Docket No. 97462.
Argued January 11, 1995 (Calendar No. 4).
Decided July 6, 1995.
Cholette, Perkins Buchanan (by Bruce M. Bieneman and Robert A. Kamp) for the plaintiff.
Morrison, Mahoney Miller (by Phillip K. Yeager and Meigs M. Day) for the defendant.
The question presented is whether the homeowner's insurance policy in this case provides coverage for the destruction of the insured's building. We hold that the policy is unambiguous, that the destruction of the building does not fall within the scope of the policy, and thus affirm the decision of the Court of Appeals.
The facts are not in dispute. Plaintiff Heniser and his wife purchased a vacation home in Honor, Michigan. The couple lived in the house intermittently throughout the years until their divorce.
Heniser retained possession of the property after the divorce, but in November, 1988, sold the property on a land contract. At the time of the sale, the property was insured by defendant-appellee Frankenmuth Mutual Insurance Company under a homeowner's policy that expired September, 1989. Heniser did not inform Frankenmuth of the sale.
In January, 1989, the property was destroyed by fire. Heniser filed an insurance claim with Frankenmuth under his homeowner's policy seeking $20,000 for the building, $24,500 for personal property and $7,200 for related cleanup expenses. Frankenmuth denied coverage, terminated the policy, and returned the unearned premium to Heniser. Frankenmuth contended that Heniser's claim was barred because of fraud and false swearing with regard to the cash value of the personal property damaged by fire, and that the damage to the building was not covered by the policy because Heniser did not and could not reside at the property, as required by the contract, at the time of the fire.
The homeowner's insurance policy issued by defendant in this case is a thirty-five-page form policy. The language pertinent to this case is found in the definitions section on page one of the policy:
In this policy, "you" and "your" refer to the "named insured" shown in the Declarations and the spouse if a resident of the same household. "We," "us" and "our" refer to the Company providing this insurance. In addition, certain words and phrases are defined as follows:
* * *
3. "Insured" means you and residents of your household who are:
a. your relatives; or
b. other persons under the age of 21 and in the care of any person named above.
* * *
4. "insured location" means:
a. the residence premises;
b. the part of other premises, other structures and grounds used by you as a residence and:
(1) which is shown in the Declarations; or
(2) which is acquired by you during the policy period for your use as a residence;
c. any premises used by you in connection with a premises in 4.a or 4.b above;
d. any part of a premises:
(1) not owned by an insured; and
(2) where an insured is temporarily residing;
e. vacant land, other than farm land, owned by or rented to an insured;
f. land owned by or rented to an insured on which a one or two family dwelling is being built as a residence for an insured;
g. individual or family cemetery plots or burial vaults of an insured;
h. any part of a premises occasionally rented to an insured for other than business use.
* * *
8. "residence premises" means:
a. the one family dwelling, other structures and grounds; or
b. that part of any other building; where you reside and which is shown as the "residence premises" in the Declarations.
Heniser then filed suit against Frankenmuth, alleging that it had breached its insurance contract. In response, Frankenmuth asserted the aforementioned defenses.
Frankenmuth's motion relied on MCR 2.116(C)(8) (failure to state a claim on which relief can be granted) and MCR 2.116(C)(10) (no genuine issue of material fact). Heniser's motion was based solely on MCR 2.116(C)(10).
Following mediation, the case was tried without a jury before Judge Robert A. Benson. At the close of testimony, Judge Benson held that because Heniser did not reside at the property at the time of the fire, the policy did not provide coverage for the loss of the building. Judge Benson also found that Frankenmuth had not carried its burden of proving fraud by clear and convincing evidence. On appeal, the parties stipulated to the facts and agreed that the only issue is whether the definition of "residence premise" provides coverage for destruction of the building.
At trial, Frankenmuth contested recovery for the personal property as well because it alleged that the entire policy was void on the basis of Heniser's fraudulent claim regarding the value of the personal property. Judge Benson found no fraud on the part of Heniser, however, and presumably Heniser has recovered for the value of his personal property. The policy language defining the scope of coverage for personal property does not employ the term "residence premises," but rather covers "personal property owned or used by an insured while it is anywhere in the world." Accordingly, the only loss in dispute is that of the building and not the contents.
The Court of Appeals affirmed the holding that the policy did not cover the destruction of the building. 201 Mich. App. 70; 506 N.W.2d 247 (1993). We granted leave to appeal on July 22, 1994. 445 Mich. 943.
GRIFFIN, J., dissenting.
Plaintiff contends that the insurance policy is ambiguous regarding whether the policy covered his loss, even though he did not, and could not, reside at the insured premises at the time of the fire. Plaintiff advances three arguments in support of claimed ambiguity: (1) the definitions section of the policy and the conditions section of the policy are internally inconsistent; (2) it is unclear whether he had to reside at the insured premises only at the time the policy was entered into or whether he had to reside at the insured location throughout the term of the policy; (3) an exclusion from coverage was deceptively placed in the definitional section.
In this case, when Heniser signed the land contract, he affirmatively manifested his intent to no longer reside at the residence premises in the future, and relinquished his right to do so. We might be faced with a different situation if the insured has not affirmatively engaged in behavior that indicates an intent to no longer reside at the insured premises, such as if the insured were to die, or if the insured continues to retain the right to reside at the residence premises, such as the period between when an insured places his home for sale but has not yet completed the transaction. These are not the facts of this case, however, and we express no opinion on how we would resolve those scenarios.
Ambiguous provisions in an insurance contract are construed against the insurer and in favor of coverage. Group Ins Co of Michigan v Czopek, 440 Mich. 590; 489 N.W.2d 444 (1992); Powers v DAIIE, 427 Mich. 602, 624; 398 N.W.2d 411 (1986). Where the policy is clear, however, "courts are bound by the specific language set forth in the agreement." Cottrill v Michigan Hosp Service, 359 Mich. 472, 476; 102 N.W.2d 179 (1960); Raska v Farm Bureau Mut Ins Co, 412 Mich. 355; 314 N.W.2d 440 (1982). Terms in an insurance policy must be given their plain meaning and the court cannot "create an ambiguity where none exists." UpJohn Co v New Hampshire Ins Co, 438 Mich. 197, 206; 476 N.W.2d 392 (1991). An insurer is free to define or limit the scope of coverage as long as the policy language fairly leads to only one reasonable interpretation and is not in contravention of public policy. Raska, supra at 361-362. If these prerequisites are fulfilled, the policy will be enforced as written.
