In Dardar v. Farmers Auto. Ins. Ass'n, 2023 Ill. App. 5th 220357 (Ill. App. Ct. 2023), the Illinois Fifth District Appellate Court reviewed the lower court's dismissal of a plaintiffs' complaint demanding property insurance coverage for the destruction of a home that they had never lived in. It agreed that the term "reside" was not ambiguous as to the terms of plaintiffs' specific agreement with the insurance company. The fact that the word "reside" has multiple meanings did not in and of itself render the term ambiguous as to this contract.
Plaintiffs, Judy and Ivan Dardar, inherited property from Judy's deceased brother and secured an insurance policy through Farmers Automobile Insurance Association. Although the couple never moved into the residence, they did complete renovations and were debating whether to move in or sell it. The Dardars filed a claim with Farmers after a fire destroyed the residence. Farmers denied the claim based on the fact that the Dardars were not occupying the property at the time of the fire, and due to this fact their claim was excluded under the terms of the policy. Neither side disputes that the Dardars were not physically living in the property at the time of the fire. Specifically the policy only covered an insured's residence premises, which included:
- The one family dwelling where you reside
- The two, three, or four-family dwelling where you reside in at least one of the units, or
- That part of any other building in which you reside.
The Dardars filed a claim against Farmers. Farmers filed a motion to dismiss and the trial court granted the motion based on the undisputed fact that the Dardars did not reside at the property. The Dardars appealed claiming the term "reside" in the policy was ambiguous.
Was the Term "Reside" Ambiguous?
In interpreting the meaning of an insurance policy the court's primary purpose is to give effect to the intentions of the parties at the time of the signing the agreement. In cases where the terms are clear and unambiguous, the court will simply apply the plain meaning of the contract. However, if the terms have more than one possible interpretation, the court will likely construe ambiguities against the drafter of the policy, or the insurer. If the provision in question limits or excludes coverage, courts are likely to interpret that provision in favor of the insured. A court must also, "construe the policy as a whole and take into account the type of insurance purchased, the nature of the risks involved, and the overall purpose of the contract." American States Insurance Co. v. Koloms, 177 Ill.2d 473, 479 (1997).
In this case, the Dardars asserted that the term "reside" was ambiguous. It pointed to a similar case where the insureds lost the property to fire, but were not occupying or living in it at the time of the fire. In Lundquist v. Allstate Insurance Co., 314 Ill.App.3d 240, 248(2000), the court found, "While it is clear that physical presence is a necessary component of residence, it is unclear what degree of physical presence is necessary before someone is deemed to reside in a particular location. We believe this provision is subject to more than one reasonable interpretation, and therefore, is ambiguous." The Lundquist court relied on FBS Mortgage Corp. v. State Farm Fire & Casualty Co., 833 F.Supp.688, et.seq. (N.D. Ill.1993). Further, in cases where a term is ambiguous courts do not have a choice of what interpretation to choose, but rather "must construe the policy in favor of the insured and against the insurer that drafted the policy." Employers Insurance v. Ehlco Liquidating Trust, 186 Ill.2d 127, 141 (1999).
The court was unpersuaded by the case law proffered by the Dardars and found that the cases differed from the one at hand on a basic level. Namely, the term "reside" was not ambiguous in the contract between the Dardars and Farmers as it was in the cases cited. The parties in the caselaw offered to the court had lived in the insured residence at some point or in some capacity, even if limited. Here, the Dardars never lived in the home and had not even decided whether or not they would ever live in the home. The fact that they engaged in renovating the home and obtained insurance coverage for the premises was not sufficient to establish any form of residency.
The court noted that the mere fact that the term "reside" has more than one definition does not make it ambiguous in all circumstances. The facts of the case here clearly showed that the Dardars had not resided in the home under any possible definition of the term. Therefore, the court found the term "reside" in the contract unambiguous and affirmed the decision by the trial court.