Coverage Under An Auto Policy; Family Member Exclusions

Insured’s in Weatherford, Mineral Wells, Aledo, Willow Park, Hudson Oaks, Azle, Brock, Millsap, Springtown, Cool, Peaster, and other places in Parker County would be confused when trying to figure out some aspects of coverage as it relates to auto insurance policy’s. The meaning of “Family Member” in a policy might sound pretty easy at first glance, but looking at individual situations makes it not so easy. What about when people just filed for divorce, are separated, not married but living together, away at college or trade school? Are they a “Family Member?” Here is a different look:
The Houston Court of Appeals, First District, issued an opinion in 1996, that is interesting. The style of the case is, State Farm Mutual Automobile Ins. Co. v. Ms. Hanh Thi Dinh Nguyen, and Dr. Bay Van Nguyen, Individually and as Next Friend of His Deceased Infant Daughter.
This appeal is from a summary judgment hearing wherein the court had to decide whether the child in the case, whose entire six-day life was spent in a hospital, was a “resident” of the insured’s household.
State Farm had issued an auto liability policy to the Nguyen’s with policy limits 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.
At a resulting summary judgment hearing, 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. There were other legal issues asserted.
State Farm contended that, to the extent it is valid, the family member exclusion applies and precludes coverage because the infant was a resident of Mrs. Nguyen’s household.
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 court said there were three possibilities here: 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.
The controlling test of whether persons are residents of the same household at a particular time, within the meaning of the policy in question, is not solely whether they are then residing together under one roof. The real test is whether the absence of the party of interest from the household of the alleged insured is intended to be permanent or only temporary — i.e., whether there is physical absence coupled with an intent not to return.
The case then discussed other cases and other cases from other states.
The court then said they agreed with a ruling which stated, “‘resident‘ is an elastic and amorphous word having different shades of meaning depending upon the context in which it is employed.” Moreover, the court considered two factors to be especially significant to the present case, the age and self-sufficiency of the injured person and the absence of another lodging. Both favor a finding that the child was a resident of Mrs. Nguyen’s household.
“If we were to hold that the child was not a resident of the Nguyens’ household, we 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.”
In this case, the court ruled that the family member exclusion applied. As a result, the Nguyen’s were not able to recover the full $100,000 under the policy. Instead, they were limited to the state minimum at that time, of $20,000. To understand this part of the ruling, someone would need to consult with an experienced Insurance Law Attorney.