Heniser has not, and cannot, demonstrate that the policy covers the destruction of the building. The policy in this case, read as a whole, is unambiguous and does not cover the loss because the property was not a "residence premises" at the time of the loss.
It is without dispute that the "insured bears the burden of proving coverage, while the insurer must prove that an exclusion to coverage is applicable." Arco Industries Corp v American Motorists Ins Co, 448 Mich. 395, 424-425; 531 N.W.2d 168 (1995) (BOYLE, J., concurring).
It is important to note at the outset that while other courts have concluded that similar language is merely descriptive of the property covered by the policy, no court in the country has found this or similar language to be ambiguous. See Hill v Nationwide Mut Fire Ins Co, 214 Ga. App. 715; 448 S.E.2d 747 (1994); Georgia Farm Bureau Mut Ins Co v Kephart, 211 Ga. App. 423; 439 S.E.2d 682 (1993); Ins Co of North America v Howard, 679 F.2d 147, 148 (CA 9, 1982) ("We also find the provision unambiguous"); Shepard v Keystone Ins Co, 743 F. Supp. 429, 430 (D Md, 1990) ("There is no ambiguity as to the meaning of the terms `residence' or `reside' in the insurance contract between Shepard and Keystone"); Nancarrow v Aetna Casualty Surety, 932 F.2d 742, 744 (CA 8, 1991); Epps v Nicholson, 187 Ga. App. 246, 247; 370 S.E.2d 13 (1988) ("we do not find the provisions here to be conflicting, or the policy language ambiguous").
Our conclusion that the policy is unambiguous is further strengthened by the language Heniser included in the land contract when he sold the property. The land contract states:
Said Purchaser shall promptly pay, when due, all taxes and assessments of every nature, which shall become a lien on said premises after the date hereof, and shall, during the continuance of this contract, keep insured the buildings now on said premises or which shall hereafter be placed thereon in the name of said Seller against loss by fire and windstorm, in such company or companies and for such amount as the Seller shall approve, and forthwith deposit all policies of insurance with the Seller, with loss, if any, payable to the Seller, as his interest may appear under this contract.
Heniser included this language to protect himself in case the property was destroyed before the purchasers completed payment. This language indicates Heniser understood that his existing insurance policy would not cover the property after he sold it, and strengthens our conclusion that the policy in question does not cover the destruction of the building.
The policy is not internally inconsistent. Although the conditions section of the policy requires the insured to notify the insurer of any "changes in title or occupancy of the property during the term of the policy" before recovering for any loss, this provision does not conflict with the definitions section mandate that the insured reside at the property. The requirement in the conditions section simply allows the insurance company to guarantee that the insured had an insurable interest in the property at the time of the loss or to coordinate coverage with other potential insurers.
While the definition of "reside" may be ambiguous in other contexts, there is no ambiguity in this case. The Court of Appeals, in interpreting the term "resides" in the Michigan Freedom of Information Act and in the Child Custody Act has found the term to have two different meanings: a legal or technical meaning and a general or popular meaning. Curry v Jackson Circuit Court, 151 Mich. App. 754; 391 N.W.2d 476 (1986); Kubiak v Steen, 51 Mich. App. 408; 215 N.W.2d 195 (1974). In some contexts, the legal term means something more than actual physical presence; it includes the intent to live at that location at sometime in the future, a meaning similar to the legal concept of domicile. Id. at 413. In other contexts, the term requires actual physical presence. Id.
MCL 15.240(1); MSA 4.1801(10)(1).
MCL 722.26; MSA 25.312(6).
The policy of interpreting ambiguities in a contract against insurers is rooted in the fact that insurers have superior understanding of the terms they employ, which should not bind relatively unsophisticated insureds. This goal is not furthered by allowing insureds to employ a sophisticated version of a term to create a claim of ambiguity.
Finally, any ambiguity created by the fact that the law ascribes multiple meanings to the term "reside" is irrelevant because Mr. Heniser fails under either standard. Mr. Heniser admits that he did not actually live at the insured premises at the time of the fire and that he did not intend to live there in the future. Accordingly, Mr. Heniser did not "reside" at the insured premises under either definition.
Whether Heniser actually had to live at the insured premises on a full-time basis, or whether intermittent occupancy was sufficient, is not in dispute. In light of the fact that this policy was issued with the knowledge that Heniser used the property as a vacation home on an irregular and sporadic basis, it is likely that Frankenmuth Mutual contemplated noncontinuous occupancy.
The policy is also clear that if Mr. Heniser did not "reside" at the insured property at the time of the loss, the property is not a "residence premises," as defined by the policy, and the policy does not cover the loss.
Mr. Heniser alternately contends that several courts have found similar language to require only that the insured fulfill the policy requirement at the time the policy was entered. In these cases, the language was viewed as an affirmative warranty and not a continuing warranty. See Reid v Hardware Mut Ins Co of Carolinas, Inc, 252 S.C. 339; 166 S.E.2d 317 (1969); Ins Co of North America v Howard, 679 F.2d 147 (CA 9, 1982). Mr. Heniser and the author of the dissenting opinion in the Court of Appeals rely heavily on the South Carolina Supreme Court opinion in Reid.
An express warranty is a
written statement or stipulation inserted on the face of the policy itself, or clearly embodied therein as a part thereof by proper words of reference, whereby the insured expressly agrees that certain facts are, or shall be, true . . . of which the validity of the contract of insurance depends. . . . [7 Couch, Insurance, 2d (rev vol), § 36:2, p 423.]
An affirmative warranty is
one which asserts an existing fact or condition, and appears on the face of the policy, or is attached thereto and made a part thereof. [ Id., § 36:4, p 426.]
Promissory or continuing warranties
are those where the insured undertakes to perform some executory stipulation, as that certain acts shall or will be done, or that certain facts shall or will continue to exist. [ Id., § 36:5, p 427.]
