New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

David A. Paterson
Governor

James J. Wrynn
Superintendent

OGC Op. No. 10-11-08

The Office of General Counsel issued the following opinion on November 22, 2010, representing the position of the New York State Insurance Department.

Re: Anti-Arson Application

Question Presented:

Must an insured complete an anti-arson application under N.Y. Ins. Law § 3403 (g)(1) (McKinney 2007) where the insured house is occupied by the insured’s mother who transferred the deed to the property to her daughter but retained a life estate in the property?

Conclusion:

Yes. The insured must complete and file an anti-arson application.

Facts:

It is reported that the inquirer’s wife’s mother deeded the title to a two-family house to his wife, but retained a life estate in the house and continues to reside there. His wife does not reside in the house. He also reported that the property is taxed as if his mother-in-law were the owner, and asserts that, “she retains the right to rent payments (upstairs tenant in two-family house),…” and that she reports the rent as income on her tax return. He reported that he received notice from the insurance company that insures the house asking that an anti-arson application be submitted to effectuate the upcoming policy renewal.

Analysis:

Insurance Law § 3403(g)(1) is relevant to this inquiry. It provides that an anti-arson application is mandatory for all insurance policies covering the peril of fire or explosion, other than those providing coverage on properties that qualify for the filing exemption under the statute as “owner-occupied real property used predominantly for residential purposes which consists of not more than four dwelling units.” An insurer may not enter into a contract of insurance without first obtaining an anti-arson application unless an exemption applies.

The purpose of requiring the completion of an anti-arson application pursuant to Insurance Law § 3403 is to help guard against arson. In an anti-arson application, the insured must provide additional information to the insurer on an application for insurance on real property and buildings and improvements that are located in New York City, Buffalo, or Rochester.

As the inquirer pointed out, an opinion of the Insurance Department’s Office of General Counsel, OGC Opinion No. 07-11-06 (November 27, 2007) addressed this exemption and concluded that, “The term ‘owner-occupied’ means just that: an owner that occupies a building. There is no exemption from filing the anti-arson application where a family member who is not also an owner is the occupant of the applicable property.” He asked whether the aforementioned OGC Opinion applies to the factual situation that he posited.

Black’s Law Dictionary, 8th Ed. (West 2004) defines a “life estate” as “an estate held only for the duration of a specified person’s life, usu. the possessor’s.” In USA v. Baran, 996 F. 2d 25 (2nd Cir. 1993), the US Court of Appeals for the Second Circuit addressed what a life estate is, holding that: “New York authorities recognize that a life estate can be created by reservation in a deed…. The phrase ‘life estate’ has a well-established meaning. It is an estate in land giving the life tenant full and exclusive possession of the property for the duration of the life tenant’s life.”

Thus, a life estate creates an interest in real estate, but not a full ownership interest; a life estate is just a right to occupy and possess. A life tenant does not have a fee simple title through which ownership of the property may be conveyed to another person. Although a person who holds a life estate in real property or “life tenant” has a duty to pay taxes on the property he occupies, a life tenant cannot sell title to the real property. The right to occupy the premises is limited to the life of the tenant or other measuring life. The life tenant does not have title to the real property and, therefore, is not the “owner” of the property for purposes of the exemption in § 3403(g)(1). Therefore, under the circumstances that the inquirer presented, the property occupied by the mother does not qualify for the statutory exemption from the requirement because the owner of the property -- his wife -- does not occupy the property. Accordingly, the anti-arson application must be completed and filed.

For further information you may contact Associate Attorney Jeffrey A. Stonehill at the New York City Office.