Adventures in ambiguity
Christina Basham owned 15 rental properties that were insured by Berkshire Hathaway Homestead Insurance Company for the period of November 17, 2016, to November 17, 2017. Berkshire Hathaway issued one policy to cover all 15 properties and issued declarations for each individual property. One of the covered properties was located in Elwood, Indiana. The declarations for that property described the premises and the coverage provided. Under the “Description of Premises,” the declarations identified the premises as “Premises Number: 15[,] Building Number: 1[.]” Id. at 23. The declarations also included an address of 800 N. 13th St., Elwood, IN 46036, and it listed the occupancy as “RENTAL DWELLINGS–OTHER THAN STUDENT HOUSING.”
The premises in Elwood consisted of a house and a detached garage. On December 30, 2016, a fire burned down the garage and severely damaged the house. Basham filed a claim for the damages. Berkshire Hathaway paid for the damage to the house, but it denied the claim for damage to the detached garage. The insurer stated that the detached garage did not meet the policy’s definition of covered property.
On April 25, 2017, Basham filed a complaint against Berkshire Hathaway in which she alleged that it had wrongfully denied coverage for the detached garage. On July 17, Basham filed a motion for partial summary judgment in which she alleged that the policy was unambiguous and that it covered the garage. In the alternative, Basham contended that if the policy was ambiguous, it should be construed in her favor to cover the garage.
In response, Berkshire Hathaway asserted that the detached garage was not covered under the policy because
the garage was not a completed addition. The insurer filed a counter motion for summary judgment in which it contended that the policy was unambiguous and did not cover the detached garage.
The court concluded that the policy was ambiguous and interpreted the policy in Basham’s favor. Accordingly, the court determined that the detached garage was covered, entered summary judgment for Basham, and denied Berkshire Hathaway’s motion for summary judgment. The insurer appealed.
On appeal, the court noted that the policy explicitly defined the building as “the building or structure described in the Declarations.” Based on the policy’s use of “the building or structure” in the singular, the declarations reference to building number 1, and the fact that the declarations page specifically described the category of occupancy as “rental dwellings,” the court stated it was clear that the only building described in the declarations was the residential building. And, under the plain language of the policy, only the “building or structure described in the Declarations” was covered as the “Building.” Because the garage was not the building or structure described in the declarations, it was not covered under the policy as the “Building.”
The court also considered whether the detached garage was a completed addition that was covered under the policy. The policy did not define the term “completed addition,” although the court pointed out that a term is not ambiguous simply because it is not defined. Berkshire Hathaway asserted that the detached garage was not a completed addition because it was not physically attached to the house. To support its contention, the insurer relied on the definition of “addition” found in Merriam-Webster’s online dictionary, which defines an “addition” as “a part added (as to a building or residential section).” Based on that definition and the fact that “[t]he term ‘completed additions’ is listed under the term ‘building’” in the policy, Berkshire Hathaway contended that any completed addition must be physically attached to the building in order to be insured as “Covered Property.” And because the garage was not physically attached to the house, Berkshire Hathaway asserted that the policy was unambiguous and did not cover the garage.
The court did not agree that the term “completed addition” in the policy could mean only that a garage must be physically attached to the building to be insured. While an addition can be defined as “a part added” to a building, that term also can be defined as an “annex.” According to Webster’s Third New International Dictionary, an “annex” is “a subsidiary supplementary structure either part of or separate from a main structure.”
The court concluded that the term “completed addition” did not have a single meaning. An ordinary policyholder of average intelligence could interpret the term to mean either an attached or separate structure. Because reasonably intelligent people may honestly differ as to the meaning of “completed addition,” the court stated that the term was ambiguous and strictly construed it against Berkshire Hathaway. Thus the detached garage was covered under the policy, and the trial court did not err when it entered summary judgment for Basham and when it denied Berkshire Hathaway’s motion for summary judgment. The judgment of the trial court was affirmed.
Berkshire Hathaway Homestate Insurance Company v. Basham-Court of Appeals of Indiana-October 16, 208-No. 18A-PL-446.