In Reid, the insureds purchased a homeowner's insurance policy that described the insured premises as a "one story frame constructed, approved roof, owner occupied, one family dwelling." Id. at 342 (emphasis added). While the policy was in effect, the Reids sold the home and the buyer assumed the mortgage. The policy was not transferred, however, and the Reids remained the named insureds. Five months after the sale, while the insurance policy was still in effect, the house was destroyed by fire. When the Reids filed a claim of loss with the insurer, the company refused to pay contending, among other things, that the policy did not cover the home because it was no longer "owner occupied." Id. at 343. The trial court found in favor of the Reids, and on appeal, the Supreme Court of South Carolina affirmed. In concluding that "owner occupied" was only an affirmative warranty that the Reids occupied the home at the time the policy was issued, the court stated:
Thus, a description of a house in a policy of insurance, as "occupied by" the insured, is a description merely and is not an agreement that the insured should continue in the occupation of it. Joyce v Main Ins Co, 45 Me. 168 [(1858)]. O'Niel v Buffalo Fire Ins Co, 3 N.Y. 122 [(1849)]. A statement in an insurance policy that the property is occupied by the insured as a dwelling for himself and family, is not a warranty that it shall continue to be so occupied but is only a warranty of the situation at the time the insurance is effected. German Ins Co [ of Freeport, Ill] v Russell, 65 Kan. 373; 69 P. 345; 58 LRA 234 [(1902)]. [ Id. at 346-347.]
The United States Court of Appeals for the Ninth Circuit addressed a situation similar to Reid in Ins Co of North America v Howard, supra. The insureds had purchased a homeowner's policy covering the "described residence owned and occupied by the insured exclusively for residential purposes." Id. at 148 (emphasis added). After the death of Mr. Howard, Mrs. Howard moved most of her possessions to another residence and began to rent the home. Two weeks after Mrs. Howard rented her home, it burned. Mrs. Howard filed a claim under the policy, and the company denied coverage, contending that because Mrs. Howard had rented the home, it was no longer "owned and occupied by the insured." The district court agreed with the insurer but, on appeal, the court of appeals reversed. Relying on Reid, supra, the Ninth Circuit stated that the policy
contains a representation that the insured is the homeowner and occupant and that the insurance is not being purchased by a third party. It does not impose a condition requiring the policyholder to continue to live at the residence. [ Id.]
Heniser erroneously contends that the Oregon Court of Appeals recently found similar language to be ambiguous in Farmers Ins Co of Oregon v Trutanich, 123 Or. App. 6; 858 P.2d 1332 (1993). The policy language in Trutanich defined "residence premises" as "the one or two family dwelling and separate structures or that part of any other building where you reside, and shown in the Declarations." Id. at 13. As explained below, this language is significantly different from the policy language in this case. The Trutanich court did not find the language ambiguous, but concluded that either "where you reside" only modified "part of any other building" and not "family dwelling," or that even if it did modify "family dwelling" it was still "insufficient to take the house out of coverage." Id. The Trutanich court relied heavily on Howard, supra, and cited the proposition found in Howard that if the insurer intended for coverage to terminate on the rental of the property, the exclusion should be clearly delineated.
Because Reid and Howard are distinguishable from this case, a different result is warranted. Unlike the language in Reid and Howard, the phrase "where you reside" in the policy before us is not a warranty but a statement of coverage.
The policy language, and the context in which the language is found in the policy before us, differs from that in either Reid or Howard. The language at issue is found in the definitions section. "[W]here you reside" is not used to describe the dwelling but is an independent part of the definition of "residence premises." To be a "residence premises" the insured must reside at the insured premises and the property must be shown as the residence premises in the declarations portion of the policy.
Both Reid and Howard found the language in the respective policies to be merely descriptive of the structure covered by the policy. It is crucial, however, to closely examine the exact policy language and context in which the language is used. In Reid at 342, the policy described the building insured as a "one story frame constructed, approved roof, owner occupied, one family dwelling." The "owner occupied" language was in a list of statements describing the building covered by the policy. Read in context, it is clear that "owner occupied" was simply a description of the dwelling in the same way that stating the building had an "approved roof" merely commented on the structure at the time the policy was created.
Likewise, in Howard, the policy stated that it covered the "described residence owned and occupied by the insured exclusively for residential purposes." Again, the "owned and occupied by the insured" language is reasonably understood as merely a description of the dwelling insured. The language immediately follows the term residence and is not set off by any punctuation.
Howard is further distinguishable in that the court was concerned that the policy did not clearly indicate that rental of the insured property could terminate coverage. Id. at 149. While it might not occur to an insured that rental of his property could affect his homeowner's policy, it is a vastly different case when the insured sells the property.
Were we to accept the argument that this definition is merely an affirmative warranty, we would freeze coverage at the time the policy is entered into and render subsequent events irrelevant. Applying this method of contract interpretation to other definitions in the policy before us illustrates the unreasonable result of such an approach. For example, the policy between Heniser and Frankenmuth states:
"Insured" means you and residents of your household who are:
a. your relatives; or
b. other persons under the age of 21 and in the care of any person named above.
If the definition of "insured" does not govern the scope of the policy on a continuing basis, an insured's relatives, who live with the named insured on the date the policy is entered into would continue to be covered by the policy even if they moved out of the insured premises the day after the policy is issued. The analysis becomes even more strained as applied to the definition of "insured location." The policy defines an "insured location" as, among other things, "individual or family cemetery plots or burial vaults of an insured. . . ." Thus, relatives who lived at the insured premises on the day the policy was entered into would have their burial vault covered until the policy expires, even if they are no longer residents at the insured premises. We conclude that the definitions are properly viewed as establishing whether the property at issue is covered by the policy at the time of the loss and not as warranties.
We agree with those courts that have found the exact language of this policy to unambiguously require the insured to reside at the insured premises at the time of the loss. The Georgia Court of Appeals recently interpreted identical policy language and found that the policy set forth two requirements: that the insured reside at the property at the time of the loss, and that the property be described as the residence premises in the declarations portion of the policy. Georgia Farm Bureau Mut Ins v Kephart, 211 Ga. App. 423; 439 S.E.2d 682 (1993).
In Kephart, the plaintiff and her husband purchased a homeowner's insurance policy that contained the same definition of "residence premises" as the policy before us. The couple's marriage deteriorated, and the plaintiff moved out of the house. In October, 1990, the couple was divorced, and in November, 1990, fire destroyed the home in which the ex-husband was living. The plaintiff filed to recover for the loss, but the insurance company denied coverage, arguing that Kephart did not "reside" at the premises at the time of the loss. The Georgia Court of Appeals agreed with the insurance company and held:
Because the evidence established that Kephart did not live at the house . . . at the time of the fire, and the policy unambiguously required her, as named insured, to live at the "residence premises" in order for coverage to be effective, no coverage existed for Kephart's claim. [ Id. at 425.]
In Kephart, two judges concurred specially, stating that the special conditions found in the policy, requiring the "residence premises [to be] the only premises where the named insured or spouse maintains a residence" further strengthened the decision that the insured had to reside at the insured premises at the time of the loss. Id. at 424. The concurrence rejected the insured's argument that because the special conditions were written in the present tense, the requirements only had to be fulfilled at the time the policy was entered. In rejecting this argument, the concurring judges noted that neither the common law or the legislature required there to be an express warning that coverage depended on the continued compliance with the policy requirements. Id. at 427.
