AmGuard’s Unique Endorsement Leads To Both Coverage and 93A Liability
Court Decision Delivers Message About Policy Interpretation and Claims Handling to Massachusetts Property Insurers
A recent federal court decision delivered a message about policy interpretation and claims handling to property insurers operating in Massachusetts. On October 23, 2024, Chief Judge F. Dennis Saylor IV of the U.S. District Court for the District of Massachusetts granted summary judgment against AmGuard Insurance Company (“AmGuard”), finding its denial of fire coverage not only incorrect as a matter of contract interpretation but also as an unfair and deceptive trade practice under Chapter 93A.
The case arose from a straightforward set of facts: Awilda Pimentel purchased a home and an AmGuard homeowner’s policy on June 28, 2022. Twenty-four days later, before she had moved in, a fire significantly damaged the property. AmGuard denied coverage based on its “Residence Premises Definition Endorsement,” which required the policyholder to “reside” at the property “on the inception date of the policy period.” According to AmGuard, because Pimentel had not physically occupied the home on June 28, AmGuard’s policy’s coverage never attached.
The Court Found Multiple Problems with the Insurer’s Coverage Denial
Judge Saylor found “multiple problems” with AmGuard’s position. First, the policy did not say what AmGuard claimed – it referred to residing at the property on the inception date, not on the date the policyholder moved in. Second, AmGuard’s interpretation conflicted with the policy’s vacancy provision, which provided 60 days of coverage for vacant property. Most significantly, AmGuard’s position would create what Judge Saylor called “a gaping hole” in coverage between closing and move-in – a result “no reasonable purchaser of a new homeowner’s policy would anticipate.”
The court’s analysis goes beyond mere contract interpretation. While finding AmGuard’s endorsement did not violate Chapter 93A, the court held that AmGuard’s interpretation of that endorsement was both implausible and oppressive. The court particularly noted that AmGuard collected a premium for coverage that, under its own interpretation, could never vest unless the policyholder happened to move in before midnight on closing day.
This article examines aspects of Judge Saylor’s decision and its practical implications, demonstrating the risk of a company’s unique endorsements that might conflict with mandatory policy provisions.
A New House & Homeowners Policy: A Fire Loss, A Denial of Coverage, And A Lawsuit
On June 28, 2022, Awilda Pimentel purchased a single-family home at 23 Redgate Drive in Methuen, Massachusetts. That same day, she took three significant actions: she took out a homeowner’s insurance policy with AmGuard, filed a homestead declaration stating her intent to occupy the property as her primary residence, and obtained insurance coverage with a one-year term and a $300,000 policy limit for property damage.
Between closing and July 22, 2022, Pimentel began transitioning to the property, though she had not yet fully moved in. She:
Moved in some boxes
Stocked the refrigerator and cleaning supplies
Visited daily to clean
Removed some trim from the pantry door
Never stayed overnight
Had not moved in living room or bedroom furniture
The extent of Pimentel’s pre-fire renovations became a contested point. While she acknowledged planning to paint and remove some trim, AmGuard contended she had undertaken larger-scale renovations that would have rendered the house uninhabitable.
On July 22, 2022 – just 24 days after purchase – a fire substantially damaged the house. The estimated repair costs totaled $318,767, exceeding the policy’s $300,000 coverage limit. Pimentel promptly notified AmGuard of the loss on July 25, 2022.
AmGuard retained Ronald Aucoin of Pilot Catastrophe Services to inspect the property. His inspection revealed missing kitchen cabinets, bathroom vanity, shower, and associated plumbing. He noted discrepancies between the property’s current condition and the photos of the property in its pre-sale real estate listing.
On January 9, 2023, AmGuard denied coverage, primarily asserting that Pimentel “did not reside on the premises at the time of the fire.” AmGuard’s denial was based on its policy’s Residence Premises Definition Endorsement, which redefined “residence premises” to mean:
“the one-family dwelling where you reside… on the inception date of the policy period.” (Emphasis added)
Pimentel contested the denial through a Chapter 93A demand letter on January 30, 2023. When AmGuard maintained its position, she filed a three-count suit in Essex County Superior Court on March 22, 2023, seeking a declaratory judgment on coverage (Count I), breach of contract damages (Count II), and multiple damages and attorney fees for unfair claim practice in violation of Massachusetts General Laws Chapter 93A and Chapter 176D.
