Uninsured Premises Exclusion Bars Coverage in Home Misrepresentation Suit

An insurer does not have to provide coverage for a couple accused of misleading the buyers of their former home because of an uninsured premises exclusion in the couple’s homeowners policy.

The lawsuit came about after Christopher and Dorothy Norton sold their Duxbury, Massachusetts, home in February of 2017 to two buyers. More than two years later, the buyers brought a suit against Christopher, claiming he made false statements causing them to purchase the property.

The complaint alleged that prior to the sale, the Nortons represented in a seller’s statement of property condition that the home had no water drainage problems and that there were no water, seepage or dampness issues in the basement. The complaint claimed that Christopher knew this was false because he had learned from the home’s previous owners that the basement flooded in the 1990s and in 2005.

In January and March 2018, the basement flooded again and caused significant damage to the home and the buyers’ personal property. As a result, the buyers had to purchase new personal property, raise the home by several feet, repair and replace the utility systems “and do extensive engineering, architectural, construction and site work including changing the topography of the land to prevent more damage from future flooding,” according to the Appeals Court document.

After the buyers filed their lawsuit, the Nortons submitted defense for the suit to their insurer, Norfolk & Dedham Mutual Fire Insurance Company. This was based on a homeowners policy Norfolk issued in September 2017 for the Nortons’ new home in Sandwich, Massachusetts.

The policy, which was in effect when the Duxbury property flooded in 2018, provides coverage for personal liability due to bodily injury or property damage. The coverage is subject to a number of exclusions, however, including one that applies to bodily injury and property damage arising out of an uninsured location.

According to the policy, the Duxbury property is not an insured location, so Norfolk brought an action seeking a declaratory judgment that it has no duty to defend or to indemnify the Nortons. A Superior Court judge concluded that Norfolk was entitled to judgment because the uninsured premises exclusion bars coverage. An appeal by the Nortons followed.

In Associate Justice Sookyoung Shin’s Appeals Court opinion, she wrote that the uninsured premises exclusion bars coverage for injury arising out of the premises of uninsured property because the insurer has not been given the opportunity to inspect and assess the property and has not been compensated to assume the additional risk. Without an opportunity for inspection, the insurer cannot know the risks associated with the uninsured property and cannot include them in the underwriting determination, she wrote.

“Indeed, by the Nortons’ logic, a subsequently issued homeowner’s policy on a different property would require the insurer to defend third-party claims arising out of any property that the insured formerly owned, and the insurer never inspected, as long as the event causing the bodily injury or property damage occurred during the policy period,” Shin wrote. “No reasonable insured or insurer would expect such a result.”

With this in mind, the Massachusetts Appeals Court affirmed the Superior Court’s judgment and concluded that the uninsured premises exclusion does apply and that Norfolk is under no duty to defend or to indemnify the Nortons in this suit.

The case is Norfolk & Dedham Mutual Fire Insurance Company vs. Christopher Norton & another.

Topics Lawsuits