The absence of the exclusive residency condition in the present policy does not alter our decision that the definition of "residence premises" unambiguously requires the insured to reside at the insured premises when the loss occurs.
A different panel of the Georgia Court of Appeals subsequently decided that similar language was merely a description of the property. Hill v Nationwide Mut Fire Ins Co, 214 Ga. App. 715; 448 S.E.2d 747 (1994). However, the difference between the policy language in Hill and the language of the policies in Kephart and the instant case, combined with the rationale employed by both panels, fortifies our decision that the contract before us does not employ the term "residence" as merely a description of the property. The policy in Hill defined "residence premises" to mean
the one- or two-family dwelling, other structures and grounds; or that part of any other building where you live, shown as the residence premises on the Declarations. [ Id. at 715. Emphasis added.]
The policy language in Hill is similar to that found in Howard. The language following immediately after the word "building" is not preceded by a comma or a semicolon, and the connector "and" does not precede the requirement that the property must also be shown as the "residence premises" in the declarations. In reaching its decision, the court in Hill specifically relied on the difference in punctuation and the lack of the word "and" to distinguish the language in Hill from the policy language at issue in Epps v Nicholson, 187 Ga. App. 246; 370 S.E.2d 13 (1988).
The policy in Epps defined "residence premises" as "the one or two family dwelling, other structures, and grounds or that part of any other building where you reside and which is shown as the `residence premises' in the Declarations." Id. at 246. The Epps court found the policy unambiguous and held that the policy "contained two requirements for coverage: first, the dwelling must be the place where the insured resides; and second, the dwelling must be shown as the `residence premises' in the Declarations." Id. at 247. The second requirement was fulfilled, but because the property was rented and the insured did not reside at the insured premises, the policy did not provide coverage. Id.
Finally, in contrasting the policy language used in Hill with the language used in Kephart (the exact language found in this policy), the Hill court stated that the policy language and sentence structure found in Kephart "clearly require that whether the covered premises is `a. the one family dwelling . . .' or `b. that part of any other building,' the insured must reside there." Hill, supra at 718.
We express no opinion on how we would interpret the policy language found in Hill.
The policy language in this case is different from that in Hill and akin to the language analyzed in Epps and Kephart. The policy language following the word "building" is preceded by a semicolon and the word "and" connects the requirement that the insured reside at the premises and the requirement that the property be shown as the "residence premises" in the declarations. Thus, we find that the policy does not cover the destruction of the building unless the insured resides at the insured premises when the loss occurs.
Heniser's final contention, that the definition of "residence premises" deceptively places a coverage exclusion in the definitions section of the policy, is without merit. Heniser's reliance on Powers v DAIIE, supra, and Transamerica Ins Corp of America v Buckley, 169 Mich. App. 540; 426 N.W.2d 696 (1988), is misplaced. Both of these cases dealt with a situation in which the insurer purported to extend coverage in one portion of the policy and excluded such coverage in another section, or where the insurer defined certain terms in variance with their common meaning. That is not the case in the policy between Heniser and Frankenmuth.
Heniser erroneously relies on Yahr v Garcia, 177 Mich. App. 705; 442 N.W.2d 749 (1989), for support of this proposition as well. Reliance on Yahr is improper because we reversed the Court of Appeals decision in Yahr and agreed with the dissenting opinion that there was no deceptive placement problem. 436 Mich. 872 (1990).
The definition of "residence premises" does not vary from its common meaning. This term is clearly defined on page two of the policy and there is no contrary definition elsewhere in the policy. The terms used in the definition of "residence premises" are clear. As noted by the Court of Appeals in Curry, supra, the general or popular definition of "reside" requires actual occupancy, unlike the legal meaning that allows an intent to occupy the property in the future to suffice. The term "reside" is clear to most laypersons and, in a homeowner's policy, ambiguity is not created by reference to legal theories outside the frame of reference of the ordinary insured.
To determine whether an insured is entitled to insurance benefits, we employ a two-part analysis. "First, we determine if the policy provides coverage to the insured. If it does, we then ascertain whether that coverage is negated by an exclusion." Buczkowski v Allstate Ins Co, 447 Mich. 669, 682; 526 N.W.2d 589 (1994). It is the insured's burden to establish that his claim falls within the terms of the policy. Arco Industries Corp v American Motorists Ins Co, 448 Mich. 395; 531 N.W.2d 168 (1995). Harvey Oil Co v Federated Mut Ins Co, 837 F. Supp. 242, 244 (WD Mich, 1993). As explained above, once Heniser ceased to "reside" at the insured premises, the policy no longer covered the property, and we need not examine whether the policy excludes coverage. Policy exclusions are based on the presumption that the insured already has established that the policy covers the property in question. The question then becomes whether this particular loss is excluded from coverage for some reason. In this case, the policy did not apply, and destruction of the building, regardless of the cause, would not have been covered.
Coverage in this case is predicated on two separate requirements: the insured must reside at the insured premises, and the premises must be listed in the declarations section. We find that this policy admits of but one interpretation and is not ambiguous or fatally unclear. See Allstate Ins Co v Goldwater, 163 Mich. App. 646, 648; 415 N.W.2d 2 (1987). Heniser did not "reside" at the premises at the time of the fire. Thus, the property was no longer a "residence premises," and the policy does not provide coverage for the destruction of the building.
We affirm the decision of the Court of Appeals.
BRICKLEY, C.J., and CAVANAGH, RILEY, and WEAVER, JJ., concurred with BOYLE, J.
The question presented is whether a homeowner's insurance policy covers a dwelling described in the policy that is sold by the insured between the date the policy is issued and the date of a fire. I would hold that the policy provides coverage although the dwelling was sold before the fire.
The policy issued by defendant, Frankenmuth Mutual Insurance, states that the insurer covers "the dwelling on the residence premises shown in the Declarations." "Residence premises" is defined as the "one-family dwelling" "where you reside and which is shown as the `residence premises' in the Declarations."
1. the dwelling on the residence premises shown in the Declarations, including structures attached to the dwelling. . . .
The policy provides:
* * *
8. "residence premises" means:
a. the one family dwelling, other structures and grounds; or
b. that part of any other building;
where you reside and which is shown as the "residence premises" in the Declarations.
