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.
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 the article "Who Really Lives (or Doesn't) in Your Household?" 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 website.)
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. 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.