AmGuard responded to the Pimentel suit by removing it to Boston’s Federal District Court based on the diversity of citizenship between Pimentel and Amguard (Parties domiciled in different states).
The Policy Endorsement and Its Contested Language
Pimentel’s lawsuit and AmGuard’s defense turned on three key policy provisions. The standard policy language covered “[t]he dwelling on the ‘residence premises’ shown in the Declarations,” originally defined as “the one-family dwelling where you reside.” AmGuard’s endorsement modified this to require residency “on the inception date of the policy period.” . Critically, the policy also contained the statutorily mandated vacancy provision, excluding coverage only if the property remained vacant for more than 60 consecutive days.
The Parties’ Legal Positions
Pimentel’s case was straightforward. She bought the property as her intended residence, filed a homestead declaration confirming this intent, and suffered a loss well within the 60-day vacancy window. While she hadn’t yet moved in, she had begun the transition process – moving in some boxes, stocking cleaning supplies, and visiting daily to clean.
AmGuard took a more technical position. It argued that “reside” required actual physical occupancy, meaning Pimentel needed to have established a household at 23 Redgate Drive on June 28, 2022, for coverage to attach. Because she admittedly hadn’t moved in furniture or spent a night there before the July 22 fire, AmGuard maintained coverage never began.
Policy Interpretation Principles
Judge Saylor’s analysis began with foundational Massachusetts insurance law principles. For courts, policy interpretation is a question of law, requiring courts to start with the actual policy language, giving terms their plain and ordinary meaning. The court must interpret every word as having a purpose and construe any ambiguous terms or words against the insurer. Most importantly, the courts must read a policy as an objectively reasonable insured would read and understand it.
The Court’s “Inception Date” Analysis
The court found AmGuard’s position fundamentally flawed because it ignored its own endorsement’s key temporal element – the “inception date” requirement. As Judge Saylor explained, AmGuard’s endorsement specified coverage for dwellings where the insured “reside[d]” on the “inception date,” not where they had established physical occupancy. By focusing solely on physical occupancy at the time of loss, AmGuard was essentially rewriting its own endorsement.
The Massachusetts Statutory Fire Form
Judge Saylor’s analysis also focused on the statute applicable to Massachusetts homeowner policies. The state-mandated standard fire policy form, codified in G.L. c. 175, § 99, requires insurers to provide at least 60 days of coverage for vacant properties. This requirement, the court opined, reflects a legislative recognition that a transition period between the purchase of a home and occupancy is the norm. As the court noted, AmGuard’s interpretation would effectively nullify this statutory protection by making coverage contingent on immediate occupancy.
AmGuard’s policy endorsement created what Judge Saylor identified as a fundamental issue of reasonableness. While Massachusetts law provides a 60-day window for vacant property coverage, AmGuard’s interpretation of its endorsement effectively reduced this to zero days unless the policyholder physically occupied the property on the very day of purchase.
The Court’s “Absurd Results” Test
Judge Saylor’s decision is noteworthy for its practical analysis of how AmGuard’s interpretation would operate in the real world. He presented a hypothetical that resonates with everyday insurance situations: A homeowner closes on a house late in the day, has arranged for utilities and moving services, but hasn’t yet physically moved in. Under AmGuard’s interpretation, if a fire occurred that night, there would be no coverage even if the policyholder had done everything reasonably expected of a new homeowner.
The court gave several reasons why it found this result “absurd:”
It would require new homeowners to move in before midnight on closing day
Coverage would never attach if the policyholder didn’t meet this deadline, regardless of when they later moved in
Policyholders would pay premiums for coverage that could never take effect
The interpretation conflicted with normal home-buying practices and reasonable expectations
The Court’s “Sensible” Interpretation of the AmGuard Policy
Instead of AmGuard’s restrictive reading, Judge Saylor adopted what he termed a “sensible” interpretation of the policy language, coverage attaches on the inception date if:
1. The policyholder purchased the property as a residence (not as commercial, investment, rental, or vacation property)
2. The policyholder intended to occupy it as such
3. The property hasn’t been vacant for more than 60 days
This interpretation, the court found, harmonized all policy provisions while respecting both practical realities and statutory requirements.
