Opinion ID: 2570305
Heading Depth: 3
Heading Rank: 1

Heading: Dugan's Interpretation of the Policy Language Is Unreasonable.

Text: The printed form of Atlanta's policy, held by Matt Dugan, includes Part C, Uninsured/Underinsured Motorist Coverage, which obligates Atlanta to pay those damages a covered person is legally entitled to but otherwise unable to recover from the owner or operator of an uninsured or underinsured motor vehicle. Under Part C, a covered person includes, among others, you or any family member. The term family member is a defined term in the opening section of the policy, which reads: Family member means a person related to you by: 1. blood, 2. marriage; or 3. adoption, including a ward or foster child who is a resident of your household. Dugan argued below, as he does here, that the phrasing and punctuation of this provision are ambiguous, leading to two possible interpretations. The first, urged by Atlanta, is that the residual clause (who is a resident of your household) modifies the entire list, thus imposing a residency requirement on all three types of family members. The second, argued by Dugan, suggests that the residual clause modifies only the immediately preceding language (ward and foster child) and that those related by blood or marriage need not share a residence to be covered. He argues that because ambiguous insurance policies are construed against the insurance company and in favor of coverage, he should be covered by the policy irrespective of residency. The superior court rejected these arguments and agreed with Atlanta that the residual clause unambiguously modified the entire list, requiring residency for all family members: to read otherwise is not consistent with the other policy provisions, farfetched, and would lead to an over-extension of the policy's intended coverage. We agree with the superior court's analysis. We interpret ambiguous insurance policies in favor of the purported insured. [4] However, the mere fact that two parties to an insurance contract have differing subjective interpretations of that contract does not make it ambiguous. Rather, ambiguity exists only when the contract, taken as a whole, is reasonably subject to differing interpretations. [5] We determine the existence of an ambiguity by determining the reasonable expectations of the contracting parties. [6] We discern reasonable expectations from the language of the disputed provisions, other provisions, and relevant extrinsic evidence, with guidance from case law interpreting similar provisions. [7] Dugan finds ambiguity in the grammar and layout of the provision. Specifically, he points out the puzzling use of punctuation within the list  a comma after blood, a semi-colon after marriage, a comma after adoption, then nothing after foster child. He also emphasizes the fact that the final clause has been indented, appearing to be aligned with the third item of the list. Dugan contends that such drafting implies that the residency language applies only to wards and foster children and thus the meaning of the provision is, at least, ambiguous. We agree that the drafting is sloppy and careless. Throughout the policy, Atlanta inconsistently formats lists  e.g., sometimes indenting residual language while other times placing it flush with the left margin. We can easily imagine scenarios in which such erratic punctuation and pagination make a provision ambiguous, resulting in a finding of coverage where perhaps none was intended. This provision, however, does not present such a case. The language simply cannot support Dugan's position. It is well settled that in situations in which reasonable interpretation favors the insurer, and any other would be strained and tenuous, no compulsion exists to torture or twist the language of the contract. [8] This is such a situation. In viewing the policy, it is clear that the residency language is not the mere continuation of the adoption language, despite the lack of punctuation, because it has been placed squarely on the line below. If it were solely qualifying the adoption language, that portion of the residency language which could have fit on the same line as the adoption language before reaching the right margin would have occupied that space. [9] More importantly, Dugan's reading leads to absurd results. First, it would create coverage for all blood relatives, including unknown or long-lost relatives living thousands of miles away. We have seen no evidence that any insurance company has ever offered such vast coverage. [10] Second, it would require residency for wards and foster children, but not for blood relatives. Such an arbitrary distinction cannot be the intent of the provision. [11] Dugan's reading also leads to a potential redundancy: Because shared residency is an inherent aspect of the foster parent-child relationship, it would be particularly unnecessary to include language requiring residency in those relationships. In contrast to all of these unlikely situations, Atlanta's reading produces results that seem well in line with normal industry practice. [12] An Illinois appellate court came to the same conclusion in Yarbert v. Industrial Fire and Casualty Insurance Co. [13] In that case, a mother making a claim on her son's insurance policy argued that use of the word relative in the UM/UIM section was not restricted by an earlier section's definition of the word that required residency, thus allowing her to claim that the policy covered all of his relatives, wherever found. [14] The court rejected her contention, finding this construction patently unreasonable and leading to absurd consequences. [15] Because we find that Dugan's interpretation of the policy is not a reasonable one, we reject his contention that the provision is ambiguous. [16] Accordingly, we agree with Atlanta that the policy unambiguously requires a family member to be a resident in the policyholder's household to be covered under its terms. [17]