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Are You an Insured? First-Party Relationship to the Insurance Contract - Insurance Coverage

Insurance Coverage

Posted on: May 23, 2018
By Robert S. O'Dell, O'Dell & Associates PC
An insurance policy is issued by an insurer to a named insured to provide coverage for specified risks of loss and with certain conditions and exclusions.  Insurance policies are a contract, and are governed by the same rules of construction as other contracts.  Briles v. Wausau Ins. Companies, 858 N.E.2d 208, 213 (Ind.Ct.App.2006); Buckeye State Mut. Ins. Co. v. Carfield, 914 N.E.2d 315, 318 (Ind. Ct. App. 2009).   As with other contracts, the interpretation of an insurance policy is a question of law.  Id. When interpreting an insurance policy, the court’s goal is to ascertain and enforce the parties' intent as manifested in the insurance contract.  Id.  Here, we will examine whether a person may qualify as an insured under the policy contract. 
The insurance contract is usually represented by a written policy containing a list of coverages, conditions and exclusions, as well as a declaration page listing the names of the insured parties, the property to be covered, the effective dates of coverage and the limits of coverage, among other items.  Typically, a contract requires the elements of an offer, an acceptance, consideration, and a manifestation of a mutual assent.  Indiana Bureau of Motor Vehicles v. Ash, Inc., 895 N.E.2d 359 (Ind.App. 2008).  Like most mortgages, leases and other financial agreements, an insurance policy contract, however, is often referred to as a “contract of adhesion” since its terms are not negotiated between the parties, and the insured must accept the terms of the pre-printed insurance policy as it is written or decline coverage altogether.  Earl v. State Farm Mutual Automobile Insurance Company, 91 N.E.3d 1066 (Ind.App. 2018). 
An insurance policy has been interpreted to create a special relationship between the insured and the insurer.  Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 518 (Ind. 1993).  Generally, only parties to a contract or those in privity with the parties have rights under the contract.  OEC-Diasonics, Inc. v. Major, 674 N.E.2d 1312, 1314-1315 (Ind. 1996).  Often, it is important to determine who the parties to the contract are.  This can be important, as only the parties to the contract have any right to enforce those terms under the contract.
First, the person listed as an insured or “named insured” on the declaration page will be considered insured under the policy, subject to the terms, conditions and exclusions of that policy.  Sometimes, a policy will specifically reference and name a person in the policy, such that they become an “additional named insured” even though the policy is not in their name.  A party named as an additional insured in an insurance contract was “a named insured.”  Rollins Burdick Hunter of Utah, Inc. v. Board of Trustees of Ball State University, 665 N.E.2d 914, 923 (Ind.App.1996); Liberty Mutual Insurance Company v. Michigan Mutual Insurance Company, 891 N.E.2d 99, 102 (Ind.App. 2008).  
Second, a person may qualify as an insured by definition under the terms of the policy.  Usually, the policy will contain a definition of an insured.  That definition may include the spouse of the named insured or other relatives residing in the same household.  Construing the term in insurance policies, it is given its broad meaning in “extension” cases, and is construed narrowly in “exclusion” cases.  Allstate Ins. Co. v. Neumann (1982), Ind.App., 435 N.E.2d 591; Aetna Cas. & Sur. Co. v. Crafton, 551 N.E.2d 893, 895 (Ind. Ct. App. 1990). An extension case involves the question of whether coverage should be extended beyond the named insured. Thus, the term “resident” will be given its broad meaning “with the traditional caveat that in choosing a broad or narrow construction of a word or phrase the choices are limited to the reasonable interpretation of the term as used.”  Neumann, supra, at 593, Crafton, supra.  
