Court: Insurer Does Not Have to Pay for Water Damage to “Unoccupied” House

Published on Dec 17, 2013 at 3:11 pm in General Blogs.

This year Marylanders are seeing an unusually cold and snowy December. A Maryland couple’s attempt to recover for the substantial damage to their home caused when the pipes burst during one winter has been unsuccessful. Maryland’s federal trial court ruled that State Farm Fire and Casualty Company did not have to pay the claim because the house was unoccupied.

Izatullo Khoshmukhamedov and Zoulfia Issaeva purchased a home in Potomac in 2005. They insured the residence with State Farm.

Khoshmukhamedov manages a business that supplies raw materials for the aluminum industry. The company is headquartered in Switzerland and has employees in Switzerland and Russia. The plaintiffs are Russian citizens. Khoshmukhamedov has a visa that prevents him from staying in the United States for more than 180 consecutive days.

They resided at the Potomac home during the first quarter of 2008 and again during September and October. When they left the house at the end of October, they intended to return to Maryland in February 2009.

Because they planned to return, they left many of their personal effects at the house, including furnishings and a car in the garage. They arranged for a friend to care for the home. The friend gathered the mail and placed it in the house, paid the bills and took care of minor maintenance such as fixing a screen. The friend also visited the house two or three times a month to inspect the inside and the outside for damage or intrusion and shoveled snow during the winter.

The electricity, cable and television service was disconnected. Because the pump that supplied water to the house ran on electricity, the plaintiffs believed that water would not flow through the piping. But, the water pump continued to receive electricity throughout the winter, leading to the pipes freezing and bursting, causing significant damage to the house and to the plaintiff’s belongings. The friend discovered the damage on February 6. State Farm denied the claim on the grounds that the home was “vacant/unoccupied” when it discovered that the plaintiffs had not been in the house since October.

Khoshmukhamedov and Issaeva filed a lawsuit in the United States District Court for the District of Maryland in March 2012 based on State Farm’s refusal to pay under the homeowner’s insurance policy. The court noted that the issue in the lawsuit was whether the home was unoccupied at the time of the damage.

The court began by addressing the plaintiffs’ argument that the word “unoccupied” was ambiguous. In Maryland, if a term in an insurance contract is ambiguous, and if ambiguity remains after consideration of extrinsic evidence, that term must be construed against the insurer. A contractual term is ambiguous “if, when read by a reasonably prudent person, it is susceptible of more than one meaning.”

“Maryland law commands that we reject Plaintiffs’ assertion of ambiguity,” the court said, explaining that Maryland’s Court of Appeals has twice ruled on the meaning of the word “unoccupied” in an insurance contract and in neither case did the court conclude that the term was ambiguous.

The definitions put forth in the two cases made it clear that the house was unoccupied when the damage was sustained, the court said, explaining that the plaintiffs had not resided in the house for four months when the pipes burst. More importantly, the court said, they had made the house uninhabitable during their absence by turning off the cable, phone service and electricity.

The plaintiffs said they had a “firm intent” to return in February 2009. They argued that the house never became unoccupied because they still intended to use it as their place of abode when they returned from abroad. Relying on an earlier decided case, the court said, intent to return is not relevant in determinations of occupancy. The court noted that another case provided an example, finding that “when the occupant of a dwelling house moves out with his family, taking part of his furniture and all the wearing apparel of the family and makes the place of his abode in another town, although he may have an intention of returning in eight or ten months, such dwelling house while thus deserted must be regarded as unoccupied.”

The plaintiffs also argued that their case was different from the two earlier lawsuits because they left substantial personal property on the premises. “This argument is based on a misreading of the case,” the court said. “Given that occupancy is absolutely inseparable from an actual, obvious abiding or living in the insured premises, no reasonable jury could find that the Potomac house was occupied at the time the damage was sustained. Given Plaintiffs’ extended absence from the home, the cutting off of utilities, the infrequency of visits to the home, and the complete lack of overnight stays, there is no genuine issue of material facts that the home was unoccupied at the time it sustained water damage.”

As a result, the court granted the defendants’ motion for summary judgment.

The case is Khoshmukhamedov, et al. v. State Farm Fire and Casualty Company.

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