Allstate wins coverage battle; overturns jury verdict for damage caused by frozen pipes
Mary McGrath insured her home in Gaylord with Allstate for years. In 1992, she began spending winters in Florida and executed a "keep full" agreement with Gaylord Gas in order to assure that the home stayed heated during the months she was gone. In 1998, McGrath developed dementia and her daughter, Cathy, moved in with her to care for her. By 2003, however, Cathy could not adequately care for McGrath and mother and daughter moved to a Farmington Hills apartment to be nearer to family support. Cathy notified Allstate of the change in billing address but it did not occur to her to Allstate that the house would now remain vacant most of the year. In the meantime, Gaylord Gas failed to deliver during the winter of 2005, the pipes froze and burst, and the house suffered substantial damage. Allstate refused to pay for the damage and McGrath's Conservator filed a lawsuit.
After a trial, the jury concluded that Allstate should pay for the damage to the house. Allstate appealed and enjoyed the good fortune of having the appeal signed to Henry Saad and Christopher Murray, two appellate judges who always vote for the insurer. The appelate court ruled that under the policy language, Allstate's coverage was lost when McGrath left the home to "live" in Farmington. It also ruled that language specifically providing coverage for frozen pipes if the insured takes reasonable precautions to prevent them, did not apply because McGrath's was not a "temporary" absence.The family had argued that language in the policy which could require that McGrath "reside in the home" was really intended to identify the home "where McGrath lived" at the time of purchase and that it remained her "residence" under the law, since most of her belongings were still in the home. The appelate judges held that the family could not apply sophisticated "residency" definitions in the law, as the trial judge had allowed, to satisfy the residency requirement.
The family also argued that Cathy's undisputed change of billing address constituted adequate notice of the change in McGrath's status as a "resident," but Saad, et al., disagreed. The judges pointed to the provision requiring the insured to inform Allstate of "any changes in title, use or occupancy" and ruled that the McGrath's notice of a change in billing address was not adequate to satisfy this obligation.
Most insureds don't get a copy of their auto or home insurance policy when they buy the coverage. Virtually no insureds read the policy when it arrives in the mail weeks later, and if they do read it, they don't go back and re-examine it when a significant life change (such as dementia) occurs. The California Supreme Court once famously ruled that a typical insured person wouldn't understand the policy even if he or she did read it carefully. As a result of the insurer including "fine print" that binds an insured in a long document that most insureds aren't really familiar with, many insureds end up paying for illusory insurance coverage that will not protect them if and when a catastrophe occurs.
Sadly, with insurance allies dominating Michigan's appellate courts, insureds are subject to a duty of understanding their insurance rights and obligations which most folks simply cannot satisfy. Once, this problem was addressed by the Supreme Court's application of the "reasonable expectation of the insured" to determine coverage issues, but the Engler Justices rejected this doctrine for Michigan several years ago.
Nor can insureds rely upon their "agent" for advice, as in many cases, the same judges have ruled that the agent's only duty is to the insurer to sell more insurance. It is a sad state of affairs, but one unlikely to change in the future.