The house owned by plaintiff, Richard J. Heniser, was a one-family dwelling, and it was shown in the Declarations. Heniser, however, sold the dwelling, November 1, 1988, on land contract, between September 28, 1988, when the homeowner's policy was renewed for an additional year, and January 12, 1989, the date of the fire.
The majority holds that the "policy is unambiguous," and that "where you reside" speaks not only as of the date the renewal certificate of insurance was issued by the insurer or the date it became effective, September 28, 1988, but also unambiguously as of the date of the fire, January 12, 1989, with the result that because Heniser ceased to reside at the dwelling described in the Declarations after he sold the dwelling on land contract, the dwelling was no longer covered for fire as residence premises.
Ante, p 157.
The words "where you reside" are in the present tense. Had Heniser read the homeowner's policy when he received the renewal certificate, as this Court has cautioned insureds to do, he would understandably have concluded that the dwelling was insured because that is where he resided at the time he received the renewal certificate.
In the unlikely event that it then crossed Heniser's mind to think about whether he would be insured were he to sell the dwelling at some future date — as it happened a few months later — he, a layman not seeking to find a hidden meaning, would again understandably have concluded that the dwelling would be covered throughout the one-year renewal term.
If "where you reside" were truly "unambiguous" as the majority holds, there would be no need to add "at the time of the loss" following "reside" or "residence premises" in the majority opinion.
The policy is also clear that if Mr. Heniser did not "reside" at the insured property at the time of the loss, the property is not a "residence premises," as defined by the policy, and the policy does not cover the loss. [ Ante, pp 163-164. Emphasis added.]
Heniser has not, and cannot, demonstrate that the policy covers the destruction of the building. The policy in this case, read as a whole, is unambiguous and does not cover the loss because the property was not a "residence premises" at the time of the loss. [ Ante, p 161. Emphasis added.]
The words "at the time of the loss" do not appear in the policy. The majority points to no other words that "unambiguously" indicate that "where you reside" speaks as of the time of the loss rather than as of the date a certificate or a renewal certificate of insurance is issued or becomes effective.
To be sure, the persons who, as members of the homeowner's household, are additional insureds for particularly defined coverages may change during the term of the policy. Ante, pp 167-168. It does not follow that whether the dwelling is covered is also transient.
The differing views expressed in the majority and dissenting opinions in the Court of Appeals, and in the cases relied on by the dissenting Court of Appeals judge and the majority in this Court, also suggest that the meaning of "where you reside," and whether those words speak as of an indefinite future date of loss, is ambiguous.
The homeowner's policy of insurance does not require an insured to notify the insurer of a change in occupancy or of a sale. The insured is only obliged, within sixty days after a fire loss, and then only after the insurer so requests, to notify the insured of "changes in title or occupancy of the property during the term of the policy."
2. Your Duties After Loss. In case of a loss to covered property, you must see that the following are done:
* * *
g. send to us, within 60 days after our request, your signed, sworn proof of loss which sets forth, to the best of your knowledge and belief:
(1) the time and cause of loss;
(2) the interest of the insured and all others in the property involved and all liens on the property;
(3) other insurance which may cover the loss;
(4) changes in title or occupancy of the property during the term of the policy. . . .
We all agree that "where you reside" speaks unambiguously — and means that the insured must actually reside in the dwelling — as of the date a certificate or renewal certificate of insurance is issued or becomes effective. I disagree with the majority's conclusion that "where you reside" also speaks unambiguously as of some indefinite future date, following issuance of the certificate or renewal certificate — requiring the insured to actually reside in the dwelling on the future date — when a fire loss may occur.
I conclude that because "where you reside" is present tense, and an ordinary layman insured who receives a renewal certificate and then resides in the insured dwelling who reads the policy when issued would understandably conclude he is covered for fire loss throughout the one-year term of the policy, and because the policy does not oblige the insured to notify the insurer of a change of occupancy until after a fire loss, it is at least ambiguous whether "where you reside" speaks as of an indefinite future date after issuance requiring the insured to actually reside in the dwelling when a fire loss may occur.
Because, as the majority acknowledges, "[a]mbiguous provisions in an insurance contract are construed against the insurer and in favor of coverage," the ambiguity whether "where you reside" speaks as of an indefinite future date, and means that coverage is eliminated unless the insured continues to reside in the dwelling when a fire loss occurs, should be resolved in favor of providing coverage protective of Heniser's substantial insurable interest in the dwelling although he had sold the dwelling on land contract before the fire. Frankenmuth has offered no underwriting reason necessitating or justifying automatic cancellation of coverage upon a sale. Rarely, if ever, will it make an underwriting difference to an insurer whether a dwelling is insured for fire loss under a homeowner's policy or a standard fire insurance policy.
This Court pertinently observed:
Recognizing the disparity in the bargaining positions of the companies which write insurance and the consumers who buy the policies, both the statutory law and judicial decisions have aimed at making certain that the interests of every insured are protected. [ Morgan v Cincinnati Ins Co, 411 Mich. 267, 275; 307 N.W.2d 53 (1981).]
Reading a homeowner's policy as eliminating coverage when a dwelling is sold, although the dwelling continues to be occupied by a responsible person, adds a condition of coverage respecting fire loss neither set forth in the standard fire insurance policy nor permitted by the essential insurance act, and is not valid or enforceable.
There is no suggestion that the risk was increased by the sale to Heniser's land contract vendee, or that he was a person with a prior arson or bad risk history or otherwise would not have been an eligible person within the meaning of the essential insurance act. See n 15.
When the insurer issued the policy of insurance to Heniser, the Insurance Code provided that an insurer shall not issue a fire insurance policy that does not conform to all its provisions with the standard policy set forth in the Insurance Code. The standard policy does not provide that coverage is eliminated in the event of a change of ownership of the insured property. The standard policy provides, rather, that a fire insurer is not liable for loss "while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days. . . ."
MCL 500.2832; MSA 24.12832.
The majority's reading of the homeowner's policy as eliminating coverage upon a sale of the dwelling — although the dwelling continues to be occupied — adds a condition of coverage not set forth in the policy.
In FBS Mortgage Corp v State Farm Fire Casualty Co of Bloomington, Illinois, 833 F. Supp. 688 (ND Ill, 1993), the homeowner's policy provided coverage for a dwelling in language paralleling the language of the instant homeowner's policy, including the definition of "residence premises" as the dwelling "where you reside." The insurer denied coverage because neither insured person had resided in the dwelling during an eight-month period before the fire. One of the insureds had transferred her interest to the other insured, and the transferee-insured had been arrested and incarcerated in the Cook County Jail until after the fire. The court concluded that "residence premises" was ambiguous with respect to the insured's claim, and that the construction urged by the insurer was unenforceable because it compromised the public policy set forth in the standard fire insurance policy.
