A New York Supreme Court affirmed a trial court's ruling that a homeowners insurer is not liable for a fire loss because the named insured was living in a nursing home. The case is Nicotera v. Allstate Ins. Co., 147 A.D.3d 1474, (App. Div. 4th Dept. 2017).
Background
Virginia Eannace owned a house in Utica, New York. In 2003, she transferred ownership of the property to an irrevocable family trust managed by her relatives, the Nicoteras. Fred Nicotera and Pauline Nicotera were listed as trustees, and Gioia and Marisa Nicotera, Virginia's nieces, were listed as beneficiaries.
Virginia continued to live in the home until 2010, and then moved into a nursing home. The home was insured by a homeowner's policy with Allstate Insurance Company. The policy was solely in Virginia's name.
On August 8, 2012, the residence was damaged by a fire. At the time of the fire, Virginia's niece, Gioia Nicotera, lived on the first floor, and two tenants lived on the second floor. Virginia was living in the nursing home at the time.
Trial Court
The family filed a claim, and Allstate denied coverage on the basis that the named insured did not live in the residence. The family subsequently sued Allstate for breach of contract and policy reformation, and sued their insurance brokers for negligence, alleging a special relationship.
The trial court dismissed all of the plaintiffs' claims, and the appellate court affirmed the decision.
Supreme Court of New York
The plaintiffs appealed, and the matter was brought before the Supreme Court of New York. Plaintiffs argued that Gioia is an insured as a resident relative under the policy, and Pauline Nicotera is an additional insured.
The court rejected the argument, finding that the policy only covered resident relatives who are of the same household. Since Virginia, the named insured, was living at the nursing home at the time of the fire, and Gioia was living at the insured property, they were not part of the same household.
The court noted that while "household" may be an ambiguous term and is not defined in the policy, and that ambiguous terms are generally interpreted to favor coverage for the insured, that it was clear that Virginia and Gioia did not live in the same household at the time of the loss.
In Pauline Nicotera's case, she was listed as an additional insured on a 2009 Allstate application, but she was not listed as an additional insured on the declarations page found in the 2012 Allstate homeowners policy. Thus, the court affirmed the trial court's dismissal.
The plaintiffs next asked the court to reform the policy to reflect the actual living situation. The court noted that while they will sometimes reform insurance policies to correct simple clerical errors, such as a misdescribed property owner, they will not rewrite the policy to award coverage that the insurance company did not agree to insure.
In this case, changing the policy to one that does not require the homeowner to reside at the insured premises is a major change and not what is intended by the insurer. The court also affirmed the trial court's dismissal of this motion.
Finally, the plaintiffs sued their insurance brokers, arguing they should have advised them on the coverage gaps, and that they had a special relationship. Under common law, an insurance broker's only duty is to obtain the specific coverage requested by a client within a reasonable time or inform their client if they are unable to do so.
Brokers have "no continuing duty to advise, guide or direct a client to obtain additional coverage." That is, unless there exists a special relationship between the broker and the insured, where the broker "may be held to have assumed duties in addition to merely obtaining requested coverage."
The plaintiffs asserted that they had a special relationship with their brokers, and that they should have advised them on the lack of coverage. However, the court ruled that there was no special relationship.
A special relationship exists where: "the agent receives compensation for consultation apart from payment of the premiums; there was some interaction regarding a question of coverage, with the insured relying on the expertise of the agent; or there is a course of dealing over an extended period of time which would have put objectively reasonable insurance agents on notice that their advice was being sought and specially relied on."
The court found that there was no special relationship. The brokers were not paid an additional fee for separate consultation; the family did not specifically rely on the broker's expertise regarding a complex coverage question; and the business relationship between the parties was relatively short, less than three years. The court again affirmed the trial court's ruling.
Editor's Note
This case highlights the importance of reading your policy and knowing the requirements for coverage. A typical homeowners policy states that an insured includes the named insured and residents of the household. Standard policies also typically require the named insured to live at the property listed in the declarations. Courts will not rewrite a policy to cover risk that was not intended by the insurer.
Read More: