Eleventh Circuit Court of Appeals Interprets Coverage Limits of Homeowners Insurance Policy for a Non-Primary Residence

By Michael J. Raudebaugh

While construing the language of a homeowners insurance policy issued in Georgia, the Eleventh Circuit’s latest opinion may have implications for Florida policyholders litigating in federal court.

In Walker v. State Farm Fire & Cas. Co., the United States Court of Appeals for the Eleventh Circuit was asked to interpret the limits of coverage for a homeowners’ policy where the insured did not use the insured property as his primary residence. The dispute arose when the plaintiff-appellant was injured while delivering food to a home owned by the insured in Stone Mountain, Georgia. At the time of the accident, the insured rented out the home and did not live there. State Farm insured the property through a policy wherein it agreed to indemnify the insured in a suit for bodily injury up to the policy limits and provide a defense at its expense by counsel of its choice.

The Eleventh Circuit carefully considered the policy’s language, stating that coverage did not apply to liability “arising out of any premises currently owned or rented to any insured,” which is not an “insured location.” The policy defined “insured location” as “the residence premises” and “the part of any other premises, other structures, and grounds used by you (the named insured) as a residence. This includes premises, structures, and grounds you acquire while this policy is in effect for your use as a residence.” Furthermore, “residence premises” was defined as the dwelling or building structure” where you reside and which is shown in the Declarations,” which specifically listed the home in Stone Mountain.

After the insured was sued by the plaintiff-appellant, State Farm initially accepted coverage and provided defense counsel on behalf of its insured but later revoked its coverage and defense. The plaintiff-appellant obtained a judgment against the insured for the amount of the policy limit and then brought a breach of contract action against State Farm as the insured’s assignee and on his own behalf. The district court granted State Farm’s motion to dismiss, finding that the policy plainly required that the insured use the property as his residence for it to be covered. 

The Eleventh Circuit affirmed the district court’s dismissal, finding the policy was unambiguous under Georgia law. It also explicitly determined that Georgia law permits an insurer to require that the insured reside at the insured premises to maintain coverage under the policy. This is in contrast with some Florida case law interpreting similar policy language, where there has been much more willingness to strictly interpret policies with respect to whether an insured must use the insured property as his or her primary residence. These cases have placed the burden on insurers to draft precise policy language if they want to exclude coverage from rental properties. See, e.g., Harrington v. Citizens Prop. Ins. Corp., 54 So.3d 999, 1003 (Fla. 4th DCA 2010) (holding that Citizens failed to use more precise language in defining “insured location” and “residence premises”); but see Arguelles v. Citizens Prop. Ins. Corp., 278 So. 3d 108 (Fla. 3d DCA 2019) (granting summary judgment for Citizens under policy defining “residence premises” as the “unit where you reside”).  Regardless of whether courts in Florida will respond to the Eleventh Circuit’s expansive interpretation of the policy language in Walker, the case provides useful reminders to both insurers and litigators. Insurers should be encouraged to draft policies with the most precise language possible when defining the limits of coverage. Litigators should pay close attention to policy language and work to develop evidence to fit the most reasonable and unambiguous interpretation of those provisions.