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Farland v. Liberty Insurance Corporation

Supreme Court of Idaho, Boise

January 30, 2019

RYAN MC FARLAND and KATHRYN MC FARLAND, Plaintiffs-Appellants,
v.
LIBERTY INSURANCE CORPORATION, Defendant-Respondent.

          Appeal from the District Court of the Fourth Judicial District, State of Idaho, Ada County. Hon. Lynn G. Norton, District Judge.

          District court award of summary judgment in favor of insurance company reversed and remanded for further proceedings consistent with this opinion.

          McFarland Ritter, Meridian, for appellant. Ryan T. McFarland argued.

          Anderson Julian & Hull, Boise, for respondent. Robby J. Perucca argued.

          Burdick, chief justice

         The appellants in this case, Ryan and Kathryn McFarland, own real property in Garden Valley, Idaho. The property features three structures: a main cabin; a detached garage with an upstairs "bonus room"; and a pump house containing a geothermal well. The McFarlands insured the property with a policy through the respondent, Liberty Mutual Insurance Group, Inc. ("Liberty"). The policy provides two types of coverage for structures. Coverage A ("Dwelling Coverage") provides up to $188, 500 in coverage for "the dwelling on the 'residence premises'. . . including structures attached to the dwelling . . ." and Coverage B ("Other Structures Coverage") provides up to $22, 350 for "other structures on the 'residence premises' set apart from the dwelling by clear space."

         In February 2017, a radiant heater burst in the bonus room and damaged the garage and its contents. After the McFarlands filed a claim, Liberty stated that the damage was covered under the policy. Believing the damage to fall under the Dwelling Coverage, the McFarlands hired contractors to repair the damage. However, after Liberty paid out a total of $23, 467.50 in March 2017, Liberty stated that the coverage was exhausted because the damage fell under the Other Structures Coverage. This led the McFarlands to file a complaint in Ada County district court in July 2017, in which they alleged, among other claims, breach of contract based on Liberty's interpretation of the policy. The parties filed cross motions for summary judgment on the issue of whether the damage fell under the Dwelling Coverage or the Other Structures Coverage. Ruling that the policy unambiguously provided coverage for the garage under the Other Structures Coverage, the district court denied the McFarlands' motion and granted Liberty's. The McFarlands timely appealed. We reverse the award of summary judgment and remand the case for further proceedings.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         The McFarlands own roughly one acre of vacation property in Boise County, Idaho. The vacation property features three structures: (1) a cabin, containing a kitchen, bathroom, and bedroom; (2) a freestanding building which features a bonus room atop a garage; and (3) a freestanding pump house which pumps geothermal water from a well to the other structures for heat.

         According to the McFarlands, Kathryn McFarland contacted Liberty around September 2015 to purchase a homeowner's insurance policy for the vacation property. Kathryn described all three structures and explained that the McFarlands regularly used the garage and bonus room as a place for family members to recreate, work, and sleep. Liberty issued the McFarlands a policy providing for four types of coverage: the Dwelling Coverage; the Other Structures Coverage; Coverage C - Personal Property; and Coverage D - Loss of Use.

         The Dwelling Coverage provides:

We cover:
1. The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling; and
2. Materials and supplies located on or next to the "residence premises" used to construct, alter or repair the dwelling or other structures on the "residence premises."

         This coverage does not apply to land, including land on which the dwelling is located.

         The policy does not define "dwelling," but does define "residence premises" as:

a. The one family dwelling, other structures, and grounds; or
b. That part of any other building;

         where you reside and which is shown as the "residence premises" in the Declarations.

         "Residence premises" also means a two family dwelling where you reside in at least one of the family units and which is shown as the "residence premises" in the Declarations.

         Like the Dwelling Coverage, the Other Structures Coverage also defines its coverage by reference to the "residence premises":

         We cover other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection.

         This coverage does not apply to land, including land on which the ...


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