It mattered in Ment Bros Iron Works Co LLC v Interstate Fire & Casualty Co (2d Circuit, 11 December 2012). Ment Bros, a welding contractor, was working on the construction of a development at 40 Mercer Street in New York and caused a fire. The property-owner's insurer denied coverage on the grounds that the policy excluded liability for property damage 'arising out of the construction of residential properties' – including a 'condominium' but excluding an 'apartment'. The latter term was defined as 'a unit of residential real property in a multi-unit residential building or project where all units are owned by and titled to a single person or entity', the former in similar terms except that '... each unit is separately owned and titled'. The New York district court took the insurer's position: 40 Mercer was a 'residential property' but not an 'apartment', so there was no duty to defend or indemnify the insured.
The 2d Circuit reversed. Under New York law, an insurer has the onus to prove that a policy exclusion applies, but the insured bears the burden of establishing the applicability of an exception to the exclusion that would preserve coverage. Forty Mercer was clearly a 'residential property'. But was it an 'apartment' or a 'condominium'? At the time the fire occurred, the property developer had not actually sold any units (although it clearly intended to do so at a later date). The insured was, at the relevant time, still the sole owner of the entire property, making it an 'apartment' for the purposes of the policy. There was language in the policy which confirmed this interpretation, in making reference to the conversion of an 'apartment' to a 'condominium' on the filing of the required declaration under the state's condominium legislation. This appeared to reflect a rational choice to provide insurance where a piece of real property has a single owner but not where there are multiple owners of units on the site. Even if it could be said that the policy was ambiguous, that ambiguity would be resolved in favour of coverage. The exception to the exclusion applied.
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