A trial court in New York has ruled that because a homeowner’s insurance policy contained conflicting provisions, an insurance company had to cover the damages the insured suffered when one of his two homes was destroyed by fire. The trial court also ruled that the insurer was estopped from denying coverage.
2 insured properties
Raj Gulati acquired a homeowner’s insurance policy from Allstate Insurance Company in or around 2000 to insure a residence he purchased at the time in Ferndale, New York (the Ferndale Property).
Around 2004, Mr. Gulati moved to Elmira, New York. Initially, he rented an apartment in the Elmira area and purchased renter’s insurance through Allstate.
In 2005, he purchased a home in Elmira (the Elmira Property) and obtained homeowner’s insurance on the property from Allstate — while also maintaining the homeowner’s insurance policy on the Ferndale Property.
Did not charge house-sitter rent
Mr. Gulati apparently had intended to primarily reside at the Elmira Property, and occasionally spend time at the Ferndale Property. At some point, however, he stopped spending any significant time at the Ferndale Property. Rather, he allowed a “house-sitter” to stay at the residence; he did not charge the Ferndale house-sitter rent.
In 2011, the Ferndale Property suffered damage from an ice storm. An Allstate representative inspected the damage and met and spoke with the house-sitter. Mr. Gulati said that he also spoke with Allstate regarding the damage to the Ferndale Property and informed the insurer that he was not present at the residence.
Allstate eventually paid Mr. Gulati $15,699 to cover the damage to the house from the ice storm. It mailed the check to Mr. Gulati at his Elmira Property.
Allstate denied coverage: not primary residence
On June 27, 2013, the Ferndale Property was destroyed by fire.
On July 25, 2013, Allstate issued a disclaimer letter denying coverage for the loss. It based its disclaimer on the ground that “the loss location is not [Mr. Gulati’s] primary residence where you reside.”
Related: The dilemma of residence premises
The disclaimer further stated that “on the date of the loss, the [Ferndale Property] was not a dwelling as that term is defined in the Allstate Insurance Company Deluxe Plus homeowner’s policy.”
Mr. Gulati sued Allstate, and the parties moved for summary judgment.
The Allstate policy
The Allstate policy for the Ferndale Property defined:
a one, two, three or four building structure, identified as the insured property on the Policy Declarations, where you reside and which is principally used as a private residence.
The policy also provided that:
[t]he residence may be vacant or unoccupied for any length of time, except where a time limit is indicated in [the] policy for specific perils.
Trial court ruled in favor of insured
The trial court ruled in favor of Mr. Gulati.
In its decision, the trial court found that the policy contained “conflicting” provisions.
The trial court noted that the Allstate policy defined dwelling as “a one, two, three or four family building structure, identified as the insured property on the policy declarations, where you reside and which is principally used as a private residence.” The Ferndale Property, the trial court added, met all of these conditions, except it was not where Mr. Gulati resided at the time of the loss.
The trial court then pointed out that a separate provision in the policy allowed Mr. Gulati to leave the house “vacant or unoccupied for any length in time.”
In the trial court’s opinion, this provision was “in direct conflict” with the provision that required Mr. Gulati to “reside” at the Ferndale Property. In other words, the trial court said, the policy “purport[ed] to require [Mr. Gulati] to reside at the property, but also specifically grant[ed] him permission to not reside there at all.”
Concluding that these two “conflicting provisions” could not reasonably be reconciled, the trial court ruled that Allstate could not rely on the fact that Mr. Gulati had not been residing at the premises at the time of the fire to deny coverage, “as it had granted him express permission to essentially not reside there and leave the house vacant for an unlimited duration.”
Knew, or should have known, insured not residing at property
Finally, the trial court ruled that because Allstate had continued to accept Mr. Gulati’s premium payments for several years after it knew or should have known that he was not residing at the Ferndale Property, it was estopped from disclaiming the loss.
The case is Gulati v. Allstate Ins. Co., No. 2014-1031 (N.Y. Sup. Ct. Chemung Cty. Sep. 5, 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 firstname.lastname@example.org.