Household, Family, and Other Problems in Homeowners Policy Language
March 2005
Most insurance contracts are contracts of
adhesion, and policyholders "adhere" to wording chosen and punctuated by insurers.
To keep insurers from abusing their monopolistic word usage authority, regulators
typically require plain language contracts. Underlying this public policy is
an almost naïve assumption that if policies are written in plain language, words
will speak so clearly that consumers need not concern themselves with linguistic
trickery.
by Tim Ryles,
Ph.D.
Tim Ryles Consulting
You may recall the following conversation from Lewis Carroll's classic, Through the Looking Glass.
- "I don't know what you mean by 'glory,'" Alice said. Humpty Dumpty smiled
contemptuously. "Of course you don't—till I tell you. I meant 'there's a
nice knockdown argument for you.'" "But 'glory' doesn't mean 'a nice knockdown
argument,'" Alice objected.
- "When I use a word," Humpty Dumpty said in a scornful tone, "it means
just what I choose it to mean—neither more nor less."
Humpty Dumpty and Alice were not debating the finer points about policy language
drafted by insurance companies, but it takes only a modest imaginative leap
to see the parallels.
Despite plain language advocacy and Flesch score requirements in personal
lines, experience teaches that a high Flesch score on readability does not necessarily
translate into improved comprehensibility. One and two syllable words can be
just as obfuscating as polysyllabic paragraphs.
In an earlier article I described how a plain
undefined term, "resident," leads to widely divergent applications in the real
world of insurance. This article offers additional commentary on how failure
to define "household" creates similar problems.
Variations on a Theme: Where the Household Ends
I begin by citing the meaning of "Insured" in the Insurance Services Office,
Inc. (ISO), Broad Form HO–2 policy, which reads as follows:
- "Insured" means you and residents of your household who are:
- your relatives; or
- other persons under the age of 21 and in the care of any person
named above.
- "You" includes the named insured and spouse if a resident of the same
household.
The policy language links insured status to the American notion of family.
Insureds are, by definition:
- The named insured;
- The spouse of the named insured if [emphasis italics] a resident of
the same household;
- Resident relatives; and
- Persons under age 21 who are in the care of 1., 2., or 3.
Translation: "insured" encompasses both
relatives and nonrelatives, but to qualify as a nonrelative insured, a person
must be (a) under 21 years of age; (b) under the care of the named insured or
the named insured's spouse if a resident of the same household, or a relative
who resides in the same household; and (c) a resident of the insured household.
So, What's a Family?
"Family" is an integral part of a household in American thought. Webster's Ninth Edition, for example,
defines "household" as "those who dwell under the same roof and compose a family;
also: a social unit comprised of those living together in the same dwelling." Black's Law Dictionary says a household
is "A family living together" but also adds, "A group of people who dwell under
the same roof."
"Family," according to Webster's, is
"a group of people living together under one roof and usually under one head"
while Black's offers a more restrictive
view, defining "family" as "A group consisting of parents and their children—Also
termed immediate family." Black's second
meaning is "A group of persons connected by blood, by affinity, or by law."
Several courts follow family-based concepts in construing the meaning of
household. Georgia courts construe "household" as "a family living together"
and "family" is "a collective body of persons who live in one house or within
the same curtilage under one head or management." State
Farm Fire & Co. v Goodman, et al., 259 Ga App 62 (2002). Missouri courts,
summarizing views expressed in other jurisdictions, see "household" as "a word
to describe a close relationship, varying in detail, where people live together
as a family in a closely knit group, usually because of a close relationship
by blood, marriage or adoption and who deal with each other informally and not
at arms length." Cobb v State Security Ins. Co.,
576 SW2d 726 (Mo 1979).
Arguably, under the Missouri view, the family need not live under one roof
to be a household. This is precisely the view expressed in Mazzili v Accident & Casualty Company of Winterthur,
Switzerland, 35 NJ 1, (1961). In Mazzili,
Winterthur's insured had property on which two houses were located. Mr. Mazzili
lived in one house insured by Winterthur. Because the Mazzilis were separated,
his wife and son lived in the other. When a judgment was entered against the
wife in a tort action, she sought indemnification under Mr. Mazzili's homeowners
policy. The court held that the property was "all one place where the entire
family was living," therefore, finding that the estranged wife was part of the
household.
Consistent with the Missouri view, Indiana courts have also held that "[M]embers
of a family need not in all cases reside under a common roof in order to be
deemed a part of the household." Erie Insurance Exchange
v Daryl Stephenson and Dawn M. Huser, 1996. IN. 0000539. (Accessible
at VersusLaw for members of the Web site.)
