Judgment on the Pleadings – Full Time Rental Not Covered Under HO 03

 An older insured individual sought to divest himself of assets by deeding the family home to his son, and then renting the home via a written annual lease to another individual.  A third party was injured on the premises, while a guest of the tenant.  An underlying action was brought by the injured party against both the father and the son, seeking damages for bodily injury.

 The subject home had been insured for many years, by an annually renewing HO 03 homeowner’s policy.  The insurer was not advised when the home was deeded to the son, or that the use of the home had changed from that of a residence premises to a leased premises.  The insured continued to pay premiums on his existing policy and the same was renewed in the year when the incident occurred.

 The insurer issuing this homeowners policy filed an action demanding a declaration that it  has no duty to defend or indemnify either the named insured father or his son from the claims asserted in the underlying action.  In granting a Motion for Judgment on the Pleadings, the Court held initially that the claims against the named insured’s son were not covered because he did not meet the definition of an insured person under HO 03.  In the more contested part of the case, the Court went on to rule that the rental of the insured premises did qualify as a business use, thereby excluded under the policy.  Although the policy did not specifically name rental use as coming within the definition of a business use, the Court found that this was so, as a matter of law.  The Court also reviewed and rejected the arguments of the insured and the claimant, that there was a reasonable expectation of coverage, merely because the premium was paid.

 Miles A. Kirshner, Esquire from the Pittsburgh office of Margolis Edelstein represents the insurer in Pennsylvania National v. Posey, No. GD 05-13549 (Court of Common Pleas of Allegheny County).  The Memorandum and Order of Judge Ronald Folino was entered January 30, 2006.  At the time of this writing, this Order is subject to potential appeal.  For a copy of this Memorandum, please contact Mr. Kirshner in the Pittsburgh office.