• When in Doubt - Define It! The Superior Court Redefines “Household” and Reminds the Insurance World of a Valuable Lesson
  • August 16, 2012 | Author: Brooke R. Ginty
  • Law Firm: Marshall Dennehey Warner Coleman & Goggin, P.C. - King Of Prussia Office
  • Key Points:

    • In the context of an insurance policy, the term “household” can have two meanings.
    • Because insurance policies are contracts, courts construe ambiguous against the drafter of the contract.
    • It is important to define key terms found within policies of insurance.

    In the context of insurance policies, statutory law and common law have shaped many of the commonly used terms. Terms such as “resident” and “domicile,” while open to interpretation based on the facts presented in each case, have been clearly defined by Pennsylvania law for quite some time. Until recently, the Pennsylvania Superior Court had also defined the commonly used term “household” to mean “those who dwell under the same roof and compose a family." Boswell v. Carolina Insurance Company, 509 A.2d 358, 361-362 (Pa. Super. 1986), citing Drake v. Donegal Mutual Insurance Co., 422 F.Supp. 272 (W.D.Pa.1976). However, in Miller v. Poole, 2012 Pa. Super. LEXIS 1040 (June 4, 2012), the Superior Court abandoned its definition of “household” and, in what appears to be a case of first impression, held that the term “household” is ambiguous and open to two interpretations: (1) living in the same home as “you” [the Named Insured] or (2) living on the premises insured by “you” [the Named Insured] under the policy of insurance.

    In Miller, Abe Poole moved into the home of his mother, Helen Poole, along with his 18-year-old son, Daniel Poole. The next day, on April 2, 2005, Helen Poole died. Abe inherited the home. He and Daniel continued to live there until September 2, 2005, when the home caught fire due to the actions of Daniel. The fire damaged the adjoining property of the plaintiffs, Scott and Glenda Miller, who sued Daniel, seeking compensation for their damages.

    The Millers obtained a default judgment against Daniel. The Wall Rose Mutual Insurance Company (Wall Rose), insurer of the residence premises of Helen Poole, the “Named Insured,” refused to indemnify Daniel Poole because he did not fit its definition of "insured." Wall Rose supported its conclusion based on the assertion that Daniel was not living with Helen Poole, in her household, at the time of the fire. The Millers appealed the matter to the Superior Court, contending that Daniel fit the definition of "insured" under the Wall Rose policy.

    On appeal, the Superior Court was asked to interpret the Wall Rose policy provision that defined who was an “insured.” The Wall Rose policy defined “Insured” as:

    1. “you” [the person listed as the “Named Insured” on the Declarations Page, here, Helen Poole];
    2. “your relatives” if residents in “your” household;
    3. persons under the age of 21 residing in “your” household and in “your” care or in the care of “your” resident relatives; and
    4. “your” legal representative...

    The Millers argued that Daniel was an insured under subsection (b), as he was a relative of Helen Poole and lived in her home at the time of the fire. The trial court, using the Superior Court’s definition of “household” to mean “those who dwell under the same roof and compose a family,” held that Daniel was not an insured of Helen Poole’s household because Helen Poole had died. Therefore, Daniel did not live under the same roof as Helen, the "Named Insured."

    On appeal, the Superior Court used common tenets of contract law to opine that “household” was ambiguous and open to more than one interpretation. The analysis of subsection (b) by the court hinged on the term “household,” since it was clear that Daniel was a relative of Helen Poole and that he lived on the insured premises at the time of the loss. The court held that the term “your household” could mean either that: (1) the insurance policy required Daniel to live with Helen Poole at the time of the loss [Wall Rose's interpretation]; or (2) the insurance policy required Daniel to live on the premises insured by Helen Poole under the Wall Rose policy of insurance [the Millers' interpretation]. Finding that the term “household” had two different meanings, the court held against the drafter of the policy, Wall Rose, and held in favor of the Millers.

    This holding is very important for insurance companies to take note of as it is the first time the Superior Court has held that the term “household” is ambiguous. When analyzing contracts, courts will always hold against the drafter of the contract because, quite simply, the drafter wrote the language of the contract and had the power to define any term it sought fit. In Miller, the court specifically stated: “As the drafter, Wall Rose had within its power to define the terms 'resident' and 'household'.” Therefore, while it appears that this case is simply an exercise in analyzing the term “household,” there is a broader lesson to be found: When in doubt - DEFINE IT!