Filed: September 30, 2015
Opinion by: Krauser, C.J.
Insurance policy covering “any dependent person in [insured’s] care” was not ambiguous and did not cover an adult, non-relative who lived in insured’s household but had a job, paid modest rent, and was not under the control of the insured.
In June 2011, Plaintiffs were struck by an automobile that was negligently driven by Driver. Driver was twenty-two years old at the time, and the automobile involved in the accident was owned by Insured. Insured’s automobile insurance limit was $500,000, an amount Plaintiffs alleged was insufficient to cover their damages. Insured also held an “umbrella” policy with Defendant that supplied up to $5,000,000 in coverage for negligence.
Driver had been living with Insured at the time of the accident for almost three years, though the two were not related. On three separate occasions, Driver moved out of Insured’s home, only to move back in. For nearly two years, Driver did domestic chores in exchange for room and board. Fourteen months before the accident, Driver obtained full-time employment earning $26,000 per year, and he agreed to pay $600 per month in rent to live with Insured. After obtaining his job, Driver was also responsible for his own personal expenses such as food, clothing, and telephone, which had previously been paid by Insured. Driver used Insured’s vehicle to get to and from work, but Driver was responsible for fuel costs.
In sworn testimony, Driver referred to Insured as “father” and “family,” but Insured never claimed Driver on his tax return, never designated Driver as a beneficiary on his health insurance policy, and never gave Driver any money or credit cards. Insured did not exercise any control over Driver’s comings and goings, and Driver was free to move out at any time, as he did on three occasions.
The umbrella policy held by Insured defined “insured person” to include “any dependent person in [Insured’s] care, if that person is a resident of [Insured’s] household.” Defendant filed for declaratory judgment against Insured, Plaintiffs, and Driver seeking a determination of whether the Insured’s umbrella policy provided coverage for Driver’s negligence. The trial court declared that Driver was not covered under Insured’s umbrella policy with Defendant, and Plaintiff appealed.
The court observed that, pursuant to principles of contract interpretation, the insurance policy must be construed in its entirety, giving effect to each clause to the extent reasonably possible. Moreover, in the event that an insurance policy contains ambiguous language, the language of the policy is to be construed liberally in favor of the insured and against the insurer as the drafter of the instrument. A policy term is ambiguous if it is susceptible to more than one meaning to a reasonable person, but it is not ambiguous simply because it cannot be precisely defined as to make clear its application in all varying factual situations.
Turning to the meanings of the terms, “dependent person” and “in the care of,” the court found that the terms overlap, but are not synonymous. In keeping with the basic principles of contract interpretation, the court was to give effect to each clause and avoid treating either term as surplusage. Finding that no Maryland cases defined these terms in context, the court turned to two out-of-jurisdiction cases, Girrens v. Farm Bureau Mut. Ins. Co., 715 P.2d 389 (Kan. 1986) and Henderson v. State Farm Fire & Cas. Co., 596 N.W.2d 190 (Mich. 1999).
In Girrens, the Kansas Supreme Court found that although the term “dependent person” may have different meanings under different factual situations, it was not so ambiguous as to require construction in favor of the insured. The Girrens court further defined “dependent person” as one who relies on another to provide “substantial contributions[,] without which he would be unable to afford the reasonable necessities of life.” Adopting that definition, the court held that Driver was not a dependent person because he had a full-time job, paid a modest rent, and performed additional work for the Insured’s household.
The court looked to Henderson for defining the phrase, “in care of.” In that case, the Michigan Supreme Court found that the phrase is not ambiguous, but rather it is “a colloquial or idiomatic phrase that is peculiar to itself and readily understood as a phrase by speakers and readers of our language.” The Henderson court then devised a non-exclusive list of factors to determine whether one person is “in care of” someone else: (1) a legal responsibility to care for the person; (2) some form of dependency; (3) supervisory or disciplinary responsibility; (4) provision of substantial essential financial support; (5) duration of living arrangement and whether it is temporary or permanent; (6) the age of the person receiving the care; (7) the physical and mental health status of the person receiving the care. Although there was some form of dependency of Driver on Insured in that Driver was paying only a modest rent and using Insured’s care to get to and from work, the court found that the other seven factors supported the conclusion that Driver was not “in the care of” Insured. Thus, there was ample evidence to support the trial court’s declaratory judgment for Defendant.
The full opinion is available in PDF.