Relatives have been defined in many policies to mean a relative or other person under a certain age or under the care of a named insured.  Relative defined in policies to include persons living in the household related by blood, marriage or adoption, but excluding any person who owns a motor vehicle have been upheld.  Burkett v. American Family Insurance Group, 737 N.E.2d 447 (Ind,App, 2000).  Relative in an insurance policy does not include college students who are children of the named insured.  Quiring v. GEICO Gen. Ins. Co., 953 N.E.2d 119, 131 (Ind. Ct. App. 2011).  
Similarly, Indiana courts have determined that the term “resident” is not ambiguous.  Jones v. Western Reserve Grp./Lightning Rod Mut. Ins. Co., 699 N.E.2d 711, 714 (Ind.Ct.App.1998); Quiring v. GEICO Gen. Ins. Co., 953 N.E.2d 119, 129 (Ind. Ct. App. 2011).  The term “resident” in an insurance policy was “neither technical in nature nor a legal term of art”; rather, it was “unambiguous and well understood by the average juror” and, as such, did not require a definitional jury instruction. Armstrong v. Federated Mut. Ins. Co., 785 N.E.2d 284, 287-89 (Ind.Ct.App.2003), trans. denied; Quiring v. GEICO Gen. Ins. Co., 953 N.E.2d 119, 129 (Ind. Ct. App. 2011).  The term “resident” is given a broad meaning in provisions that, as here, extend coverage to persons other than the named insured, as distinguished from exclusionary provisions in policies. Aetna Cas. & Sur. Co. v. Crafton, 551 N.E.2d 893, 895 (Ind.Ct.App.1990); Quiring v. GEICO Gen. Ins. Co., 953 N.E.2d 119, 129 (Ind. Ct. App. 2011). However, we are “limited to the reasonable interpretation of the term as used.” Id.
Addressing the meaning of residence in an automobile insurance policy, this court observed that residence, as distinguished from domicile and from merely transient physical presence, “refer[s] to one having a fixed abode but only for the time being.” Allstate Ins. Co. v. Neumann, 435 N.E.2d 591, 593 (Ind.Ct.App.1982). “More than physical presence [is] necessary” for one to be a resident of a household, as there is also “a subjective element of intent.” Id. at 594. A person may have more than one residence. Id. at 593. Such a meaning of residence comports with the purpose of an “inclusion clause ... to provide coverage to persons having unrestricted access to the home and its contents.” Id. at 594. Subsequent cases have articulated a three-factor test for determining residence: “(1) whether the claimant maintained a physical presence in the named insured's home; (2) whether she possessed the subjective intent to reside therein; and (3) the nature of her access to the named insured's home and its contents.” Jones, 699 N.E.2d at 714 (footnotes omitted). In addition, “the fact finder must consider all of the evidence indicative of the claimant's living habits.” Id. at 714–15.
Quiring v. GEICO Gen. Ins. Co., 953 N.E.2d 119, 129 (Ind. Ct. App. 2011).  A person may have more than one residence.
Prior caselaw indicates a person can be a resident of two households, such as where parents have joint custody of minor children. Cf. Ind. Farmers Mut. Ins. Co. v. Imel, 817 N.E.2d 299, 305 (Ind.Ct.App.2004) (noting in context of grandparent visitation that a person may have more than one residence, but declining to find dual residency based on the facts). Yet, legal custody is but one factor in determining residence for purposes of an insurance policy, and is not of itself controlling; “[r]ather, the residence of a child of divorced parents must be determined by an evaluation of the unique facts of each case.” Crafton, 551 N.E.2d at 896. 
Quiring v. GEICO Gen. Ins. Co., 953 N.E.2d 119, 131 (Ind. Ct. App. 2011).  The Quiring Court found that an emancipated student was not a resident of his father’s household where the father had joint legal custody but not primary physical custody.  In Indiana, a child can become emancipated at 19, or earlier under certain circumstances.  See, Indiana Code 31-16-6-6.
