Varsalona et al. v. Auto-Owners Insurance Company

Court of Appeals of Georgia, Case No. A06A1371, decided September 21, 2006 (Andrews, P.J., for the Court; Barnes and Bernes, JJ., concurring). The complete opinion appears below. Our text comes from the Caselaw Access Project (case.law), Harvard Law School’s open archive of published U.S. case law. Removed: the reporter’s head matter — the docket line, the caption, the parallel-cite line “(637 SE2d 64)”, the decision-date line, and the counsel-of-record blocks for appellants (Jones & Bell; Lloyd N. Bell) and appellee (Gray, Rust, St. Amand, Moffett & Brieske; Michael D. St. Amand), all of which the print volume interleaves in the middle of the opinion — that information is stated in this line instead. Also removed: the archive’s structural bracket marker labeling the opinion. Every scan repair made, in full: the judge’s name line is set in bold; the passage the reporter sets as a block quotation is set as a block quote; “[ijnsured premises” restored to “[i]nsured premises”; “[w] e cover” restored to “[w]e cover”; the missing space restored in “479 SE2d404”; and the spacing around ellipses inside quotations regularized. The opinion’s single footnote, which the archive prints at the end, is left there and labeled. No word of the Court’s has been changed, condensed, or paraphrased.

The full opinion

Andrews, Presiding Judge.

Elaine and Rocky Varsalona sued their insurer, Auto-Owners Insurance Company, alleging that Auto-Owners breached the terms of a homeowners insurance policy by refusing to pay for property damage to a residence covered by the policy. The trial court granted summary judgment in favor of Auto-Owners on the basis that the residence was not covered by the policy because the Varsalonas never used it as their residence. For the following reasons, we affirm.

On October 31, 2002, the Varsalonas bought a residence located at 2276 Turtle Landing in Marietta. The Varsalonas allege that in February 2003, the residence suffered damage covered by an Auto-Owners insurance policy when a portion of the slab collapsed under the residence. At the closing on the residence, the Varsalonas bought a “Homeowners Insurance Policy” from Auto-Owners which shows on the policy declarations page that the Varsalonas are the insureds and that the “residence premises” insured by the policy is located at 2276 Turtle Landing in Marietta. The policy provides that “[i]nsured premises means … the residence premises … any structures or grounds you use in connection with your residence premises … [and] any other premises you acquire during the policy term and which you intend to use as a residence premises.” The policy further defines “residence premises” to mean “the one or two family dwelling where you reside, including the building, the grounds and other structures on the grounds … [or] that part of any other building where you reside, including grounds and structures … which is described in the Declarations.” Finally, under the section of the policy related to “Property Protection … Coverage A - Dwelling” the policy provides that: “We cover … your dwelling located at the residence premises including structures attached to that dwelling. This dwelling must be used principally as your private residence.”

The Varsalonas concede that, after buying the residence, they never lived there or used it as their residence. According to the Varsalonas, when they bought the residence at 2276 Turtle Landing, they intended to sell the residence they were living in and use the residence at 2276 Turtle Landing as a temporary residence until they could build a permanent residence. When the residence they were living in did not sell quickly, the Varsalonas changed their minds and decided not to reside at 2276 Turtle Landing. Instead, in early 2003, their daughter and grandchild moved into the residence at 2276 Turtle Landing and were living there when the damage was discovered in February 2003.

The Auto-Owners policy provides that, for coverage to apply to the residence premises located at 2276 Turtle Landing, the dwelling located there must be used as the insureds’ residence. Despite never using the Turtle Landing property as their residence, the Varsalonas contend that the policy provided coverage because they intended to use the property as their residence when they bought it, and the policy states in part that the “insured premises” means “any other premises you acquire during the policy term and which you intend to use as a residence premises.” In conjunction with this language, they also contend that coverage is provided under the property protection section of the policy stating that “[w]e cover … other structures which you own and you use in connection with the residence premises that are located at an insured premises other than the residence premises.” We find no merit to these contentions. The policy clearly states that the “insured premises” means “the residence premises,” and the location of “the residence premises” when the policy term commenced on October 31, 2002, was 2276 Turtle Landing. It follows that the reference to “any other premises you acquire during the policy term and which you intend to use as a residence premises” does not refer to “the residence premises” at the commencement of the policy term. It also follows that coverage for “other structures … located at an insured premises other than the residence premises” does not refer to the residence premises located at 2276 Turtle Landing.