The Ambiguity Resolution
Finally, the court found that even if AmGuard’s interpretation was not wrong, at minimum, the term “reside” was ambiguous in this context. Under Massachusetts law, the court would have to construe the ambiguity against the insurer, AmGuard, who drafted the language, and find coverage in favor of the insured, Pimentel.
The Court’s Chapter 93A Analysis: Beyond Simple Coverage Disputes
Massachusetts General Laws Chapter 93A provides consumers a direct cause of action against insurers who engage in unfair claim settlement practices as defined in G.L. c. 176D, § 3(9). The statute offers a powerful remedy: successful plaintiffs can recover actual damages, attorney’s fees, and, in cases of knowing or willful violations, up to triple damages.
Judge Saylor’s 93A analysis addressed two distinct questions: First, whether AmGuard’s creation and inclusion of the Residence Premises Definition Endorsement itself violated the statute; second, whether AmGuard’s interpretation and application of that endorsement constituted an unfair or deceptive practice.
On the first question, the court found no 93A violation in merely including the endorsement. Two factors drove this conclusion: the endorsement’s language was ambiguous rather than contradictory of the standard policy, and AmGuard had obtained Division of Insurance approval. This holding suggests that regulatory approval provides meaningful (though not absolute) protection against 93A claims based on approved policy language.
The court’s analysis of AmGuard’s interpretation and application of the endorsement proved more complex. Judge Saylor found AmGuard’s position violated 93A for two primary reasons:
The interpretation was “not plausible” because it ignored that the “inception date” language contradicted the vacancy provision, and created unreasonable coverage gaps.
The application was “oppressive” because AmGuard collected premiums for coverage that could never vest under its interpretation and applied undisclosed residency criteria.
Notably, Judge Saylor distinguished between different levels of insurer conduct under 93A:
Good faith coverage disputes based on plausible policy interpretations do not violate the statute, even if courts reject the insurer’s position. However, maintaining implausible interpretations that ignore policy language can trigger 93A liability.“
In Pimentel’s case, Judge Saylor found AmGuard’s conduct sufficient for liability to pay single damages and attorney fees but insufficient to require the award of multiple damages. As a result, the court allowed Pimentel recovery from AmGuard of:
Actual damages (the $300,000 policy limit)
Reasonable attorney’s fees
Expenses
In this case, the court’s ruling appeared to find that regardless of good faith, a violation of Chapter 93A occurs if the insurer’s position asserts policy requirements that are practically impossible to fulfill or otherwise renders coverage illusory.
Conclusion
While Pimentel v. AmGuard seemingly presents as a routine coverage dispute, Judge Saylor’s analysis offers several points to consider in Massachusetts coverage litigation.
First, the Division of Insurance’s approval of an endorsement, while relevant to Chapter 93A analysis, provides no shield when the endorsement’s interpretation effectively nullifies statutory protections or creates coverage impossibilities. The decision suggests courts might look past regulatory approval to examine how endorsements operate in everyday insurance transactions.
Second, the decision discusses when implausible policy interpretations cross into Chapter 93A territory. Judge Saylor found AmGuard’s interpretation “implausible” and “oppressive” – sufficient for base 93A liability – while finding insufficient evidence of knowing or willful misconduct that would warrant multiple damages. This distinction provides valuable guidance on the evidence required for different levels of Chapter 93A exposure in coverage disputes.
Third, and perhaps most significantly, the decision signals that Massachusetts courts will scrutinize endorsements modifying standard policy provisions through the lens of practical impossibility. When an endorsement’s interpretation would require policyholder action that is practically impossible (like moving in before midnight on closing day) or would create what Judge Saylor termed “absurd results,” courts may find coverage and Chapter 93A liability regardless of the endorsement’s technical validity.
The Agency Checklists Podcast
A new episode of the Agency Checklists’ podcast featuring this decision is now available to listen for free here.
Owen Gallagher, Esq.
Insurance Coverage Legal Expert/Co-Founder & Publisher of Agency Checklists
Over the course of my legal career, I have argued a number of cases in the Massachusetts Supreme Judicial Court as well as helped agents, insurance companies, and lawmakers alike with the complexities and idiosyncrasies of insurance law in the Commonwealth.
Connect with me directly, by calling me at 617-598-3801.
