Court Opinion

ID: 7960203
Source: CourtListenerOpinion
Date Created: 2022-09-09 00:35:28.205191+00
Date Added: 2024-06-11T16:34:24.734011
License: Public Domain

Griffin, J.
(dissenting). I respectfully dissent. In my view, the majority has impermissibly transformed a policy definition into an exclusion. As a general rule, once coverage is afforded,
if an insurer intends to exclude coverage under certain circumstances, it should clearly state those circumstances in the section of its policy entitled "Exclusions.” Powers v DAIIE, 427 Mich 602, 632-633; 398 NW2d 411 (1986). [Transamerica Ins Corp *74of America v Buckley, 169 Mich App 540, 546; 426 NW2d 696 (1988).]
As noted by the majority, the sole issue before us is whether coverage is excluded in this instance because the home did not meet the policy’s definition of "residence premises” at the time of the fire. The seminal case in this area appears to be Reid v Hardware Mutual Ins Co of the Carolinas, Inc, 252 SC 339; 166 SE2d 317 (1969). In Reid, the plaintiff insureds purchased a policy of fire insurance covering their family home. The insured building was described in the policy as a "one story frame constructed . . . owner occupied, one family dwelling.” Id. at 342 [emphasis added]. While the policy was in force, the Reids sold their home to a third party, who assumed the Reids’ outstanding mortgage on the property. Significantly, the insurance policy was not transferred with the property and the Reids remained the named insureds.
Shortly after the property was sold, the home was destroyed by fire. Because she remained liable on the mortgage, Mrs. Reid sought to recover the outstanding balance from the insurer, Hardware Mutual. Hardware Mutual denied coverage, arguing, in part, that because the Reids were no longer living in the home, it was not "owner occupied” at the time of the fire. The trial court disagreed and entered judgment in favor of Mrs. Reid.
On appeal, the Supreme Court of South Carolina affirmed. After concluding that Mrs. Reid held an insurable interest in the property, the court held that the policy provision describing the property as "owner occupied” did not operate to exclude coverage after the property was sold. In pertinent part, the court concluded:
[A] description of a house in a policy of insur*75anee, as "occupied by” the insured, is a description merely and is not an agreement that the insured should continue in the occupation of it. Joyce v Maine Ins Co, 45 Me 168 [71 Am Dec 536 (1858)]. O’Niel v Buffalo Fire Ins Co, 3 NY 122 [1849]. A statement in an insurance policy that the property is occupied by the insured as a dwelling for himself and family, is not a warranty that it shall continue to be so occupied but is only a warranty of the situation at the time the insurance is effected. German Ins Co v Russell, 65 Kan 373; 69 P 345; 58 LRA 234 [1902].
There is no provision in the policy contract that the dwelling would be "owner occupied” during the term of the insurance contract nor any requirement that if the premises are otherwise occupied than by the owner, notice of such change of occupancy or use would be given to the insurer.
The insurance contract here involved contained a description of the dwelling insured as being "owner occupied.” This was an affirmative warranty, not a continuing warranty, by the respondent that the dwelling was so occupied by him at the time the contract of insurance was made. [Reid, supra at 346-347.]
The decision in Reid was followed by the United States Court of Appeals for the Ninth Circuit in Ins Co of North America v Howard, 679 F2d 147 (CA 9, 1982). In Howard, the insured rented her home to a third party, after which it burned down. The policy previously issued to the insured defined the covered dwelling as the "residence owned and occupied by the insured exclusively for residential purposes.” Id. at 148 [emphasis added]. Like the majority in the case at bar, the district court in Howard found the policy language unambiguous and concluded that there was no coverage. On appeal, the Court of Appeals for the Ninth Circuit reversed, holding in pertinent part as follows:
*76The district court found the provision "unambiguous,” saying that it required the policyholder to occupy the residence herself during the entire time the policy was in effect or forfeit coverage under the policy. We also find the provision unambiguous. However, we find that it has a wholly different effect than the district court thought. The provision describes the residence covered at the time of the issuance of the policy. It contains a representation that the insured is the homeowner and occupant and that the insurance is not being purchased by a third party. It does not impose a condition requiring the policyholder to continue to live in the residence.
Neither party cites any Oregon decision interpreting language similar to that contained in the provision. Nor did the district court in its brief order. Plaintiff insurance company cites Bryan v United States Fire Ins Co, 456 SW2d 702 (Tex Civ App, 1970), in support of the district court’s interpretation. Mrs. Howard cites Reid v Hardware Mutual Ins Co of Carolinas, 252 SC 339; 166 SE2d 317 (1969). We find that the latter case and the authorities on which it relies far more pertinent and persuasive. . . .
In interpreting state law in a diversity case we are required to apply the law as we believe the Supreme Court of the state would apply it. See Kabatoff v Safeco Ins Co, 627 F2d 207, 209 ([CA 9] 1980). We believe the Oregon Supreme Court would adopt the same reasonable, enlightened view of the effect of the "owned and occupied” language which the South Carolina court has adopted. We conclude that, under Oregon law, if an insurance company wishes to have a homeowner’s policy terminate upon rental of his home, it must so provide explicitly and unambiguously in the policy of insurance, and that a mere statement in the policy that he is the owner and occupant is wholly insufficient for this purpose. Under any proper view of the law, a homeowner is entitled to be given specific and unequivocal notice in the insurance policy that his coverage will be forfeited upon his rental of his home so that if a death in *77the family, other changes in family or economic circumstances, or even just a desire to change his way of life, causes him to move from his home, he may make whatever other insurance arrangements are necessary to protect the asset which often represents all the remaining proceeds of a lifetime of labor. [Ins Co of North America, supra at 148-149. Emphasis added.]
Although there exists authority to the contrary,1 I would follow the holdings in Reid and Howard. Not only are these decisions persuasive, they are consistent with the following general rule:
"A statement in an insurance policy that the building insured is a residence or dwelling house, or is used and occupied as such, is as a rule regarded as a matter of representation or description only, and even where from the stipulations of the contract the statement amounts to a warranty, such warranty is not generally regarded as a continuing one, but only a warranty of the situation at the time of the issuance of the insurance.” [Rush v Hartford Mutual Ins Co, 652 F Supp 1432, 1435 (WD Va, 1987), quoting 44 Am Jur 2d, Insurance, § 1209, p 153.]
In the present case, there is no dispute that the homeowner’s policy issued by Frankenmuth was in full force and effect at the time of this loss. There is also no dispute that plaintiff possessed an insurable interest in the property by virtue of his status as a land contract vendor. Sriro v Dunn, 265 Mich 112, 113; 251 NW 370 (1933). Consistent with the foregoing authorities, I would hold that the fact that plaintiff sold the home on a land contract does not operate to forfeit coverage for plaintiffs interest. Accordingly, I would reverse the judgment of the circuit court and remand for entry of judgment in favor of plaintiff._

 See Nancarrow v Aetna Casualty & Surety Co, 932 F2d 742 (CA 8, 1991); Epps v Nicholson, 187 Ga App 246; 370 SE2d 13 (1988).