In an automobile policy, the term “resident” was found to refer to one who dwelled permanently or continuously or occupied a place as one's legal domicile, and it was thus not to be construed broadly so as to extend coverage to wherever possible.  Armstrong v. Federated Mut. Ins. Co., App.2003, 785 N.E.2d 284 (Ind.App. 2003).  As noted above, the term "residence" is given broad meaning in cases in which it must be determined whether coverage should be extended to someone other than the named insured.  Chance v. State Auto Ins. Companies, 684 N.E.2d 569 (Ind.App. 1997).  To establish residence in a household of named insured, more than mere physical presence is necessary; and the party's subjective intent is an important consideration.  Chance, supra.   
In Allstate Insurance Company v. Shockley, 793 F.Supp. 852 (S.D.Ind. 1991), the Court developed a “two-prong test for determining whether a person is a household resident for insurance purposes.”  First, the person must maintain more than a mere physical presence in the household.  The person need not be a permanent member of the household and in fact can be the resident of another household at the same time, but must be more than a transient.  Second, the person must possess his subjective intent to stay in the household for more than a transitory period.  Whether such intent exists does not depend solely on the person’s assertions, but a court may also look for objective manifestations that demonstrate a subjective intent to stay.  The person will be a resident if all the facts demonstrate that he or she has maintained a fixed abode in the household for some continuous amount of time.  A person can be a resident simply by having a “fixed abode” in a household, even if only for the time being.  In Indiana, a person may be a resident of more than one household, and may be covered by more than one homeowner’s policy at a time.  
A household typically has been defined to mean a family unit.  In United Farm Bureau Mutual Insurance Company v. Brantley, 375 N.E.2d 235 (Ind.App. 1978), the Court found that an ex-wife was entitled to coverage a member of the household even though she was not a “named insured” where the insurance company issued the Family Automobile policy while the insureds were married and the agent was aware the vehicle was to be insured while the ex-wife was driving it, since there was no change in the risk to the insurer.  In American States Insurance Company v. Adair Industries, Inc., 576 N.E.2d 1272 (Ind.App. 1991), the Court stated that children dwelling with their parents as a family under one roof are members of the same household.  Household does not connote ownership or supremacy, but means the household of which he is a member.  Id.  
In Rzeszutek v. Beck, 649 N.E.2d 673 (Ind.App. 1995), the Court noted that a household may be defined as consisting of those who dwell under the same roof and compose a family; a domestic establishment.  The term has been said to be synonymous with “family” but broader, in that it includes servants or attendants, and all who are under one domestic head.  It is not restricted to relatives by blood or marriage.  See also, Erie Insurance Exchange v. Stephenson, 674 N.E.2d 607 (Ind.App. 1996).  
In Erie Insurance Exchange v. Stephenson, 674 N.E.2d 607 (Ind.App. 1996), the Court noted that courts have traditionally characterized “household” as an ambiguous term “devoid of any fixed meaning.”  The Court, citing to Mazzilli v. Accident and Casualty Insurance Company of Winterthur, Switzerland, 170 A.2d 800 (1961) as follows:
Household is not a word of art, its meaning is not confined within certain commonly known and universally accepted limits.  True, it is frequently used to designate persons related by marriage or blood, who dwell together as a family under a single roof.  But it has been said also that members of a family need not in all cases reside under a common roof in order to be deemed a part of the household.  
Id.  The Court concluded that there is no requirement that members of a household live under the same roof.  Also, it is possible to maintain two households or to live as a member of one household and still be the “domesticate” of a separate household.   The Court noted that Erie could have defined the word “household” in the policy, and without such a definition, the Court strictly construed the term against Erie.  
Note, however, that a “Household Exclusion” provision in automobile policies barring coverage for injuries sustained by persons related to the insured by blood, marriage or adoption residing in his household, does not contravene any public policy of Indiana.  Allstate Insurance Company v. Boles, 481 N.E.2d 1096 (Ind. 1985).  In the next article, we will examine when third-parties who do not meet these definitions may also be insured under a policy of insurance.
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