The Standard Policy sets forth a limited number of exclusions for restricting coverage. The only exclusion involving occupancy provides that an insurance company will not be liable for losses occurring when "a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days." (Standard Policy, lines 28-35). Illinois courts have construed "vacant or unoccupied" to mean "that [a] dwelling was without an occupant at the time of the loss, that is, that no person was living in it." [Citations omitted.] Accordingly, the Standard Policy's exclusion is inapplicable in this case because Cabrera lived at the Insured Premises until December 15, 1990 — 15 days before the fire.
State Farm's proposed interpretation of the Homeowner's Policy denies coverage in the absence of continuous, physical inhabitation of the Insured Premises by the Named Insured at the time of loss. Hence, State Farm broadens the Standard Policy's exclusions by requiring physical occupation of the Insured Premises for a period of less than 60 days before the loss. In doing so, State Farm unlawfully compromises the Standard Policy by diminishing the coverage it provides to achieve uniformity and concurrence of contract. [ FBS Mortgage, supra, p 695. Emphasis in original.]
The only provision of the standard fire policy that bears on the extent of coverage following a sale of the property is the "insurable interest" provision, providing explicitly, what the law would imply, that the obligation of the insurer shall not "in any event [be] for more than the interest of the insured." The homeowner's policy similarly provides that the insurer is not liable beyond the amount of the insured's interest at the time of loss.
1. Insurable Interest and Limit of Liability. Even if more than one person has an insurable interest in the property covered, we will not be liable in any one loss:
a. to the insured for more than the amount of the insured's interest at the time of loss; or
b. for more than the applicable limit of liability.
The provision in the homeowner's policy regarding insurable interest thus parallels a similar provision in the standard fire insurance policy. And the provision in the homeowner's policy requiring the insured to notify the insurer after loss of changes in title or occupancy parallels a similar provision in the standard fire policy.
The standard policy provides that within sixty days after loss the insured shall render proof of loss stating, among other things, "any changes in the title, use, occupation, location, possession or exposures of said property since the issuing of this policy. . . ." MCL 500.2832; MSA 24.12832.
The homeowner's policy, consistent with the standard fire policy, thus reduces coverage only to the extent the homeowner ceases as a result of a sale to have an insurable interest. Heniser clearly had a substantial insurable interest represented by title to the dwelling and the land contract seller's interest.
The essential insurance act provides that a homeowner insurer "shall not refuse to insure, refuse to continue to insure, or limit the coverage available to an eligible person [defined as an `owner-occupant'] for home insurance, except in accordance with underwriting rules" (emphasis added) that are put in writing, filed with the Commissioner of Insurance, and applied uniformly. The act permits a homeowner insurer to terminate insurance "due to reasons which conform to the underwriting rules of the insurer" (emphasis added), effective not earlier than thirty days after notice to the insured of a specific reason for termination that so "conforms" to the underwriting rules of the insurer.
1979 PA 145; MCL 500.2101 et seq.; MSA 24.12101 et seq.
"Eligible person," for home insurance, means a person who is the owner-occupant or tenant of a dwelling of any of the following types: a house, a condominium unit, a cooperative unit, a room, an apartment; or a person who is the owner-occupant of a multiple unit dwelling of not more than 4 residential units. [MCL 500.2103(2); MSA 24.12103(2).]
The term "owner-occupant" is not statutorily defined.
An "eligible" owner-occupant does not include a person convicted of arson, or a person who has committed other specifically defined transgressions. MCL 500.2103(2); MSA 24.12103(2).
As a condition of maintaining its certificate of authority, an insurer shall not refuse to insure, refuse to continue to insure, or limit the coverage available to an eligible person for home insurance, except in accordance with underwriting rules established pursuant to this section and section 2119. [MCL 500.2117(1); MSA 24.12117(1).]
MCL 500.2119; MSA 24.12119.
(1) Except as provided in subsection (2) or (3), a termination of insurance shall not be effective unless the insurer, at least 30 days prior to the date of termination, delivers or mails to the named insured at the person's last known address a written notice of the termination. The notice shall state the effective date of termination and each specific reason for the termination.
(2) A notice of termination mailed or delivered within the first 55 days after the initial issuance of a policy may be made effective not less than 20 days after the date of mailing or delivery of the notice.
(3) A notice of termination for nonpayment of premium shall be effective as provided in the policy.
(4) A termination of insurance shall not be effective unless the termination is due to reasons which conform to the underwriting rules of the insurer for that insurance.
(5) This section shall not authorize an insurer to terminate an automobile insurance policy in violation of chapter 32. [MCL 500.2123; MSA 24.12123.]
Frankenmuth did not refuse to insure or refuse to continue to insure Heniser's dwelling. Rather, it issued a renewal homeowner's insurance certificate to then owner-occupant Heniser in September, 1988, over a month before he sold the dwelling on land contract and three and a half months before the fire. Owner-occupant Heniser, however, may have ceased to be an owner-occupant within the meaning of the essential insurance act when he sold the dwelling on land contract and ceased to occupy the dwelling.
Nor did Frankenmuth avail itself of the provision in the essential insurance act permitting termination of coverage by notifying Heniser that his homeowner's insurance was terminated because he had vacated the dwelling after selling it on land contract. Frankenmuth claims rather that it can "limit the coverage available" to Heniser by the "where you reside" clause.
See n 17.
The essential insurance act permits a homeowner insurer to adopt an underwriting rule based on "[t]he unoccupancy of a dwelling for more than 60 days, if there is evidence of an intent to vacate or keep the premises vacant or unoccupied, as to the applicant or insured." (Emphasis added.)
MCL 500.2117(2)(h); MSA 24.12117(2)(h).
The construction of "where you reside" urged by Frankenmuth and adopted by the majority conflicts with the foregoing provision of the essential insurance act. Both address the same subject matter: elimination of coverage upon unoccupancy and vacation of the dwelling or intent to vacate by the insured. The construction adopted by the majority conflicts with the statute because a homeowner insurer may not adopt an underwriting rule permitting it to refuse to insure or renew or terminate coverage simply because the owner-occupant has vacated the premises; the underwriting rule only may provide for elimination of coverage if there has also been "unoccupancy of a dwelling for more than 60 days."
