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After Total Loss, Fed. Court Rejects "Residency" Provision, Requires Personal Property Limits Paid

The 1943 New York Standard Fire Policy, adopted by statute in West Virginia, excludes coverage for losses that occur when a building is vacant or unoccupied for more than 60 days.  West Virginia law has generally held that an insured is required to prove the value of a personal property claim rather than merely claim the policy limit.  In Shank v. Safeco Ins. Co. of Am., No. 2:15-CV-09033, 2016 WL 4534028 (S.D. W.Va. Aug. 30, 2016), the federal court held that an insurer could not rely upon a policy requirement that the insured actually reside in an insured dwelling instead of using the vacancy/occupancy exclusion in the standard fire policy. Additionally, the court required personal property policy limits be paid in the event of a total fire loss, regardless of whether an insured could prove the actual value of their personal property claim. 

In Shank, the federal court attempted to predict how the West Virginia Supreme Court of Appeals may rule on the following issues: (1) whether an insurer may deny coverage based upon actual residency rather than occupancy of a dwelling, and (2) to what degree an insurer may require its insureds detail their personal property losses in the event of a "total loss" determination after a fire damage claim. 

The policy provided coverage for the “residence premises” which was defined to include “where you reside.” The parties disputed the meaning of “reside.” Plaintiffs argued that the term was ambiguous (and therefore should be construed against the insurer) and that the residency provision was unlawful regardless. Conversely, the insurer argued that the term was unambiguous and merely required insureds to actually live at the “residence premises" to afford coverage. 

Although the fire loss occurred at Plaintiffs' secondary residence—to which they frequently visited but never resided—the residence was included on the declarations page and Plaintiffs paid a separate premium on the property. The insurer denied coverage because the property was not Plaintiffs' primary residence. The insurer did not rely upon exclusions regarding the “vacancy or occupancy” of the dwelling.  The Court noted that West Virginia has adopted the 1943 New York Standard Fire Policy by statute and multi-line insurance policies, like the Shanks’, cannot be more restrictive than the standard fire policy.  The Court found that the “residence” requirement in the “residence premises” definition is more restrictive than the standard fire policy’s “occupancy” exclusion.  In doing so, the Court noted that the insurance agent never informed the insureds that the insurer expected them to maintain only one residence at a time.

As to the second issue, the Court found that Plaintiffs had substantially complied with the policy's requirements for describing their personal property loss. Despite the fact that they were unable to provide ages or costs for their itemized property, the Court held that the policy limits for the personal property should be afforded because the real property was a total loss. 

Borrowing from dicta in Hayseeds, Inc. v. State Farm Fire & Cas., 352 S.E.2d 73, 81 n.2 (W. Va. 1986), the Court noted that the insurer set the coverage limit for Plaintiffs’ personal property,  the basis for recovery of personal property is “actual loss sustained,” and that the “actual loss” Plaintiffs sustained was the personal property that existed when the policy was issued and the insurer established the covered amount.  Thus, the Court predicted that the West Virginia Supreme Court of Appeals would require insurers to pay the full policy limits of personal property coverage when a "total loss" occurs. 

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About this Author

Michelle Gaston, Steptoe Johnson Law Firm, Litigation Attorney
Of Counsel

Michelle Gaston concentrates her practice in the areas of general litigation, insurance coverage, and extra-contractual matters.  Ms. Gaston's practice also involves reviewing insurance policies, researching insurance coverage issues, drafting coverage opinions, representing clients in coverage disputes, and representing clients in bad faith or other extra-contractual matters, including administrative proceedings before the West Virginia Insurance Commission. 

Ms. Gaston also represents clients in fraud and arson cases involving insurance...