Insured Location: What Is It?
Definition in Standard HO Policies Gives Rise to a Wide Range of Court Interpretations
By Diane Richardson
From the November 18, 2004, issue of National Underwriter—Property and Casualty edition
According to some courts, standard homeowners policies know no boundaries—or at least give rise to very wide territorial boundaries—when defining the term insured location.
Standard homeowners policies define an insured location as “any premises used by you in connection with a premises described in a. and b. above” that:
a.)is the residence premises which is shown on the declarations, and
b.)is the part of other premises used by the named insured as a residence and shown on the declarations, or acquired by the insured for residential use during the policy period.
All appears straightforward, until a claim for damages arises as the result of an accident occurring on a supposed “insured location.” Then, no one is really sure what “used in connection with” means, let alone the definition of “premises.”
Years ago, in Homeowners Underwriting 101, a common example was that of a garden plot near the homeowner's property. But now, with the advent of snowmobiles and ATVs (all-terrain vehicles), and their tendency to be ridden away from the residence premises, the term takes on new significance.
How tenuous can the connection between premises be? Are there geographical limits?
The Michigan appellate court in Michigan Basic Property Ins. Assoc. v. Crouch (2002) declared: “The policy language is patently ambiguous. A connection with the premises can span a range of associations. Where defendants repeatedly made use of the neighboring property, a reasonable person could conclude that those premises were used in connection with the insured's property.”
This decision, using as it does the word neighboring, suggests that the premises in question must at least be nearby, if not bordering, the residence premises. Indeed, in 1996 in State Farm Fire & Casualty v. Comer, the U.S. District court for Mississippi said it failed “to see how a pasture located several miles from the defendant's home “could be used in connection with the residence premises.”
But in Erie Insurance v. Szamatowicz (2004), a warehouse some 20 miles from the residence premises was an insured location, and therefore there was liability coverage for the insured homeowner when a guest, injured at the insured's birthday party, sued. The insured had leased the warehouse with the vague intention of developing it in the future, and because of the large number of invited guests, decided to host his birthday party there. The North Carolina appellate court looked at an earlier case involving an all-terrain vehicle (Nationwide v. Prevatte, North Carolina App. 1992) and said it had rejected a similar argument for geographic constraints “absent express language in the policy to that effect.” Therefore, the warehouse could indeed be an insured location.
But a court in another jurisdiction from Erie looked at Prevatte and rejected its outcome. Despite the fact that the insured homeowner regularly used the adjoining premises (owned by the insured's mother) for burning trash and loading or unloading trucks, the U.S. District Court for Oregon said the usage was not sufficient to “transform the adjacent land” into an insured location. The property was not used routinely, nor did the insured have an easement for usage. This case is SAFECO v. Clifford. But note that the policy does not make either of these requirements; it simply states the “insured location” is a premises used “in connection with” a premises as described.
Some courts allude to the insureds' “reasonable expectations” and hold that, because the insurer charges a small premium, insureds will impose upon themselves a geographical limit, even though the policy does not. This was a point the Alaska Supreme Court made in Jones v. Horace Mann Insurance Co. (1997), where liability coverage was denied for an insured who injured another in a snowmobile accident. Although we believe this case was correctly decided (the snowmobile accident took place on a public road about four-tenths of a mile from the insured's residence), the fact that insureds are to impose geographical limits where none are stated is daunting.
Many courts dismiss the “used in connection with” language as inapplicable without elaborating on what the language does (or doesn't) mean. In Illinois Farmers Insurance Co. v. Coppa (1993), the Minnesota court of appeals said “'insured location' was not meant to describe adjacent, non-owned land on which an ATV might be used and it was not reasonable to expect that every field or pathway in the neighborhood leading to the insureds' residence was property 'used in connection with' that residence.” So saying, the court did not say what “insured location” was meant to describe, only what it wasn't.
The Georgia Court of Appeals in Georgia Farm Bureau Mutual Insurance Co. v. Huncke (1999) took the “ATV and insured location” concept a step further, declining to find coverage because “any benefit from use of vehicle was not related to the residence.”
Can a roadway ever be an insured location?
Some homeowners forms include “all access ways immediately adjoining the 'insured premises'” within the definition of an insured location. (This was true in Jones, above, but the distance of the accident from the insured residence eliminated this description from consideration.) However, this language was not in one insured's homeowners policy when suit was brought against him. Here, the operator of an all-terrain vehicle owned by the insured was fatally injured on a roadway. The Pennsylvania Superior Court determined that because the roadway was privately owned by a residential development, it followed that it was private property used in connection with the insured residence (Uguccioni v. United States Fidelity and Guaranty Co., 1991).
This decision is not altogether satisfactory, because it ignores the meaning of the word premises, apparently simply equating it with private property.
The court in Sheldon v. Zimmerman. (2004) reversed a lower court's decision that had found coverage for an accident occurring on a public roadway a short distance from the residence premises. In this case, the plaintiff was injured while riding in a golf cart owned by the insureds and operated by their daughter.
The Michigan appeals court said “the meaning of 'premises' derived from the context of its use within the insurance contract comports with the term's plain and ordinary meaning as derived from its common dictionary definition. The American Heritage Dictionary (2nd College Ed, 1985) defines premises as '(a) land and the buildings upon it. (b) a building or part of a building.' Similarly, Random House Webster's College Dictionary (2nd ed, 1997) defines it as '(a) a tract of land including its buildings…' Under the common meaning of the term 'premises,' a public road does not fall within the definition of 'premises' and is not an 'insured location' under the homeowners policy.”
How simple it would have been, therefore, for the appeals court of Massachusetts in Massachusetts Property Insurance Underwriting Assoc. v. Wynn (2004) to decline coverage by referring to the definition of premises instead of reverting to a rather convoluted argument concluding with the statement “the term 'insured location' is intended and appropriately understood [by whom?] to be limited to the residence and premises integral to its use as a residence.” Then, when an accident involving a snowmobile on a nearby beach occurred, a more clearly articulated decision might have contributed to a resolution of this issue that is not yet in sight.