The construction adopted by the majority also conflicts with the essential insurance act because it eliminates coverage without the thirty days' written notice to the insured required by the essential insurance act, after a homeowner's policy has been issued to an eligible owner-occupant, stating a reason for termination that "conforms" to such a permitted underwriting rule.
Such notice of termination is critical because it would have put Heniser, in the instant case, on notice of the need to obtain alternative insurance, and would have provided adequate time for him either to require the land contract purchaser to obtain his own homeowner's policy or other fire insurance, as required by the land contract, showing Heniser as an additional insured as land contract seller, or to obtain in his own name a standard fire insurance policy to protect his insurable interest as land contract seller.
This summary disposition record does not justify elimination of Heniser's insurance coverage. It does not appear whether Frankenmuth's underwriting rules provide that it will not insure or renew insurance where there has been such unoccupancy and vacation of the dwelling or intent to vacate by the insured, and whether such an underwriting rule has been filed with the Commissioner of Insurance. Frankenmuth did not avail itself of the provision in the essential insurance act permitting it to terminate a homeowner's policy for a reason that conforms to its underwriting rules by providing thirty days' written notice to Heniser of termination of coverage for the reason that he had vacated the dwelling.
The filing of such an underwriting rule would not have validated the "where you reside" clause, which literally eliminates coverage automatically upon unoccupancy and vacation of the premises, even though the premises have not been unoccupied for more than sixty days.
See n 21.
It is again relevant that the homeowner's policy does not require an insured to notify the insurer of a change in occupancy or of a sale, and requires notice only after a fire loss of a change in title or occupancy. See text accompanying, and n 7.
To be sure, Heniser was aware of the change in occupancy and of the sale on land contract. But so, too, is an insured who fails to pay premiums timely. Nevertheless, the statutes provide, as here, that the insurer must give written notice of cancellation or termination and the reason therefor — notice that Frankenmuth failed to give in this case.
Courts in other jurisdictions have considered whether "where you reside" or similar language eliminates coverage when the homeowner sells or ceases to occupy the dwelling.
In Reid v Hardware Mut Ins Co of Carolinas, Inc, 252 S.C. 339, 346; 166 S.E.2d 317 (1969), the policy described the dwelling as "owner occupied." In Ins Co of North America v Howard, 679 F.2d 147, 148 (CA 9, 1982), the policy provided coverage for "the described residence owned and occupied by the insured exclusively for residential purposes. . . ."
In Reid, the insured had sold the property but remained liable on the mortgage. The Supreme Court of South Carolina concluded that "owner occupied" was a "description merely and is not an agreement that the insured should continue in the occupation of it":
A statement in an insurance policy that the property is occupied by the insured as a dwelling for himself and family, is not a warranty that it shall continue to be so occupied but is only a warranty of the situation at the time the insurance is effected. German Ins Co [ of Freeport, Ill] v Russell, 65 Kan. 373; 69 P. 345; 58 LRA 234 [(1902)].
There is no provision in the policy contract that the dwelling would be "owner occupied" during the term of the insurance contract nor any requirement that if the premises are otherwise occupied than by the owner, notice of such change of occupancy or use would be given to the insurer. [ 252 S.C. 346-347.]
The majority states that it would be faced with a different situation if the insured continued to retain the right to reside at the residence premises, as where the insured moves out before the dwelling is sold. Ante, p 160, n 5.
If "where you reside" were truly unambiguous, coverage would not depend on factual differences.
We believe the Oregon Supreme Court would adopt the same reasonable, enlightened view of the effect of the "owned and occupied" language which the South Carolina court has adopted. We conclude that, under Oregon law, if an insurance company wishes to have a homeowner's policy terminate upon rental of his home, it must so provide explicitly and unambiguously in the policy of insurance, and that a mere statement in the policy that he is the owner and occupant is wholly insufficient for this purpose. Under any proper view of the law, a homeowner is entitled to be given specific and unequivocal notice in the insurance policy that his coverage will be forfeited upon his rental of his home so that if a death in the family, other changes in family or economic circumstances, or even just a desire to change his way of life, causes him to move from his home, he may make whatever other insurance arrangements are necessary to protect the assets which often represents all the remaining proceeds of a lifetime of labor.
Id. at 149.
The majority states that Reid and Howard are distinguishable because of the differences in the insurance policy language in those and the instant cases, and that "the phrase `where you reside' in the policy before us is not a warranty but a statement of coverage." (Emphasis added.) In Reid, the court paraphrased and did not quote the policy language. But in Howard, the "owned and occupied by the insured" policy language is set forth under "coverages." The policy language in Howard is as much "a statement of coverage" as the policy language in the instant case.
The policy in Howard provided:
Coverage A. Dwelling. Coverage A insures, subject to the Exclusions and limitations stated herein, the described residence owned and occupied by the insured exclusively for residential purposes. . . . [ Id. at 148.]
See n 1 for the policy language in the instant case, which is similarly set forth under "coverages."
The Oregon Court of Appeals in Farmers Ins Co of Oregon v Trutanich, 123 Or. App. 6; 858 P.2d 1332 (1993), relied on Howard. The dwelling and other property was damaged by a tenant who was renting part of the house and who was engaged in a methamphetamine operation. Paralleling the definition in the instant case, "residence premises" was defined as "the one or two family dwelling and separate structures or that part of any other building where you reside, and shown in the Declarations." (Emphasis added.) Noting the possible interpretations of "where you reside," including some confusion concerning which structure the language was meant to modify, the court concluded that "where you reside" was "insufficient to take the house out of coverage."
The majority seeks to distinguish Trutanich on the basis that the clause there at issue was different than the one at issue in the instant case. But the clause in Trutanich, defining "residence premises" as the dwelling "where you reside," is substantively the same as the language in the instant case. Ante, p 166, n 12.
The majority continues that Trutanich was primarily concerned with which type of dwelling "where you reside" modified. The majority ignores the import of the court's conclusion that there was coverage and its relevance to the instant case by suggesting that Trutanich really is a case about word placement and that it should be applied only in a case with similar facts (because it concerned the rental of insured property, as did Howard).
A United States District Court in Virginia in Rush v Hartford Mut Ins Co, 652 F. Supp. 1432 (WD Va, 1987), also relied on Reid and Howard in finding coverage. The policy spoke of "the described residence owned and occupied by the insured exclusively for residence purposes. . . ." The court said that "[t]he mere statement that the insured property is a dwelling used principally for dwelling purposes is not clear and explicit enough to create a warranty." The court characterized the clause as a representation required to be true at the time the policyholder applied for insurance.
