ISO Tries to Fix “Where Do You Reside” Problem in HO

ISO Fixes the Residence Prob- lem in Homeowners Policies— Somewhat.

Mary, an elderly widow, suffers from a number of chronic ailments and has signs of dementia. Her family decides that she can no longer live on her own and must be moved to a nursing home. They realize that Mary will never recover sufficiently to return to her home and plan to put it up for sale. Mary has an ISO homeowners policy in her name. No changes are made to the policy. The house is destroyed by a hurricane a few days later. Is Mary covered for the loss?

Ed and Yvonne divorce. As part of the divorce settlement, Yvonne receives title to the home and continues to live there with their children. Ed moves to another home. Ed is the only named insured on the homeowners policy; no change is made in the name of the insured. The house is destroyed by fire some months later. Are either Ed or Yvonne covered for the loss?

There’s no vacancy or unoccupancy exclusion in a homeowners policy, so you might expect that there is coverage. I agree that there certainly should be, but many adjusters and courts don’t. I feel their posi- tion is inconsistent. An ISO HO policy can be used to insure a home under construc- tion and coverage remains in force under an ISO HO even if the insureds are absent while on an extended vacation.

Nevertheless, the dissenters point to the statement in the ISO HO policy that the policy covers the residence premises shown in the declaration and that the residence premises means the one family dwelling where the insured resides. Since the house is no longer Mary’s or Ed’s residence, courts, including some in New York, have ruled that the homeowners policies in their names do not provide coverage. Similar situations arise when an insured moves to a new home intending to sell the old one or buys a home but doesn’t move in until renovations are completed.

ISO is filing a new endorsement that will cure some, but not all the problems. Via a mandatory endorsement, the defini- tion of residence premises is changed to read: “…dwelling where you reside…on the inception date of the policy period shown in the Declarations and which is shown as the ‘residence premises’ in the Declarations.” Therefore if Mary and Ed were residing in the home on the inception date, there will be coverage. However, when the current policies expire the renewal policies will not provide coverage.

Furthermore, it’s very often the case that insureds that purchase a new home move in some days or weeks after putting a homeowners policy in force to meet clos- ing requirements. Should a loss occur before they move in, they may be without coverage. ISO is filing an optional endorse- ment to suspend the residency require- ment for a specific period of time, but sad- ly most insureds find out about the availability of that type of endorsement after the loss. It’s a situation that cries out for a better solution.