469_C336
EXTENDED
RENTAL, NOT BUSINESS USE
|
Homeowner |
Business use |
|
Ambiguity |
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The Villanueva family (Villanuevas) purchased a summer home in a skiing area and
that home was insured under a homeowners policy from
Preferred Mutual Insurance Company (Preferred). Several years later, in
January, 2005, the home was destroyed by a fire. At the time of the fire, the Villanuevas’ home was occupied by renters under a
five-month lease.
The fire claim included a
request to be reimbursed for a personal property loss of approximately
$121,000. Preferred advised the Villanuevas that it
considered the extended rental to be a business use and, therefore, the
personal property claim was subject to a $2,500 sub-limit that applied to
personal property used for business. The Villanuevas
sued Preferred, seeking summary judgment and a lower court found in favor of
their suit. Preferred appealed the decision.
In the appeal, Preferred
reasserted its argument that the five-month long rental represented a business
use. The higher court paid particular attention to the policy’s relevant
language. The policy defined business as:
“including
the rental of property to others. It does not include the occasional rental for
residential purposes of the part of the “insured Premise’ normally occupied
solely by “your household.”
Preferred claimed that a
five-month rental agreement falls outside of what should be considered
occasional. The court agreed that the insurer’s interpretation was reasonable.
However, it also considered that:
·
this
instance was the only time the Villanuevas had rented
the home
·
the
Villanuevas had used the home prior to and had
planned to continue to use the home as a residence after the rental period
·
the
policy did not define “occasional”
In light of their
examination, the higher court found that the extended rental did not fall
outside what could be considered an occasional rental, which was allowed by the
policy wording. The lower court decision in favor of the Villanuevas
was upheld.
Robert Villanueva et al.,
Respondents, v. Preferred Mutual Insurance Company, Appellant. Supreme Court, Appellate Division,