Jul 20, 2015
ISO pins down the ‘residence premises' definition
The Department of Banking and Insurance has approved effective Oct. 1, 2015, a multistate filing made by the Insurance Services Office Inc., which revises its homeowners program coverage forms to add more explicit language to the definition of "residence premises." This is important because Coverage A-Dwellings, Coverage B-Other Structures, Coverage D-Loss of Use, and some of Coverage C-Personal Property and Section II-Liability Coverages are only applicable to the "residence premises" as defined in the policy.
In short, the current definition of "residence premises" has two conditions. One is that it must be the dwelling "where you reside" (where "you" is the named insured). The second is that it must be described on the declarations. Only owner-occupants are eligible for dwelling coverage on a homeowners policy. If the dwelling is not occupied by the owner, then a dwelling policy should be written instead.
There has been significant countrywide litigation over the phrase "where you reside" after a claim has occurred when the owner is not actually occupying the home at the time. There are a variety of reasons for not occupying the home besides material misrepresentation at the time a homeowners policy was requested. The owner may have been placed in a nursing home or recently departed. The owner may have moved to a newly purchased home and is waiting for the old home to be sold. The owner may have purchased the home to occupy, but is unable to move into it for months because of renovations or delays in executing an employer relocation plan. A separation or divorce may occur and the named insured owner moves out, leaving the non-owner spouse, who is not a named insured, to occupy the home. There also are times when a child lives in the parents home or the parents live in a childs home.
In order to eliminate uncertainty under some of the above scenarios, ISO has made a revision to the definition of "residence premises" by means of the following mandatory endorsements: HO 06 48 10 15 Residence Premises Definition endorsement (other than HO-6 and Mobilehome); HO 17 48 10 15 Residence Premises Definition endorsement-Unit Owners; and MH 04 26 10 15 Residence Premises Definition endorsement-Mobilehome. These endorsements add that the named insured must reside at the premises "on the inception date of the policy period shown in the Declarations." This means that midterm changes in occupancy will not adversely impact coverage. It also means occupancy changes need to be disclosed prior to renewal in order to resolve issues of coverage at that time.
A significant coverage gap remains when the owner does not reside in the home at the time the policy period begins (e.g., the loan has closed and the owner will not be moving in for a few weeks). In recognition that owners are delayed in moving into their home for various reasons, ISO is introducing the following optional endorsements to provide an exception for a limited time: HO 06 49 10 15 Broadened Residence Premises Definition endorsement; HO 17 47 10 15 Broadened Residence Premises Definition endorsement-Unit Owners; HO 04 27 10 15 Broadened Residence Premises Definition endorsement-Mobilehome. The endorsements provide an "inception date" and "termination date" for the time residency by the named insured will not be required; which, if permitted by underwriting, could represent the entire policy period. To develop the additional premium for this option, you would multiply the base premium by a factor of 1.02 for each 30-day period to be included within the two dates.