Michigan Court of Appeals rules that rental property owners are not protected by home owner insurance policies and must obtain “rental dwelling policies”.

In the recent Michigan Court of Appeals (Unpublished) Case Washington v. Allstate Prop. & Cas. Ins. Co. the court of appeal ruled that a property owner acting as a landlord must obtain a rental dwelling policy and is not covered under a homeowner policy.

The case arose from an insurance policy Allstate issued to Washington in 12/08. He testified that in 4/08 he purchased a residence intending to operate it as a rental property. After finishing the necessary repairs, he contacted Allstate to obtain insurance for the property. He called Allstate's "800" number and spoke with an Allstate employee about an insurance policy. He claimed, and Allstate conceded for the purpose of its summary disposition motion, that Washington requested a landlord, or "rental dwelling," insurance policy. After completing the application process and receiving a quote over the phone, Washington purchased the insurance policy. Allstate mailed Washington a copy of his insurance policy. He claimed he read "the important stuff" in the policy, but did not read the entire policy. His policy was a "homeowners policy." In 1/09, he obtained a tenant, who occupied the residence until the property suffered damage due to an arson fire in 4/9. During its investigation of Washington's property loss claims, Allstate learned for the first time that he was not residing at the insured premises, but rather, was operating it as a rental property. Allstate refused to pay Washington's claims under the policy, which required him to reside at the insured property. The court of appeals upheld the denial of insurance coverage as the policy defined "dwelling" as "the single family building structure identified as the insured property on the Policy Declarations, where you reside and which is principally used as a private residence." This definition stated that the "dwelling" is the "insured property" where the insured resides. Also, the policy defined "insured premises" as "the residence premises[,]" and that term was defined as "the dwelling, other structures and land located at the address stated on the Policy Declarations."

                The lesson learned is that if you are a property owner you must obtain a rental dwelling policy and a simple homeowner policy will not provide coverage.