United States District Court for District of Massachusetts holds that insurer breached ch. 93A by denying fire coverage for new homeowner because she had not yet moved into her house

Fire at house homeowner had just purchased and not yet moved into

Awilda Pimental closed on a new home on June 28, 2022.  She purchased a homeowner's policy from AmGuard Insurance Company that went into effect on the closing date, that included coverage for fire losses.

On July 22, 2022, before Pimental moved into her house, a fire significantly damaged it.  

Policy's definition of residence premises, and denial of coverage

The policy provided coverage for the "residence premises," which it defined as the "dwelling where you reside."  An endorsement to the policy amended the definition to "the dwelling where you reside . . . on the inception date of the policy period." The term "reside" was not defined by the policy.  (The decision did not address that the declarations page of the policy almost certainly would have listed the address as the residence premises or the insured location or similar language.)  

AmGuard denied Pimental's claim on the ground that she did not reside on the premises at the time of the fire, as she had not yet moved in.  

U.S. District Court holds that the insurer's interpretation of policy was not plausible, and was a 93A violation

In Awilda Pimental v. AmGuard Ins. Co., the United States District Court for the District of Massachusetts held that there were "multiple problems" with AmGuard's position.

First, according to the court, coverage applied to the dwelling where Pimental resided on the inception date of the policy, not the date she moved her belongings in and set up a household.  The inception date was June 28.  AmGuard ignored the "inception date" language entirely. 

Second, the policy had a vacancy exclusion that excluded coverage if the property was vacant for more than 60 consecutive days.   According to the court, that meant that a homeowner had 60 days from the closing date to move in before the vacancy exclusion applied.  AmGuard's position rendered the exclusion a nullity.  

The court pointed out that if AmGuard's position prevailed, there would never be insurance coverage between the day of a closing and the day the purchaser moves in sometime after that. "No reasonable purchaser of a new homeowner's policy would anticipate that gaping hole in her insurance coverage."  Moreover, under AmGuard's position coverage would never attach at all because the purchaser of a home does not reside in the home on the date of purchase, the inception date of the policy.  

The court held that the policy should be interpreted "sensibly" -- that it covered the dwelling beginning on the closing date, provided that the insured purchased the property intending it as her residence, and did not wait more than 60 days to move in. 

The court further held that AmGuard's interpretation of the policy was not plausible, and was therefore a violation of Mass. Gen. Laws ch. 93A.  However, the violation was not knowing or willful, so multiple damages were not awarded.  

My take 

In my view the decision was results-oriented.  The word "reside," for example, does not strike me as ambiguous.  Coverage was not illusory, because there would be circumstances where the coverage would come into play under the insurer's interpretation -- but not, as the court pointed out, for a new homeowner.  For that reason the court was correct that its interpretiation was "sensible" -- it would indeed by absurd for there to be no property coverage between the closing date and the date the homebuyer moves in.