Move From Colorado to Missouri Defeats Coverage

Insured Must Reside at Premises at Time of Loss
Unrealized Future Intent Does not Create a Residence

Post 4860
Perla Olave owned a house in Thornton, Colorado, that was insured by American Family Mutual Insurance Company, S.I. In late 2017, Ms. Olave began spending a majority of her time in Missouri, and starting in March 2018, she allowed the family of her brother, Jamie Darci Olave-Hernandez, to live in the Thornton house. In September 2020, the house was damaged by fire. Ms. Olave had last stayed there in December 2019, and she had not spent a day in Colorado in 2020.

In Perla Olave; Jamie Darci Olave-Hernandez v. American Family Mutual Insurance Company, S.I., No. 23-1337, United States Court of Appeals, Tenth Circuit (August 15, 2024) the Tenth Circuit resolved the dispute over the meaning of the term "reside."

BACKGROUND

American Family denied Ms. Olave's and Mr. Olave-Hernandez's claims under the insurance policy on the ground that Ms. Olave did not reside in the Thornton house at the time of the fire and had not complied with the policy's requirement to notify American Family of her change in residence.

Ms. Olave and Mr. Olave-Hernandez (collectively, the Appellants) sued American Family and the district court granted summary judgment to American Family.

The Policy.

In December 2016, Ms. Olave represented in her application that she and her child would be the only residents of the Property, it would be her primary residence, and it would be owner-occupied. American Family renewed the policy in December 2019 (the Policy). The Policy's Declarations identified Ms. Olave as the named insured and the Property as a "Primary Residence".

Change in Occupancy.

In January 2018, she enrolled her child in school in Missouri and obtained a business license there. At that point, the Property was vacant. When the Policy was up for renewal in December 2019, Ms. Olave told her insurance agent that her mailing address had changed to Missouri, but that she was still living at the Property and was going back and forth to Missouri for work.

The Claim and Investigation.

The Property was damaged in an electrical fire on September 15, 2020. Ms. Olave was in Missouri.

The last time she had stayed at the Property was some weeks in December 2019; the time before that was in August 2019. But due to the COVID-19 pandemic, she had not spent a single day in Colorado in 2020. She also stated she had a Missouri driver's license, and her Colorado driver's license had expired in 2018.

American Family Denied Coverage.

In January 2021, American Family denied coverage because:

Ms. Olave's Colorado vehicle registration for a 2018 Jeep Grand Cherokee expired in 2018;
Social media posts by Ms. Olave since 2018 were from Missouri;
Ms. Olave was the owner of Frida Microblading Studio located in [the city of] Town and Country Missouri and Ms. Olave maintains her tattoo license with the State of Missouri;
A blog focused on Ms. Olave's business states that Ms. Olave "move[d] to the St. Louis area . . . to ensure that her daughter grew up around extended family;" and
Most notable, Ms. Olave registered to vote in Missouri beginning on 2/01/2018 and continuing through the date of loss.

Ms. Olave's residency at the Property the District Court identified four relevant factors:

the subjective or declared intent of the individual,
the formality or informality of the relationship between the individual and members of the household,
the existence of another place of lodging, and
the relative permanence or transient nature of the individual's residence in the household.

The District Court held that Ms. Olave breached her obligation under the Policy to notify American Family of her change of residence within 30 days.

The District Court granted summary judgment to American Family on the bad faith and statutory delay/denial claims.

DISCUSSION

Under Colorado law, residence denotes a place where a person dwells. It simply requires bodily presence as an inhabitant in a given place. Ms. Olave's focus on her intent, without regard to her physical presence, is not a reasonable interpretation of "reside" under Colorado law.

The Court Did Not Err In Holding The Misrepresentations Were Material.

A misrepresentation will be considered material if a reasonable insurance company, in determining its course of action, would attach importance to the fact misrepresented.

No reasonable juror could conclude that an insurance company would not attach importance to the alleged reason for Ms. Olave's travel where the Policy specifies a "work related travel" exception to the requirement to report the Property as "uninhabited" and  no reasonable juror could conclude that an insurance company would not attach importance to a statement of ownership of items at the Property in determining whether Ms. Olave truly resided at the Property, as she claimed.

ZALMA OPINION

A homeowners policy is a contract of personal indemnity that requires the person who is the subject of the insurance actually live in the property that is the subject of the insurance. Ms. Olave did not live at the Colorado house and lied to the insurer when she renewed the policy that she lived there as her primary residence. It burned when someone else lived there and she resided in Missouri not Colorado.

(c) 2024 Barry Zalma & ClaimSchool, Inc.

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