We all know that, when it comes to insurance policies, language is king. Coverage can turn on fine point distinctions in the meaning of words or seemingly minutiae-like differences between the choice of one term over another – even “an” versus “the” can be the difference between millions of dollars in coverage. In Lee v. Mercury Insurance, No. A17A0624 (Ga. Ct. App. Nov. 3, 2017) the Court of Appeals of Georgia took the rule, that policy language is king, to another level – coverage turned on the existence of a semicolon.

At issue was coverage for a residence destroyed by fire. I’ll try to simply the facts. Ronald Lee traveled frequently for work. To help a childhood friend, in financial distress, Lee purchased his home in Riverdale, Georgia, and allowed him and his family to continue to live in it free of charge. As part of the arrangement, Lee could stay there when he was flying through Atlanta. When Lee first took out the mortgage on the home he stayed there so many nights each week that the mortgage company considered it his primary residence. Later, he stayed there “maybe one night a week, every other week, or something.”

The home was destroyed by fire, killing Lee’s friend. Lee sought coverage for the loss from his homeowner’s insurer, Mercury Insurance. Mercury disclaimed coverage. Lee filed suit against Mercury alleging various theories of recovery. The trial court granted Mercury’s motion for summary judgment, that no coverage was owed, based on Lee’s failure to reside at the house as required by the terms of the policy. The case went to the Georgia appeals court on various issues.

For purposes here, the policy provided coverage as follows:

The “COVERAGE A — DWELLING” “We cover: the dwelling on the residence premises shown in the Declarations used principally as a private residence, including structures attached to the dwelling; materials and supplies located on the residence premises used to construct, alter or repair the dwelling or other structures on the residence premises.”

The policy defined “residence premises” as: “the one, two, three or four family dwelling, condominium or rental unit, other than structures and grounds, used principally as a private residence; where you reside and which is shown in the Declarations.” (semicolon not giant in the original).

The court didn’t have much problem concluding that coverage was owed, even though the house at issue was not where Lee resided. The court stated: “Based upon the placement of the semicolon in the definition of ‘residence premises,’ a layperson could reasonably understand the defined term to mean ‘the one, two, three or four family dwelling condominium or rental unit, other than structures and grounds, used principally as a private residence’ or ‘where you reside and which is shown in the Declarations.’” (emphasis added).

Since the home at issue was a family dwelling used principally as a private residence, one of the two independent definitions of “residence premises” was satisfied. So it did not matter that the other one – “where you reside and which is shown in the Declarations” was not.

The court noted that, for the dissent to reach its conclusion, it was required to rewrite the policy by removing the semicolon. This the court was not willing to do.

The court was also influenced by the fact that Mercury used the same definition of “residence premises” in its policies covering secondary residences. Thus, under Mercury’s interpretation,
“a secondary residence, such as a beach or mountain home, would be not be covered under the policy form, even though it is undisputed that Mercury used the same policy form to insure secondary residences.” But, under the court’s interpretation of “residence premises,” the policy would be prevented from being illusory for secondary residences. That’s a compelling argument

In any event, you don’t need to be Aesop to see the moral here -- when it comes to insurance policies, language – all of it -- is king.