Heniser v. Frankenmuth Mut. Ins. Co.

• Decision Date: 02 August 1993
• Citation: 506 N.W.2d 247,201 Mich.App. 70
• Parties: Richard J. HENISER, Plaintiff-Appellant, v. FRANKENMUTH MUTUAL INSURANCE COMPANY, Defendant-Appellee. Docket 142957.
• Court: Court of Appeal of Michigan — District of US

Page 247

506 N.W.2d 247

201 Mich.App. 70

Richard J. HENISER, Plaintiff-Appellant, v. FRANKENMUTH MUTUAL INSURANCE COMPANY, Defendant-Appellee.

Docket 142957.

Court of Appeals of Michigan.

Submitted Nov. 9, 1992, at Grand Rapids.

Decided Aug. 2, 1993, at 9:30 a.m.

Released for Publication Oct. 19, 1993.

Cholette, Perkins & Buchanan by Bruce M. Bieneman and Robert J. Riley, Grand Rapids, for plaintiff-appellant.

Denenberg, Tuffley, Bocan, Jamieson, Black, Hopkins & Ewald, P.C. by Michael P. McDonald, Grand Rapids, for defendant-appellee.

Before MacKENZIE, P.J., and RICHARD ALLEN GRIFFIN and CONNOR, JJ.

MacKENZIE, Presiding Judge.

This is an action for recovery under a homeowner's insurance policy issued by defendant to plaintiff. Following a bench trial, the trial court found that the policy provided no coverage for plaintiff's fire-loss claim and entered a judgment in favor of defendant. Plaintiff appeals as of right. We affirm.

The facts are undisputed. For several years, plaintiff had owned a house in Honor that he used as a seasonal residence. In September 1988, he renewed his homeowner's policy on the house for a one-year period. In November 1988, plaintiff sold the property on a land contract, and the buyers took possession of the house. In January 1989, while the homeowner's policy was still in effect, the house was destroyed by fire. Defendant denied coverage for the fire loss.

The policy at issue provided in relevant part in Section I--Property Coverages:

We cover:

1. the dwelling on the residence premises shown in the Declarations, including structures attached to the dwelling.

The definitions section of the policy states in relevant part:

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. "Residence premises" also means a two to four family dwelling where you reside in at least one of the family units and which is shown as the "residence premises" in the Declarations. [Emphasis added.]

The sole issue in this case is whether the trial court erred in finding that the policy of insurance issued by defendant to plaintiff provided no coverage for the fire loss because of the "residence premises" definition in the policy. We find no error.

Insurance policies will be construed in favor of coverage when an ambiguity exists. However, if an insurance contract fairly admits of but one interpretation, the policy should not be considered ambiguous or fatally unclear. Farm Bureau Mutual Ins. Co. of Michigan v. Stark, 437 Mich. 175, 182, 468 N.W.2d 498 (1991). Here, we agree with the trial court that "residence premises" as defined in the insurance policy was unambiguous and not in conflict with other language used in the policy. As found by the court, the policy is clear that the dwelling listed on the declaration sheet must be used as the insured's residence in order to receive coverage. Here, when plaintiff sold the house two months before the fire loss, he relinquished his possessory interest and all rights to reside there. Under the clear language of the policy, the house was no longer his "residence premises," and, thus, he was not entitled to coverage under this insurance policy. Instead, it appears that plaintiff's remedy lies with the purchasers of the house, who under the terms of the land contract were obligated to insure the property with a loss-payable clause in favor of plaintiff.

Plaintiff also relies on Powers v. DAIIE, 427 Mich. 602, 398 N.W.2d 411 (1986), and Transamerica Ins. Corp. of America v. Buckley, 169 Mich.App. 540, 426 N.W.2d 696 (1988), to argue that an insurer is not allowed to enforce purported exclusionary language that is found in the definitions section of the insurance contract. We agree with the trial court that those cases are inapplicable under the circumstances of this case. Unlike Powers and Buckley, the policy in this case clearly defines "residence premises" without resort to unusual or multiple definitions that might frustrate the insured's expectations or act as an exclusion. Accordingly, we affirm the decision of the trial court.

Affirmed.

CONNOR, J., concurs.

GRIFFIN, Judge (dissenting).

I respectfully dissent. In my view, the majority has impermissibly transformed a policy definition into an exclusion. As a general rule, once coverage is afforded,

if an insurer intends to exclude coverage under certain circumstances, it should clearly state those circumstances in the section of its policy entitled "Exclusions." Powers v DAIIE, 427 Mich 602, 632-633; 398 NW2d 411 (1986). [Transamerica Ins. Corp. of America v. Buckley, 169 Mich.App. 540, 546, 426 N.W.2d 696 (1988).]

As noted by the majority, the sole issue before us is whether coverage is excluded in this instance because the home did not meet the policy's definition of "residence premises" at the time of the fire. The seminal case in this area appears to be Reid v. Hardware Mutual Ins. Co. of the Carolinas, Inc., 252 S.C. 339, 166 S.E.2d 317 (1969). In Reid, the plaintiff insureds purchased a policy of fire insurance covering their family home. The insured building was described in the policy as a "one story frame constructed ... owner occupied, one family dwelling." Id. at 342, 166 S.E.2d 317 [emphasis added]. While the policy was in force, the Reids sold their home to a third party, who assumed the Reids' outstanding mortgage on the property. Significantly, the insurance policy was not transferred with the property and the Reids remained the named insureds.

Shortly after the property was sold, the home was destroyed by fire. Because she remained liable on the mortgage, Mrs. Reid sought to recover the outstanding balance from the insurer, Hardware Mutual. Hardware Mutual denied coverage, arguing, in part, that because the Reids were no longer living in the home, it was not "owner occupied" at the time of the fire. The trial court disagreed and entered judgment in favor of Mrs. Reid.

On appeal, the Supreme Court of South Carolina affirmed. After concluding that Mrs. Reid held an insurable interest in the property, the court held that the policy provision describing the property as "owner occupied" did not operate to exclude coverage after the property was sold. In pertinent part, the court concluded:

[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. Maine Ins. Co., 45 Me. 168 [71 Am.Dec. 536 (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. v. Russell, 65 Kan. 373, 69 P. 345, 58 L.R.A. 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.

The insurance contract here involved contained a description of the dwelling insured as being "owner occupied." This was an affirmative warranty, not a continuing warranty, by the respondent that the dwelling was so occupied by him at the time the contract of insurance was made. [Reid, supra at 346-347, 166 S.E.2d 317.]

The decision in Reid was followed by the United States Court of Appeals for the Ninth Circuit in Ins. Co. of North America v. Howard, 679 F.2d 147 (CA 9, 1982). In Howard, the insured rented her home to a third party, after which it burned down. The policy previously issued to the insured defined the covered dwelling as the "residence owned and occupied by the insured exclusively for...