A federal district court recently held that – where a boat owner stayed a plurality of evenings on his boat, purchased the boat after separating from his wife, terminated his apartment lease at the time of his boat purchase, obtained a boat slip with the intent of living aboard, and used the boat to shorten the commute to his workplace – the boat qualified as its owner’s “primary residence.” Progressive Garden State Ins. Co. v. Metius, 18-CV-2893, 2022 WL 214546 (D.N.J. Jan. 25, 2022).  Accordingly – after the boat burned and the boat owner filed a claim with its boat insurer to recover damages for the fire – the court held that the insurer’s “primary residence” exclusion in a Boat and Personal Watercraft Policy barred coverage. The court also held that the insurer was entitled to rescind coverage because the boat owner applied for a policy without disclosing that the boat was his primary residence.

About a year before purchasing his boat, the policyholder and his wife separated, and the policyholder moved out of their jointly owned home in Jersey City, NJ. Though the policyholder had changed his address to a second home in Blairstown, NJ, he nonetheless rented an apartment in Jersey City, NJ, where he worked. But within a month of purchasing his boat, he terminated his lease for that apartment. And he procured a boat slip at a Jersey City marina after asking the marina’s manager to excise a provision from the slip agreement requiring that he “no[t] live aboard” the boat.

While applying for a Boat and Personal Watercraft Policy for the vessel, however, the policyholder did not disclose that the boat would be used as a primary residence. The policy application required applicants to state whether their boats were for “Business/Commercial use,” “Pleasure use exclusively,” “Primary Residence,” “Racing/Speed contests,” or “Rented or leased to others.” The policyholder picked “Pleasure use exclusively” instead of “Primary Residence.”  Separately, the application included a “Boat Questionnaire” which asked whether the vessel the policyholder sought coverage for was “used as a primary residence,” and he answered “No.” The insurer issued the policy based on the information provided.

While staying overnight on his boat, a fire started, consuming the vessel, burning a neighboring boat, and threatening an oil spill. The policyholder sought coverage for damages to his vessel, for damages to the neighboring boat, and for environmental remediation. After conducting an investigation, the insurer denied coverage based on the primary-residence exclusion, which barred coverage for “bodily injury or property damage arising out of an accident while using a watercraft as a primary or permanent residence.” The insurer ultimately rescinded the policy, relying on a policy provision authorizing rescission for material misstatements by the policyholder. Coverage litigation followed.

The court found that the insurer was entitled to a declaration of non-coverage.  According to the court, the boat was the policyholder’s “primary residence,” which was an unambiguous phrase meaning “the main, principal place where the insured maintains a physical presence as an inhabitant” or “where the insured mainly physically resides.” Though the policyholder had testified that his second home in Blairstown was his primary residence, the court found that the policyholder’s subjective belief was not controlling. Instead, the court cited a totality-of-the circumstances test, which provides a “non-exhaustive list of factors to determine . . . primary residence” including “how often a person stays at a residence; how transient he is; how long he has resided in a residence; where he keeps his belongings; whether he lists a residence on important documents; whether he owns or rents; whether he shares a residence with others; and the subjective views of the person and other people living in his residences.” The court emphasized that the place a person spends most of his or her time is the most important factor in this inquiry.

Applying this test the court considered “the frequency and nature of [the policyholder’s] stays” on his boat, “the place he keeps his belongings[,] the place he receives mail[,] and the address he lists on important documents.” The court noted that: (1) the policyholder spent almost twice as many nights on his boat as anywhere else during the period at issue; (2) the policyholder testified that the boat was intended to shorten his commute to his workplace during the weekdays and that the Blairstown home was merely his “second home;” and (3) the boat “was an affirmative step in establishing a new residence in Jersey City” given that the policyholder needed to find somewhere else to live after separating from his wife, procured a slip for the boat with the express intent to live aboard it throughout the year, and terminated his Jersey City apartment lease upon taking possession of his boat. While the policyholder kept belongings in multiple locations – and listed multiples addresses for mailing – the court did not consider these factors dispositive.

The “the totality of the circumstances” sufficiently established that the policyholder was using his boat as his primary residence at the time of the fire. As such, the primary-residence exclusion barred coverage and the insurer was entitled to rescind the policy.