A homeowner’s insurance policy offers important protections for both property owners and individuals who may suffer a personal injury on the subject property. But the precise scope of coverage depends on the language of the policy. For example, many homeowner’s policies exclude coverage for injuries suffered by tenants who rent the home from its owner.
State Farm Fire & Casualty Company v. Moss
The Georgia Court of Appeals recently considered the nature of a tenant exclusion in a homeowner’s policy that is the subject of a personal injury lawsuit. The homeowner in this case owned two properties, her primary residence and a lake home. She purchased a homeowner’s policy to cover both properties, listing the lake home as her “secondary residence.”
After a few years, the homeowner decided to put the lake home up for sale. By this point she lived “exclusively” at her primary residence and did not spend any significant time at the lake home except to “perform maintenance.” While still looking for a buyer, the homeowner rented the lake home to a married couple. The parties signed a month-to-month lease with the understanding the tenancy could be canceled at any time.
Less than a week into the lease, according to court records, the wife “sustained bodily injuries allegedly as a result of a fall caused by a hazardous condition on the property.” The couple subsequently sued the homeowner for damages. The homeowner’s insurance carrier then filed its own lawsuit, seeking a declaration it was not liable for paying any damages that might be awarded in the underlying personal injury lawsuit.
The focus of the insurance company’s lawsuit was the wording of the rental exclusion. The insurer was not liable under the policy for “bodily injury…arising out of…the rental or holding for rental of any part of any premises by the insured.” But there was an exception for any rental that took place “on an occasional basis.”
The Court of Appeals noted there was no prior case in Georgia that “elaborated on what evidence demonstrates that a rental is occasional as a matter of law.” But the Court of Appeals leaned towards defining “occasional” as referring to a rental where “the homeowner intends to continue using the home as a residence” at some future date. The court cited a 1989 case from Illinois which said an occasional rental was designed “to allow the insured to rent his or her residence while living elsewhere temporarily, but with the intention to return there to live.”
Applied to the facts of this case, the Court of Appeals said it was clear that the homeowner’s rental to the married couple was not “occasional” as defined in the insurance policy. The homeowner had no intention of returning to live at the lake house. And even though she planned to sell the lake house, she signed an indefinite lease with the couple. In other words, the homeowner “treated the lake home as a rental property,” which was a situation beyond the scope of her homeowner’s insurance policy. Accordingly, the Court of Appeals said the insurer was entitled to summary judgment.