Insurance policy terms ambiguous, Court of Special Appeals finds

When might a house not be a home? When it is vacant, uninhabitable and offered for sale as commercial property.

Under those circumstances, the Court of Special Appeals has held, there is at least a question as to whether a house retains the characteristics of a dwelling as contemplated by a dwelling property insurance policy.

Last week's decision gives Mutual Fire Insurance Co. another chance to fight a claim by policyholder Corwin Ackerman, personal representative of the estate of Phyllis Morss, and assignee Michael O'Brien.

The Circuit Court for St. Mary's County had granted summary judgment for the insured on the question of coverage for a presumed arson fire.

The policy did not define dwelling, and dictionary definitions, while incorporating the concept of occupancy by a person or persons, do not suggest that actual, continuous occupancy is required in order for property to qualify as a dwelling or a building used for dwelling purposes, Judge Sally D. Adkins wrote for the court.

Still, there was other evidence, which, when pooled together, would permit a juror to infer that the property was no longer a dwelling.

When the fire occurred, the property had been vacant for two years, during which time it had fallen into such a state of disrepair that it was uninhabitable and allegedly used by teen- agers as a hangout for illegal drug use, Adkins noted.

Ackerman acknowledged he would have had to replace the septic system and put four weeks of effort, plus $10,000, to make the place habitable.

According to O'Brien, only four properties out of 40 were used residentially within a mile radius of the property on Three Notch Road in California, Md.

While O'Brien's own plans for the property were ambivalent, Adkins wrote, he was contemplating selling the property to commercial developers for it to be renovated or demolished.

We conclude that these facts, when viewed together, would permit the trier of fact to infer that at the time of the fire, the house was not being used for dwelling purposes, the court concluded.

It also found that the insurance contract was ambiguous as to whether the policy's vandalism exclusion applied to arson, as Mutual Fire contended.

As vandalism was not defined by the contract, the court again looked to the common meaning of the terms.

An analogous case from New Mexico held that the common and ordinary meaning of vandalism is something different than that of arson, Adkins wrote.

However, a reasonable person could also read the term 'vandalism' broadly, as Mutual Fire urges, to include the act of a vandal setting fire to a building, she added. Considering these diverging definitions, we think the policy is ambiguous in this respect.

As such, the case was remanded for extrinsic evidence to clarify the intent of the policy.

Mutual Fire issued the dwelling property policy to Ackerman in 1999. Ackerman subsequently contracted to sell the property and assigned all of his rights under the policy to O'Brien, though the sale did not go through until after the house was extensively damaged by a fire thought to be intentionally set by drug users on the abandoned property.

Mutual Fire denied the claim on grounds that the house was no longer used principally for dwelling purposes as required by the policy, and that arson was a form of vandalism, which was excluded from coverage.

The circuit court granted Ackerman and O'Brien's motion for summary judgment.

Last week, the Court of Special Appeals reversed that ruling and remanded for further proceedings.

WHAT THE COURT HELD

Case:

Mutual Fire Insurance Co. of Calvert County v. Ackerman, Pers. Rep. Estate of Morss, et al,. CSA No. 2565, Sept. Term 2003. Reported. Opinion by Adkins, J. Filed April 13, 2005.

Issue:

Did the lower court err in granting summary judgment to the holder of a dwelling policy that excluded vandalism, where the house had long stood vacant, was uninhabitable and offered for sale as a commercial property?

Holding:

Yes; vacated. While continuous occupancy is not required for a structure to be considered a dwelling, the facts were sufficient to let a juror infer that the property in question had ceased to be a dwelling. Similarly, the question of whether a vandalism exclusion applied to arson was one for the trier of fact.

Counsel:

George E. Reede, Jr. for appellant; Walter E. Sawyer III for appellee.

Copyright 2005 Dolan Media Newswires
Provided by ProQuest Information and Learning Company. All rights Reserved.