Dallas Fort Worth Insurance Lawyer Blog
Weatherford lawyers and those in Mineral Wells, Aledo, Springtown, Willow Park, Millsap, Brock, Hudson Oaks, Azle, and other places in Parker County need to know how to determine residency in an insurance policy.
The Houston Court of Appeals, 1st District, decided a case in 1996, that provides guidance on this issue. The style of the case is, State Farm Mutual Automobile Ins. Co. v. Nguyen. Here is some background.
The court had to decide whether the family member exclusion in Nguyen’ automobile liability insurance policy applied and, therefore, limited the amount of their recovery. The court had to also decide whether their child, whose entire six-day life was spent in a hospital, was a “resident” of Nguyens’ “household.” The court held that the child was a resident of the household and that the family member exclusion limited Nguyens’ recovery to $20,000.
State Farm issued Nguyen an automobile liability policy, with policy limits on liability of $100,000. In 1992, Mrs. Nguyen, who was pregnant, was in a car accident. She sustained injuries that resulted in an emergency cesarean section. A daughter was born. She lived for six days but then died from her injuries in the accident. It is undisputed that the child spent her life in the hospital and never went home to her parents’ house.
Dr. Nguyen sued his wife for the child’s wrongful death caused by her negligent driving. State Farm defended the lawsuit. The trial court rendered a $100,000 judgment against Mrs. Nguyen. Dr. Nguyen, as third party beneficiary, and Mrs. Nguyen, as insured, sought insurance coverage from State Farm for the amount of judgment. State Farm denied coverage under the family member exclusion in the policy and filed a declaratory judgment action. The Nguyens brought a counterclaim, also asking for a declaratory judgment of coverage under the policy.
State Farm and the Nguyens filed motions for summary judgment. The Nguyens asserted that the family member exclusion in the policy did not apply to the facts of this case because their child never resided in Mrs. Nguyen’s household. In the alternative, the Nguyens asserted that, if their child were considered a resident of the household, the exclusion is void because it leaves Mrs. Nguyen uninsured, contrary to the statutory public policy that all drivers be insured. Therefore, the Nguyens contend, they are entitled to recover the policy limits of $100,000.
State Farm contended that the family member exclusion denied all coverage, or alternatively, if the family member exclusion was void up to the minimum statutory limits of $20,000, then it still excluded coverage in excess of the minimum limits.
The policy excluded liability coverage “for [the insured] or any family member for bodily injury to [the insured] or any family member.” “Family member” is defined as:
[A] person related to you [the insured] by blood, marriage or adoption who is a resident of your household. This includes a ward or foster child who is a resident of your household, and also includes your spouse even when not a resident of your household during a period of separation in contemplation of divorce.
The parties cited Texas and other cases deciding whether an injured person was a resident of an insured’s household. These cases all determined whether the insured’s household or some other household was the injured person’s residence. No case cited presented the unique facts of this case, in which there is no competing household. There are three possibilities: 1) the child was a resident of the Nguyens’ household; 2) the child was a resident of the hospital; or 3) the child established no residence before she died.
Other states’ courts have struggled with the issue of residency under an insurance contract. One court held that whether a person is a resident or member of a household in this context depends on: (1) living under the same roof; (2) in a close, intimate, and informal relationship; and (3) when the intended duration is likely to be substantial and consistent with the informality of the relationship. The court noted that no one factor is controlling, but that the elements must combine to establish the relationship. The court stated that living under one roof is neither the sole nor the controlling test of whether a person is a resident or member of a household. The intended duration of the relationship is a necessary element whether the attempt is to show the creation or termination of the relationship.
If this court held that the child was not a resident of the Nguyens’ household, it would have to conclude that she had no residence. Clearly, she was not a resident of the hospital. While she was there for all six days of her short life, there was no intention that she remain there upon recovery; the intention was that she would reside with the Nguyens. Here, the child could have but one residence, that of her parents, the insureds, for the purpose of determining the application of the family member exclusion.
Because the child was a resident of Mrs. Nguyen’s household, the family member exclusion applied, but only to limiting the amount of the recovery.
These situations have to be looked at by an experienced Insurance Law Attorney. One eye has to read the policy and its’ definitions while the other looks at the facts applicable to the case. After doing so, competent advice can be rendered.