No ambiguity, no coverage

No ambiguity, no coverage

Veronika Serpikova purchased a house in Houston, Texas. She purchased a homeowners policy from American Risk Insurance Company, Inc., and was listed as the named insured. At first, Serpikova and her husband lived in the house, but in May 2012 they moved to another location. They then leased the property to two tenants.

On September 6, 2012, a renewal policy became effective. In November 2012, a fire severely damaged the house. Serpikova made a claim under the policy. American Risk denied coverage, stating that because Serpikova did not reside at the property at the time of the loss, the property did not fall within the policy’s definition of “residence premises” and, therefore, the house was not a dwelling on the residence premises, which was a requirement for dwelling coverage under the policy.

Serpikova filed suit against American Risk, asserting claims for breach of the policy, violations of the Texas Insurance Code, violations of the Texas Deceptive Trade Practices Act, breach of the duty of good faith and fair dealing, and violations of the Prompt Payment of Claims Act. She also sought a declaratory judgment that her house was within the policy definition of “residence premises” and that the fire loss was covered.

Serpikova filed a motion seeking partial summary judgment as to liability on her breach of contract claim as well as a declaratory judgment that her loss was covered under the policy. American Risk filed a cross-motion for summary judgment, asserting numerous grounds against Serpikova’s claims. The court granted Serpikova’s
motion and denied the insurer’s motion, reserving for trial the amount of Serpikova’s damages, the remaining claims, and her requests for attorney fees.

The court awarded Serpikova actual damages, 18% interest as damages, and attorney fees. The court also declared that the property fell within the policy’s definition of “residence premises” and that the fire loss was covered loss under the policy. American Risk appealed.

On appeal, American Risk first asserted that the trial court erred in granting Serpikova’s summary judgment motion. In its second issue, the insurer asserted that the trial court committed an error of law when it interpreted the term “residence premises” in a way that did not require the insured to reside at the premises.

Under “Coverage A (Dwelling),” the policy covered:

1. the dwelling on theresidence premisesshown on the declarations page including structures attached to the dwelling.
2. other structures on theresidence premisesset apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line or similar connection.

The policy defined “residence premises” as “the residence premises shown on the declarations page. This includes the one- or two-family dwelling, including other structures, and grounds where an insured resides or intends to reside within 60 days after the effective date of this policy [September 6, 2012].”

Serpikova asserted that the property was the residence premises under the first sentence of the definition because the property was the “residence premises” shown on the declarations page. Serpikova also argued that, based on the use of the term “includes,” the second sentence of the definition could only enlarge the scope of the definition beyond the parameters of the first sentence. The declarations page did not contain the term “residence premises,” but the address for the property was listed on the declarations page as the “Location of Property Insured.” American Risk asserted that, under the second sentence of the definition, the property could not be the residence premises because Serpikova never resided on the property during the term of the policy, nor did she intend to reside on the property during the 60 days after September 6, 2012, the policy’s effective date.

Serpikova also argued that the policy contained no exclusion of coverage if the insured rented the residence premises to a third party. The court stated that an exclusion was not needed if there would be no coverage under the insuring clause based on the definition of “residence premises.” The court concluded that, under the policy’s unambiguous language, the property did not fall within the definition of ìresidence premisesî because Serpikova never resided on the property during the policy term, nor did she intend to reside on the property during the 60 days after the policy’s effective date. There was no coverage for Serpikova’s loss; therefore, the appellate court stated, the trial court erred in implicitly granting summary judgment as to Serpikova’s first, third, and fourth grounds.

On Serpikova’s second ground, that the Texas Insurance Code prohibited the insurer from denying coverage under the policy, the court held that the code did not provide coverage as a matter of law. The court sustained American Risk’s two appellate issues, reversed the trial court’s judgment, and remanded the case to the trial court for further proceedings.

American Risk Insurance Company vs. Serpikova-Court of Appeals of Texas, 14th District- No. 14-14-00859-CV-March 9, 2017.