Insured Property or Insured Location

The insured owns a two family /two story dwelling that is insured on an HO 03 04 91. The insured lived on the first floor and rented the second floor, but then moved out and rented the first floor as well. No notice was given to the carrier about the change in the situation. The second floor tenant tripped and fell down the common area stairs. The policy states in Section II that Exclusions indicate Coverage E does not apply to bodily injury arising out of the rental or holding for rental of any part of any premises by an “insured”. The exclusion exception however extends coverage to rental or holding for rental of an “insured location”:…(2) In part for use only as a residence, unless a single family unit is intended for use by the occupying family to lodge more than two roomers or boarders.

The carrier maintains that the injury to the tenant is not covered because the insured location was used to lodge more than two roomers or boarders. We disagree. This is a two story/two family structure. The first floor tenant is a single male occupant. The second floor tenant is a three-person family consisting of husband, wife, and adult son. Does coverage apply?