The ordinary rules of contract construction apply to determine the intent of the parties with respect to the insurance contract at issue. Boardman Petroleum v. Federated Mut. Ins. Co., 269 Ga. 326, 327 (498 SE2d 492) (1998). This generally presents a question of law for the court unless language in the policy creates an ambiguity that cannot be resolved by the rules of construction. Collier v. State Farm &c. Ins. Co., 249 Ga. App. 865, 866 (549 SE2d 810) (2001). “No construction of an insurance contract is required or even permissible when the language is plain, unambiguous, and capable of only one reasonable interpretation.” Ga. Farm &c. Ins. Co. v. Kephart, 211 Ga. App. 423, 424 (439 SE2d 682) (1993).

When the language of an insurance policy defining the extent of the insurer’s liability is unambiguous and capable of but one reasonable construction, the courts must expound the contract as made by the parties. Courts have no more right by strained construction to make an insurance policy more beneficial by extending the coverage contracted for than they would have to increase the amount of coverage.

(Citation and punctuation omitted.) Southern Fire & Cas. Co. v. Jamerson, 223 Ga. App. 582, 583 (479 SE2d 404) (1996). An insurance company may, by the terms of its policy, insure against certain risks and exclude others, so long as the terms are not contrary to Georgia law. Continental Cas. Co. v. HSI Financial Svcs., 266 Ga. 260, 262 (466 SE2d 4) (1996). It is not contrary to Georgia law for an insurer to require by the terms of its policy that the insured reside at the insured premises in order to maintain coverage under the policy. See Roland v. Ga. Farm &c. Ins. Co., 265 Ga. 776 (462 SE2d 623) (1995).

Here, the plain language of the Auto-Owners policy insuring the residence premises located at 2276 Turtle Landing unambiguously required as a condition of coverage that the insureds use the residence premises principally as their private residence. Because it is undisputed that neither insured ever used the property as a residence, the trial court correctly concluded that the policy provided no coverage and that Auto-Owners was entitled to summary judgment. Epps v. Nicholson, 187 Ga. App. 246, 247 (370 SE2d 13) (1988); Kephart, 211 Ga. App. 423.

Judgment affirmed.

Barnes and Bernes, JJ., concur.

Footnote to the opinion, as the archive prints it:

References in the policy to “you” or “your” mean the insureds named on the declarations page.

What it decided

The Varsalonas bought a house in Marietta on October 31, 2002 and bought an Auto-Owners homeowners policy at the closing. They planned to live there temporarily while building a permanent home. Their old house did not sell quickly, they changed their minds, and they never moved in. Their daughter and grandchild moved in instead. In February 2003 a portion of the slab collapsed under the house.

Auto-Owners refused to pay, and the Court of Appeals affirmed summary judgment for the insurer. The reasoning is four sentences long in substance:

• Coverage A said “We cover … your dwelling located at the residence premises,” and added: “This dwelling must be used principally as your private residence.”
• “Residence premises” was defined as “the one or two family dwelling where you reside.”
• “You” meant the two people named on the declarations page — not a daughter, not a grandchild.
• Neither named insured ever resided there. So there was no coverage.

The Varsalonas argued that the policy’s own “insured premises” definition reached “any other premises you acquire during the policy term and which you intend to use as a residence premises,” so their intent at purchase should be enough. The court held that clause refers to premises acquired after the policy started, not to the address on the declarations page on day one. And the court confirmed the underlying rule: “It is not contrary to Georgia law for an insurer to require by the terms of its policy that the insured reside at the insured premises in order to maintain coverage under the policy.”

What it did NOT decide

This is a short opinion doing one job, and carriers stretch it well past its edges.

