Definition Of Residence Premises In Homeowners Policy

For lawyers handling homeowners claims, a 14th Court of Appeals opinion needs to be read.  The case is styled, American Risk Insurance Company, Inc. v. Veronika Serpikova.

Veronika purchased a house in Houston (the Property).  She purchased a policy to insure the house from American.  At first, Veronika and her husband lived in the house but in May 2012, they moved to another location.  They leased the Property to two tenants, and did not move back into the Property.

On September 6, 2012, a renewal homeowner’s insurance policy became effective.  American issued the policy and Veronika was the named insured.  In November 2012, a fire severely damaged the Property.  Veronika made a claim and it was denied.  The denial was based on the fact that Veronika did not reside at the Property at the time of the loss and thus, the Property did not fall within the Policy’s definition of “residence premises” as required for dwelling coverage under the Policy.

Veronika sued for for violations of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act, violations of the Prompt Payment of Claims Act, and breach of the duty of good faith and fair dealing.  She also sought a declaratory judgment that her house fell within the definition of “residence premises” in the Policy and that the fire loss is covered.

The trial court ruled in favor of Veronika, but this appeals court reversed that ruling.

In making its decision, this appeals court looked at the Policy language.  The policy defines “residence premises” as “the residence premises shown on the declarations page.  This includes the one or two family dwelling, including other structures, and grounds where an insured resides or intends to reside within 60 days after the effective date of this policy [September 6, 2012].

A court generally interprets an insurance policy under the same rules of construction that apply to any other contract, reading all the parts of the policy together and viewing the policy in its entirety to give effect to the written expression of the parties’ intent.  Applying the ordinary rules of contract construction to insurance policies, the reviewing court ascertains the parties’ intent by looking only to the four corners of the policy to see what is actually stated and does not consider what allegedly was meant.

The court concluded that the Policy language only includes coverage for a dwelling and other structures where an insured resides or intends to reside within 60 days after the effective date of the Policy.  Veronika did not reside there and there was no evidence that she intended to reside there.

Veronika argued that the policy contained no exclusion of coverage if the insured rents the residence to a third party.  But, an exclusion is not needed if there would be no coverage under the insuring clause based on the definition of “residence premises.”