceled, and Mr. Sun said that he planned to sell the property or use it as a rental property.
The Suns argued that Allstate then changed the Suns' residence and home address to reflect the move to Ohio. They contended that this demonstrated that both the Allstate agent and Allstate were aware that they resided in Ohio as of May 2011 and, therefore, that there had been a change in the title, use and occupancy of the property as of that date.
|Failed to meet their obligation
The Suns moved for summary judgment, arguing that this change of residency and use was in violation of the Allstate underwriting guidelines because they were no longer using the property as their primary residence. According to the Suns, inasmuch as Allstate had knowledge of this ongoing violation, but had taken no action to update or change their homeowners' insurance policy to reflect the change in residency and use, Allstate had waived any defenses to coverage of the Suns' insurance claim.
The Suns also argued that Allstate should be estopped from claiming non-residency at the property as a basis for the denial of coverage for the March 5, 2015 fire loss because it collected insurance premiums and continued to insure the property as a primary residence on the date of loss.
Allstate also moved for summary judgment, contending that it had properly denied the Suns' claim because the definition of “dwelling” in the policy required that the property be where the Suns' “reside,” and the Suns had failed to meet their obligation to inform Allstate that they had begun using the property as a rental.
|The Allstate policy
The Allstate policy provided:
|In reliance on the information you have given us, Allstate agrees to provide the coverage indicated on the Policy Declarations. In return, you must pay the premium when due and comply with the policy terms and conditions, and inform us of any change in title, use or occupancy of the residence premises.
The court's decision
The court granted summary judgment in favor of Allstate.
In its decision, the court found that the Suns' “passing comment with an Allstate agent” in May 2011 that they were thinking about selling or renting out the property was “not sufficient to put Allstate on notice or inform it” that the Suns had in fact been renting out the property since March 2012.
The court said that it was “unreasonable to impute knowledge” on Allstate “from a single comment made before the property had been actually utilized as a rental property.”
The court said that the policy “clearly indicate[d] that [the Suns] needed to inform Allstate of any change in title, use or occupancy of the Property,” and it ruled that they had not done so.
It also rejected the Suns' assertion of the doctrines of waiver and estoppel, finding no evidence that Allstate had voluntarily or intentionally relinquished its right to be informed of any change in title, use, or occupancy of the property.
The court also said that there was “insufficient evidence” that Allstate “had any knowledge, let alone full knowledge of the fact that tenants were living at the property from March 2012 until the date of loss.”
It concluded by ruling that Allstate had never taken “any action that would have lulled the [Suns] into sleeping on their rights under the insurance contract.”
The case is Sun v. Allstate Indemnity Co., 47 N.Y.S.3d 895 (Sup.Ct. Rockland Co. 2017).
Steven A. Meyerowitz, Esq., is the director of FC&S Legal, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. Email him at [email protected].
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