Many insurance policies extend coverage to a relative of the insured if the relative is a resident of the insured’s household. Whether a person is a resident of the insured’s household has been the subject of many lawsuits and appellate court decisions. The North Carolina Court of Appeals, in 2014, held that a 16-year-old girl (Harley) was a resident of her grandfather’s (Thurman) household despite the fact that they lived in separate houses one mile apart. The Court relied on the following facts: Thurman owned both houses located on his several-hundred-acre farm and he paid for all expenses of both houses. Thurman was the most constant caregiver in Harley’s life and he paid for the vast majority of her expenses including food and clothing. Harley’s mother was not involved in her life. Although Harley lived with her father during most of her childhood, she lived with her grandfather during several periods of time when her father was in prison.

The Court’s opinion contains the following statement: “Members of a family need not actually reside under a common roof to be deemed part of the same household.” The North Carolina Supreme Court, in NC Farm Bureau Mut. Ins. Co. v Martin, rejected that statement and held that “in order to be deemed residents of the same household, the parties must have lived in the same dwelling for some meaningful period of time under circumstances demonstrating an intent to form a common household.”

In Martin, a 2020 decision, the insured (Mary) lived in the main house on her family farm and the two relatives that claimed insurance benefits lived in the guest house on the farm. The two houses were 100 feet apart and shared a common driveway but had separate street addresses and separate mailboxes. All three family members had keys and free access to both houses. They worked on the farm together and ate meals together. However, except for occasional overnight stays (power outage, etc.), Mary lived in the main house and the two relatives lived in the guest house. The Supreme Court held that the two relatives were not residents of Mary’s household because they did not live in the same dwelling with Mary for any meaningful length of time. The relatives argued for a “family farm exception” allowing family members who live near each other on a family farm to qualify as residents of a single household. The Supreme Court declined to create a family farm exception because such an exception was inconsistent with the policy language.