Exclusion of Coverage for "Residents" under Homeowners' Insurance Policies: Tennessee Law

By J. Ross Pepper on January 10, 2013 9:37 AM

Homeowners' insurance policies abound in Tennessee (and in other states), and are frequently the source of insurance litigation. Such insurance policies provide liability coverage to homeowners for bodily injuries and a source of monetary recovery for injured persons, provided that the policy in question (1) covers the bodily injury, and (2) does not exclude coverage in some other provision.

Homeowners' insurance policies typically contain provisions which specifically exclude coverage for residents of the household of the owner if the resident was also a relative of the owner. Homeowner's insurance policies also typically exclude from coverage, by defining as "residents," persons under the age of twenty-one and in the care of a relative of the owner , if that relative is also a resident of the household.

When a relative is staying with a homeowner temporarily, or on less than a permanent basis, can that relative be considered a "resident" of the household? Keep in mind that, if the answer to that question is "yes," then, the relative will not be able to look to an insurance company standing behind a homeowner's insurance policy to pay a judgment entered against the owner of the home. A recent Tennessee case lays out a good road map to use in evaluating how a Tennessee court might determine whether or not an injured relative was a resident under a homeowner's insurance policy.

The facts of the case are as follows:
• A Mother and Father had two children
• Mother and Father moved out of their apartment in Alabama because their lease was about to expire and their rent-to-own home was not yet available
• Mother and Father moved in with relatives in Elora, Tennessee
• A short while later, Mother and Father separated, and Mother filed for divorce
• In March, Mother and the two children moved to the home of another relative named Candy, who lived in Tennessee
• In June, Candy took the children to a swimming pool at Candy's parents' home
• While at the home of Candy's parents, tragically, one of the children drowned in the pool

On behalf of her deceased child, Mother filed a wrongful death action against Candy. Candy sought a defense and coverage from the insurance company which issued her homeowner's insurance policy. Candy's homeowner's insurance policy excluded coverage for bodily injuries to "residents" of Candy's household. The exclusion in Candy's homeowner's insurance policy was identical to the typical exclusion discussed above in the second paragraph of this blog.

The evidence at trial was that, in the months prior to the accident, Mother had spent a "significant amount" of time away from Candy's home because she also stayed at other places. The evidence also established that Mother's furniture and belongings, except some clothes, remained in storage during the time she stayed at Candy's. Mother testified that she intended to stay at Candy's indefinitely, but that she intended to move when she could find a place of her own. The proof at trial also established that Mother, in fact, moved out of Candy's home and into her own home about eight months after her child drowned.

The trial court, the Chancery Court for Lincoln County, Tennessee, found that Mother was not a resident of Candy's at the time of the death of her child. The trial court found that being a "resident" required a degree of permanence that was not present in Mother's situation based on the facts set forth above. (Since Mother was found not to be a resident of Candy's household, any damages awarded in the case would be paid by the insurance company to the extent of coverage under the homeowner's insurance policy issued to Candy).

The insurance company appealed to the Court of Appeals of Tennessee. The appeals court affirmed the trial judge in all respects.

In insurance litigation and personal injury litigation, it is very often absolutely crucial to a plaintiff's ability to recover money that the plaintiff's lawyer establish that any damages awarded to the plaintiff are covered by a homeowner's insurance policy. Where the claim for bodily injury is held by a relative that is not clearly a permanent resident of the household in question under the policy in question, the case discussed in this blog might well prove helpful.