• It never decided anything about slab collapse. The word “collapse” appears once, in the recitation of what the Varsalonas alleged. No collapse provision was construed. Whether a slab failure is a covered peril under any Georgia policy is simply not in this case.
• It did not decide what happens when you move out. The insureds here “never lived there or used it as their residence” — the court says so twice. Nothing here addresses a homeowner who lived in the house and then left for a rebuild, a hospital stay, a deployment, a divorce, or a job transfer.
• It did not decide part-time or split residency. Two homes, a snowbird pattern, a house you occupy on weekends — none of it was before the court.
• It did not decide whether a resident relative can satisfy the requirement. The daughter and grandchild lived in the house, and the opinion does not analyze that at all. It disposes of the case on the definition of “you.”
• It did not decide anything about the agent or the sale of the policy. Nobody appears to have argued that selling a “Homeowners Insurance Policy” at a closing on a house the buyers were not going to occupy raised a claim against anyone. Whatever such a claim would look like, it is not decided here.
• It did not create a general vacancy or occupancy rule for Georgia. It enforced the specific words of one Auto-Owners form. Compare Hill v. Nationwide (1994), where a family moved out and the house burned two months later: that policy contained no vacancy exclusion and no occupancy condition, and the Court of Appeals refused to read one in out of the definition of “residence premises.” Varsalona’s policy said, in Coverage A, “This dwelling must be used principally as your private residence.” Different words, opposite result — which is also the premise of Nationwide v. Kim, where an exclusion the policy never wrote could not be enforced.

Why it matters to policyholders

This is a rule that can cost you your claim if you ignore it, so read it plainly.

A homeowners policy is not a policy on a building. It is a policy on the building where the named insureds live. Most people never learn that, because most people buy the policy in the last twenty minutes of a closing, from a list of quotes, without opening the definitions page. The Varsalonas did exactly that, and the slab under their house failed four months later, and none of it was covered.

The practical line to walk away with: if the people named on your declarations page are not going to live in the house, tell the insurer before something happens. There are other products for that situation — dwelling fire and landlord forms, builder’s risk during construction, vacant-property coverage. They cost differently and they cover differently. The one thing that does not work is a homeowners policy on a house you never occupy.

Three moments worth a phone call to your agent, in writing, before the loss:

1. You bought a house you are not moving into yet. Rental to a relative, a rebuild, a slow sale of the old house — say so and get the right form.
2. You are moving out for a repair or a rebuild. A long displacement can put you outside a residence requirement even though the loss started while you lived there. Ask what the policy needs from you and get the answer in writing.
3. You inherited a house, or a parent moved to care. The named insured on the declarations page has to match reality.

If your claim has already been denied on occupancy, the fight is factual, not rhetorical. Who resided there, when, and what does your specific policy language require — “reside,” “principal residence,” “used principally as your private residence,” and a vacancy clause with a day count are all different tests. Never occupying at all is not the same as moving out. Varsalona is the never-occupied case. Hill v. Nationwide is the moved-out case, and there the homeowners won, because that policy simply did not contain the condition Auto-Owners had written into Coverage A. Find your Coverage A sentence and read it before you accept anyone’s characterization of the law. Georgia reads a policy’s plain words as written, in both directions: the same rule that sank the Varsalonas is the rule that stops a carrier from enforcing an exclusion it never actually printed (Nationwide v. Kim), and that resolves genuinely ambiguous language against the insurer that drafted it (American Strategic v. Helm). Georgia also requires that a denial letter name the specific policy provision it rests on — Ga. Comp. R. & Regs. 120-2-52-.03, paragraph 7. Make the carrier put the words on paper, then read them against what actually happened in your house.

A public adjuster documents the occupancy record, the damage, and the extent of the loss, and negotiates. If a denial turns on a legal fight over what “reside” means in your form, that is an attorney’s job and we refer it out. More Georgia authority sits on the Georgia shelf.

Now you know the rule. Enforcing it against a carrier is a different job — and it's ours. A free, confidential case review by a licensed public adjuster takes three taps.

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