Translation:Tim speaks German because he lived in Germany a lot.
That's interesting, because it's also unusual to see "he lived in Germany a lot". I could imagine hearing it, but never, ever writing it. Rather "he lived in Germany a long time" (which is marked wrong, btw).
The only case I can think of this making sense is if Tim moved into and out of Germany many times. But unless that was established in previous context, this sentence would require "he lived in Germany a lot during <some period>"
Honestly, any version of this sentence that uses "a lot" for talking about how long somebody lived somewhere, instead of "for a long time" (or "many times," if the time he spent living there wasn't consecutive), could easily be interpreted as being about how intense Tim's life was when he lived in Germany. This is why "a lot" is a poor choice of wording for this sentence, regardless of the intent.
It's odd but OK. There is consistency in the course много = a lot. With a different verb phrase "a lot" would sound quite normal; "Tim speaks German because he spent a lot of time in Germany, but the point of the exercise is to demonstrate the past tense of "to live" not "to spend time."