The Missouri Court of Appeals concluded similarly in Huffstutter v Michigan Mut Ins Co, 778 S.W.2d 391, 394 (Mo App, 1989). A clubhouse on the property adjacent to the insured's house was damaged by hail. Although it did not cite Howard or Reid, the Missouri court examined similar policy language that stated that the "described dwelling" was "occupied principally as a private residence." Id. at 393. The court held that there was coverage, rejecting the insurer's construction that the clubhouse must be occupied and used by the insureds as their primary place of residence. The court refused to read an occupancy requirement into the policy, and construed the policy as requiring only that the clubhouse be used as a dwelling house.
Much of the majority's analysis hinges on decisions of the Georgia Court of Appeals. These decisions — Epps v Nicholson, 187 Ga. App. 246; 370 S.E.2d 13 (1988), Georgia Farm Bureau Mut Ins Co v Kephart, 211 Ga. App. 423; 439 S.E.2d 682 (1993), and Hill v Nationwide Mut Fire Ins Co, 214 Ga. App. 715; 448 S.E.2d 747 (1994) — consider "where you reside," the language in this case.
The policy definition described "residence premises" as "the one or two family dwelling, other structures, and grounds or that part of any other building where you reside and which is shown as the `residence premises' in the Declarations."
In the first case, Epps, the Georgia court said "it is clear" that "the dwelling must be the place where the insured resides. . . ." In Kephart, the policy contained the same language as in Epps, with a "special provision," not included in the policy in Epps or in Heniser's policy, providing that "`the residence premises [must be] the only premises where the named insured or spouse maintains a residence other than business or farm properties.'" The court found no coverage because the "plain and ordinary" meaning of the policy "requires that the named insured live in the residence listed on the declarations page and that the listed residence be the named insured's only residence."
The insured had bought a house with her ex-husband before the divorce. When the marriage dissolved, the insured instructed the insurer to remove her ex-husband's name from the policy. The insured did not keep the house as part of the divorce (and thus the only spouse with an insurable interest was not a named insured), moving out of state, but leaving some possessions, after which the ex-husband moved into the house with his girlfriend. The house and garage were destroyed by fire a month after the divorce was finalized.
211 Ga. App. 424.
Id. at 424-425.
The Georgia court found, however, for the insured in Hill, on the basis of what it perceived to be different policy language. The definition of "residence premises" was "the one- or two-family dwelling, other structures and grounds; or that part of any other building where you live, shown as the residence premises on the Declarations." (Emphasis added.) The court contrasted the language in Hill with the Epps language, noting differences in punctuation and grammar. The court also distinguished Hill from Kephart on the basis that the policy language was different and the Kephart policy contained the special provision requiring that the residence premises be the insured's sole residence.
214 Ga. App. 715. The facts were only briefly noted by the court. They were that the insureds had a policy on their home, from which they moved in June 1992. The house was fire damaged in August 1992.
The court said:
One major difference in the wording of the Epps and instant clauses is the inclusion of the word "and" between "where you reside" and "which is shown . . . [on the declaration page]" in the Epps clause. This language makes it clear that in the Epps policy, both situations are required. The conjunctive "and" does not, however, appear in the instant clause. To the contrary, the instant clause includes a disjunctive "or," which is not present in the Epps clause at all. Additionally, the inclusion of the semi-colon in the instant clause clearly shows that "where you live," without any intervening punctuation, is only intended to modify "that part of any other building." [ Id. at 717.]
Id. at 718.
In these cases, the Georgia courts, by couching their analyses in terms suggesting that the meaning is obvious and clear, protected their interpretation without having to offer reasoned justification. The extent to which the cases relied on by the majority have made fact-specific distinctions is evidenced by the Georgia court's strained attempt to distinguish its decision in Hill from its decisions in Epps and Kephart. Were the clauses at issue in those cases truly unambiguous, there would have been no need to resort to analysis concerning the placement of conjunctions and colons. The majority engages in the same strained analysis in the instant case, attempting to show that, by placement of conjunctions and colons, the insurance policies are distinguishable.
The United States Court of Appeals for the Eighth Circuit, in Nancarrow v Aetna Casualty Surety Co, 932 F.2d 742, 744 (CA 8, 1991), held for the insurer where the house was abandoned by the insured, the policy had been canceled for nonpayment of the premium (the plaintiff contending that the cancellation was ineffective), and no one having lived in the house for a number of years. Similarly, in Shepard v Keystone Ins Co, 743 F. Supp. 429 (D Md, 1990), no one had lived in the house for a number of years.
Ante, p 170.
The majority asserts that its conclusion that the policy is unambiguous is strengthened by the provision in the land contract between Heniser and the purchaser obligating the purchaser to keep the buildings insured in the name of the seller against loss by fire and windstorm. The majority argues that "Heniser included this language" to protect himself against loss by fire, and that the inclusion of this language "indicates Heniser understood that his existing insurance policy would not cover the property after he sold it. . . ."
Heniser did not include this language. It is standard boilerplate language in the printed land contract that he and the purchaser signed. This is not a case of an owner who did not recognize the need to insure the property from loss by fire. Heniser had purchased a homeowner's policy. There is no reason to suppose that if he in fact "understood that his existing insurance policy would not cover the property after he sold it" that he would not have obtained substitute insurance either by seeking to enforce the land contract provision or otherwise obtaining insurance to protect his interest.
Frankenmuth was not a party to the land contract, and the language of the land contract has no bearing on the meaning of the language of the homeowner's policy.
For reasons that probably do not appear on this record, when Heniser entered into the land contract he did not require the purchaser to provide evidence of fire insurance, which would generally be in the form of a homeowner's policy with a loss-payable clause added showing that Heniser was an additional insured as the land contract seller. Heniser's failure to require proof of insurance might have been attributable to ignorance on his part, which would be especially understandable if he was not represented by counsel. His or his counsel's ignorance or neglect tells us nothing about the correct construction of "where you reside" in homeowner's policies.
The majority's construction of "where you reside" leads to harsh results not mandated by any rule of construction or underwriting risk. A homeowner's policy ceases to apply if an uninformed homeowner vacates the dwelling without causing policies of insurance to be rewritten. This is a windfall to insurers, to be availed of adventitiously. In the instant case, it was a fallback from its unsuccessful effort to withhold payment on factual grounds.
Frankenmuth also contended that Heniser's claim was barred because of fraud and false swearing with respect to the value of personal property damage by the fire. The circuit judge ruled against Frankenmuth on this issue.
MALLETT, J., concurred with LEVIN, J.