On May 30, 1997, Alex and Janet Yeung signed a contract to purchase a house from The Ryland Group. The Yeungs then entered into a lease back to Ryland that would permit Ryland to use the property as a model home and sales office for six months. According to Mr. Yeung, when he called his Allstate Insurance agent to order homeowner’s insurance, he told the agent about his intent to lease the property. However, when the agent filled out the application and policy binder, the agent wrote that the house would be owner occupied with no business use. The Yeungs denied that they read that, and nothing further was discussed until after the fire.

The Yeungs took title to the property on June 30. Ten days later, fire destroyed the house. Allstate denied coverage because the house had been leased for business purposes.

Allstate was sued for failing to pay for the damages to the house. At trial, the parties agreed to submit a single factual issue to the jury. The jury accepted the Yeungs’ version of the facts, finding: “Mr. or Mrs. Yeung notified, informed or advised Allstate’s agent prior to the issuance of the policy that their home was to be leased back to Ryland immediately after the purchase and that the Yeungs would not occupy the property during that lease term.”

Based upon the jury’s finding that the Yeungs had advised Allstate of their intended use of the property, the court held that Allstate had waived the condition of occupancy, and that Allstate was estopped from denying coverage for the fire.

Allstate v. Reliance, 141 Md. App. 506, 786 A.2d 27 (decided December 3, 2001).

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