A significant part of my practice involves advising clients and litigation regarding personal injury insurance coverage issues such as the issue involved in this case:
On January 7, 2014 the North Carolina Court of Appeals issued a decision which illustrates the oft-cited principle of insurance law that if a Court believes an insurance policy provision is ambiguous, the Court will interpret it against the insurance company and in favor of the person seeking coverage. In Insurance Company v. Paschal, sixteen year-old Harley Jessup (Harley) was injured in a motor vehicle accident. She filed a personal injury claim for underinsured motorists coverage under an auto insurance policy issued to her grandfather, Thurman Jessup (Thurman). The issue was whether Harley was a resident of her grandfather’s household at the time of the accident in question. If so, she was entitled to underinsured motorists coverage from Thurman’s auto insurance policy. Although Harley did not live in the same house as Thurman, the Court of Appeals decided she was a resident of his household because the house where Harley lived with her father (Reggie) and brothers and the house Thurman lived in were both located on several hundred acres of “family farm” land owned by Thurman, and because Thurman was the most constant caregiver in Harley’s life. The Court noted that Thurman’s insurance policy does not define the words “resident” or “household” and stated that the word “resident” is “flexible, elastic, slippery and somewhat ambiguous, meaning anything from a place of abode for more than a temporary period of time to a permanent and established home.” The Court then relied on, and quoted from, a previous North Carolina Court of Appeals decision:
When an insurance company, in drafting its policy of insurance, uses a ‘slippery’ word to mark out and designate those who are insured by the policy, it is not the function of the court to sprinkle sand upon the ice by strict construction of the term. All who may, by any reasonable construction of the word, be included within the coverage afforded by the policy should be given its protection. If, in the application of this principle of construction, the limits of coverage slide across the slippery area and the company falls into a coverage somewhat more extensive than it contemplated, the fault lies in its own selection of the words by which it chose to be bound.
The Court found it significant that Thurman did not charge any rent for Reggie, Harley and her brothers to live in their house, that Thurman paid the utility bills and bought appliances for their house as needed, and that he had a key to their house, freely entering it whenever he desired. The Court also noted that Thurman was often the one who took Harley to the dentist or doctor and that he paid for the vast majority of Harley’s expenses, including food, clothing and even lifestyle items, such as Harley’s prom dress.