469_C301
NO COVERAGE
FOR OUTBUILDING
|
Homeowners |
Building Exclusion |
|
Ambiguity |
|
Miguel Arreguin
had a homeowners insurance policy issued by Farmers
Insurance Company of
After the policy was
issued, fire caused damage to the detached garage. When Arreguin
filed a claim, Farmers denied coverage, claiming that the
"Outbuilding" exclusion applied. Arreguin
sued Farmers for breach of contract and bad faith. The lower court found in
favor of Farmers; Arreguin appealed.
On appeal, Arreguin argued that the "Outbuildings" exclusion
was ambiguous, and it should therefore be interpreted in his favor. Farmers
argued that the exclusion was unambiguous, but that even if it was ambiguous, Arreguin had notice that the detached garage was an
"outbuilding" within the meaning of the policy.
The language of the Farmers
policy provided, in part: "Coverage B-Separate Structures: We cover other
structures on the residence premises separated from the dwelling, or connected
to the dwelling by only a fence, utility line, sidewalk, driveway, patio or
similar connection. Wall-to-wall carpeting attached to the structure is part of
the structure. We do not cover land or the value of land, including land on
which the separate structure is located or the cost to restore, replace, repair
or rebuild land. If a covered loss causes damage to a separate structure and to
the land on the residence premises, we do not cover any increased cost to
repair or rebuild the separate structure because of damage to the land. We do
not cover separate structures which are intended for use in business or which
are actually used in whole or in part for business purposes." The policy
also contained a restrictive endorsement that read, in part: "We agree not
to cancel this policy for 30 days from the date shown above. You and we agree
that this policy does not cover loss by / to: 1. ALL OUTBUILDINGS . . . This
endorsement is part of your policy. It supersedes and controls anything to the
contrary. It is otherwise subject to all other terms of the policy."
In an effort to prove that
all definitions of "outbuildings" included detached garages, Farmers
provided several definitions of "outbuilding." The Supreme Court of
Idaho found that these definitions demonstrated just the opposite. According to
the court, one definition of "outbuildings" included both adjoining
and separate buildings, while another included only detached buildings. This
inconsistency led the court to conclude that the definition of
"outbuilding" could vary. In addition, the court noted that there
were other exclusions in the policy that were described in "clear and
precise language," and that Farmers could have simply used the word "garage"
or another similarly clear and precise term if it wanted a detached garage to
be excluded. For these reasons, the court concluded that the
"Outbuildings" provision was ambiguous and should be strictly
construed against the insurer.
Farmers also argued that
regardless of whether the exclusion was ambiguous, Arreguin
had been notified that the provision excluded the garage. The court found that
the degree of Arreguin's notice was a finding of fact
to be determined at the trial court level. Thus, it would not consider the argument
on appeal.
The court reversed the
lower court's decision in favor of Farmers and remanded the case to the lower
court.
Arreguin vs. Farmers Insurance Company of