Some courts have essentially neutralized the concept of a fixed abode in
construing the meaning of household. In Cincinnati Ins.
Co. v Jeffrey Argubright, 151 Ill App 3d 324 (1986), the court was asked
to construe the following definition of "Insured":
- "Insured" means you and the following residents of your household"
- Your spouse
- Your relatives
- Any person in the care of you or an insured spouse or relatives.
One readily notes that while the language applicable to nonrelative insureds
is less restrictive than ISO's policy, "household," nevertheless, seems to embrace
the same notion as in ISO's policy. In construing "household," the court concluded,
"Household connotes membership in a family group, not attachment to a building."
Taken to its logical extreme, this interpretation most likely expands insurance
coverage well beyond what Cincinnati Insurance Company ever envisioned.
Is "Household" Ambiguous?
It is generally conceded that "household," though widely used in insurance
policies, is not a term of art. When a word achieves term-of-art recognition,
it has a unique meaning in the business, profession, or trade in question (insurance
in this case). Because it is not a term of art, "household" is relegated to
commoner status. Hence, as the discussion above suggests, it is not surprising
that some courts find the term to be ambiguous, even to the point that one Missouri
court declared the term to be "a chameleon-like word." Cobb v State Security Ins. Co., 576 SW2d 726
(Mo 1979).
In Gibson v Callaghan, 158 NJ 662 (1999),
a grandson and his wife moved into the paternal grandmother's home to become
what most persons would recognize today as "housesitters" while the grandmother
recuperated from injuries at her daughter's separate residence. The grandmother
continued to maintain homeowners insurance on the home and intended to return
there upon recovery. When a dog owned by the grandson's wife injured an 88-year
old woman who subsequently sued the housesitters, the couple asked the insurer
(Allstate) for indemnity and defense under the grandmother's policy. Allstate
refused on the grounds that the grandson's wife was not an insured.
The "Definitions" section of Allstate's policy stated:
- "You" and "your"—means the person named on the declarations page as
the insured and that person's resident spouse.
- "Allstate", "We", "Us" or "Our"—means the company named on the declarations
page.
- "Insured person"—means you, and if a resident of your household: (a)
any relative; and (b) any dependent person in your care.
Allstate urged the court to accept a Black's
Law Dictionary definition of "household" and uphold a trial court decision
in its favor. (As noted above, Black's defined the term as "A family living together… Those who dwell under the same
roof and compose a family.")
In rejecting Allstate's proposed meaning of "household" the court said:
- [T]he meaning of "household" will vary depending on the circumstances
of a given case…. The insurance industry has known for almost forty years
that the term household is susceptible of several interpretations. If Allstate
intended to limit coverage … it could have so defined "household" in [the
insured's] homeowners' policy.
In contrast, other courts stop short of declaring the word ambiguous. California
appellate courts, for example, who find no difficulty in declaring the term
"resident" ambiguous, balk at the suggestion that household should be accorded
similar status. Affirming the general principle that whether a person is a member
of the household depends on factual circumstances, the court stated that the
absence of a definition does not render a term or phrase, ipso facto, ambiguous. [See Mehran Afrasiabi v State Farm Fire & Casualty Co.,
73 Cal App 4th 1183 (1999). See also George B. Mitroff
v United Services Automobile Association, 72 Cal App 4th 1230 (1999).]
Still, even without unanimity among the states, one might argue that if two
courts of similar jurisdiction construe the same language under similar circumstances
to mean different things, it is a reasonable inference that these divergent
views make a case for ambiguity.
What's a Humpty Dumpty To Do?
For insurers, the time to address the ambiguity issue is yesterday. In 21st
century America, the meanings of family and household are changing. These changes
are not only the subject of legislative struggles, but are being catalogued
by the official statistics that often underlie public policy. For example, the
November 2004 U.S. Census Bureau Report, America's
Families and Living Arrangements: 2003, finds it necessary to offer definitions
of two types of households: Family and nonfamily. The report also establishes categories
of unrelated subfamilies and reference people as ways of describing contemporary
living arrangements. It is only a matter of time before these concepts work
their way into disputes over undefined policy terms.
Humpty Dumpty could practice lexicographical tyranny because he did not have
to answer to any higher authority. Insurers are not clothed with such immunity.
As the few examples cited above indicate, failure to define what they mean sometimes
results in "a nice knockdown" of insurers. This signals a crack in Humpty Dumpty's
protective shell and we all know how hard it was to put the mythical character
back together again after his fall.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author’s employer or IRMI. This article does not purport
to provide legal, accounting, or other professional advice or opinion. If such advice
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