Insurer’s Denial Of Fire Coverage A 93A Violation

A federal judge has ruled that an insurance company violated Chapter 93A by denying coverage under a homeowner’s policy for fire damage that occurred after the policyholder purchased her home but before she moved in. The policy defined the insured premises as the dwelling where one resides. It included an endorsement that modified this definition to the “dwelling where you reside … on the inception date of the policy period.” Less than a month after the purchase, but before she moved in, a fire caused over $300,000 in damage. The company denied the claim, arguing that she did not yet reside on the premises at the time of the fire and, therefore, contended that coverage had not been attached.

WHY THIS IS IMPORTANT… The homeowner argued that the interpretation was unreasonable and was an unfair and deceptive trade practice. The U.S. District Court Judge agreed that the insurer’s interpretation of the policy endorsement could lead to absurd consequences. He also noted that the insurer’s interpretation conflicted with a vacancy provision in the policy, which excluded coverage if the property was vacant for more than 60 days. This suggests that, in practice, a new homeowner would have 60 days from the purchase date to move in before the exclusion took effect. This ruling challenges many insurers’ defenses in 93A cases, stating their position is based on a plausible policy interpretation. It establishes that an insurer’s coverage position can be deemed implausible and in violation of Chapter 93A, even when it relies on a literal reading of the policy language.