Policy Enforced as Written

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NO COVERAGE FOR INSURED WHO DOES NOT RESIDE IN DWELLING

The plaintiffs appealed the dismissal of their suit against Farmers Automobile Insurance Association (Farmers). The plaintiffs were insured by Farmers for a St. Joseph residence that the plaintiff Judy had inherited from her deceased brother. The plaintiffs filed a claim with the company following a fire that destroyed the residence. Farmers denied the claim as the plaintiffs were not occupying the property at the time of the fire and were therefore not covered under the terms of the policy.

In Judy Dardar and Ivan Dardar v. Farmers Automobile Insurance Association and Jason Sticklen, Farmers Automobile Insurance Association, No. 5-22-0357, 2023 IL App (5th) 220357-U, Court of Appeals of Illinois, Fifth District (June 2, 2023) the claim of the Dardar’s was resolved.

BACKGROUND

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

Farmers issued a homeowner’s policy amending declarations, which added the decedent’s estate and Judy as additional insureds as well as a non-occupancy permit endorsement.

Once the estate was closed, and the house was transferred to Judy, she began making renovations to the residence. The plaintiffs were undecided as to whether they were going to live in the house after the renovations were complete or sell it. Then, on July 4, 2018, firework embers from an unidentified source caught the house on fire, and it was destroyed.

The plaintiffs never lived in or occupied the home. Judy had no knowledge that the policy was issued without the non-occupancy permit endorsement.

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

the one-family dwelling where you reside;
the two, three, or four-family dwelling where you reside in at least one of the units; or
that part of any other building in which you reside.

Farmers determined that the plaintiffs did not reside at the St. Joseph property and therefore were not covered under the policy terms. Judy claimed Sticklen failed to properly inform Farmers of her condition, and Farmers issued a new policy without the non-occupancy permit endorsement.

The court found that, based on the facts alleged, there was not a 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 resided on the St. Joseph property.

ANALYSIS

The issue on appeal was whether the trial court erred in granting Farmers’ motion to dismiss the breach of contract count.

A court must construe a policy of insurance as a whole and take 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 policy contract language between Farmers and the plaintiffs. The record established that the plaintiffs never lived on the property, were not occupying it in any way, and had not decided whether they would move into the home once the renovations were done.  The mere fact that because “reside” 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 trial court, concluded that the term “reside” as used in Farmers’ policy s not ambiguous.

There is nothing secret or difficult to understand about a policy definition that provides “one-family dwelling where you reside.”  Since the insured did not reside in the dwelling and never resided in the premises, the unambiguous requirement of coverage was not met. They could easily have acquired a fire insurance policy that insured the plaintiffs, as a non resident, against the risk of loss of the house by fire. Instead they acquired a homeowners policy that required that they reside in the house. They did not and they recovered nothing.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.