Opinion ID: 2571444
Heading Depth: 3
Heading Rank: 1

Heading: The Household Exclusion Applies.

Text: The main question presented in this case is whether the claims of the former foster children A.J. and D.D. against the Falgousts are excluded by the terms of the household exclusion in the Falgousts' homeowner's policy. The liability insurance coverage provided by the homeowner's policy issued by Allstate to the Falgousts protects insured person[s] from liability claims brought by others. The term insured person[s] encompasses the Falgousts as named insureds and also includes relatives and dependent persons in the Falgousts' care residing with the Falgousts. The homeowner's policy defines insured persons as: Insured person(s)means you and, if a resident of your household: (a) any relative; and (b) any dependent person in your care. (Emphasis in original.) The policy defines you and your as the named insured: You or yourmeans the person named on the Policy Declarations as the insured and that person's resident spouse. [Here, Douglas and Melissa Falgoust.] (Emphasis in original.) Although the policy thus broadens the category of insured persons to include resident relatives and dependents, it also provides that claims brought by insured persons against other insured persons under the policy are excluded from liability coverage. The exclusion provides: We do not cover bodily injury to an insured person or property damage to property owned by an insured person whenever any benefit of this coverage would accrue directly or indirectly to an insured person. (Emphasis in original.) This is the so-called household exclusion that is the centerpiece of this case. The superior court denied Allstate's motion for summary judgment concerning the household exclusion because it concluded that the word dependent is ambiguous. The court stated: Regardless of the length of placement, all foster care is intended to provide the children with a safe, caring environment where they are clothed, fed, sheltered, disciplined and supervised. Allstate is correct that there is conclusive evidence that A.J. and D.D. lived with the Falgousts for extended periods of time and that the Falgousts cared for them, but the term dependent is susceptible to more than one meaning. Dependent is often used in the sense of being financially dependent. A.J. and D.D. were in the legal custody of the State of Alaska at the time of S.M.'s death. They were financially dependent upon the State of Alaska (and, in D.D.'s case, upon his natural parents). They were not financially dependent upon [the] Falgousts. (Citations omitted.) Having found that the term dependent is ambiguous, the superior court construed the ambiguity against the insurer and thus concluded that the foster children did not fall within the meaning of the term. We construe insurance policies in such a way as to honor a lay insured's reasonable expectations. [1] And, as the superior court correctly observed, ambiguities in insurance policies should be construed most favorably to an insured. [2] But the latter rule only applies when there are two or more reasonable interpretations of particular policy language. [3] Here, for the reasons described below, we conclude that this condition is not present. In our view the term any dependent person in the policy cannot reasonably be read as referring only to persons who are financially dependent on the named insureds. The term any dependent person is inclusive. The only textual limitations on the term are that the dependent person must be in the care of the named insured and a resident of the named insured's household. There is no suggestion in the policy language that some subcategories of dependent persons that satisfy these limitations are meant to be excluded. Policy language is construed in accordance with ordinary and customary usage. [4] The common usage of the adjective dependent when used to describe a person is lacking the necessary means of support and receiving aid from others (as from persons outside the immediate family or from a private or public welfare agency) such as a program of assistance for children. [5] Black's first definition of the noun dependent is [o]ne who relies on another for support. [6] Under these definitions foster children clearly are dependent persons. We conclude that the term any dependent person in your care as used in the policy includes foster children who have been committed to the care of the named insured. If the term did not encompass foster children, it would seldom be applied. The household exclusion (setting aside for the moment the dependent person clause) encompasses any relative who is a resident of the named insured's household. Thus, all natural or adopted children of the named insured are included regardless of their dependent status. Adult dependent persons not related to the named insured are included within the term, but that is a category that is much less common than the foster parent/child relationship. Case law from other jurisdictions supports our conclusion. Allstate Insurance Co. v. Thom, from the Court of Appeals of Michigan, is squarely on point. [7] In Thom an insurance company sought a declaratory judgment that it did not have an obligation to defend or indemnify a foster parent whose alleged negligence caused the injury of a foster child who had been in the foster parent's custody for some eleven months. [8] The Michigan Court of Appeals held that the foster child was a dependent person in the foster parent's care and thus an insured under the household exclusion of the foster parent's homeowner's policy: On de novo review, we agree with the lower court that [the child] met this definition, even though [the child's] placement with the [foster parents] was temporary and the placement agency . . . had ultimate responsibility and control over [the child's] care and funded his support.[ [9] ] Other courts have also found foster children to be within the household exclusion of the homeowner's policies of their foster parents. [10] But there is a difference between the homeowner's policy in this case and the homeowner's policies in most other cases. Whereas the present policy speaks of any dependent person in [the insured's] care, the other policies commonly refer to any person under twenty-one in the care of the insured. [11] It appears that by using the present language Allstate sought to broaden the insured persons category to include dependent adults. Since virtually all non-relative minors in the care of an insured are dependents, a convenient way to accomplish this purpose was to describe the newly broadened category in terms of dependency. Therefore, despite the language difference, we believe that these cases are persuasive precedents as to the intended operation of the household exclusion with respect to foster children. The remaining question is whether A.J. and D.D. were residents of the Falgousts' household. The homeowner's policy does not define the term resident. A.J. and D.D. argue that the term resident is ambiguous and requires further factual inquiry. We disagree. In determining who qualifies as a resident of a household under insurance policies, we have declined to formulate a fixed rule but instead look closely at the facts of each case. [12] We have stated that a child may be a resident of the household of one parent for coverage purposes even when the other parent has custody. [13] In Dugan v. Atlanta Casualty Co., we noted that residents differs from visitors [or] guests in that the former term requires something more than a temporary habitation. [14] In this case, A.J. and D.D. lived with the Falgousts for periods of fifteen and seven months respectively before S.M.'s death. [15] There is no evidence that there were definite plans for either child to leave the Falgousts' care at that time. [16] Without demarcating the precise time boundary separating residents from temporary guests, we think that it is clear that A.J. and D.D. were residents of the Falgousts' household. We are supported in this view by numerous decisions of courts in other jurisdictions holding that foster children are residents for the purpose of similar homeowner's policies where the foster children had been with their foster parents for more than a few months and had no definite date of departure. [17] We conclude that the household exclusion excludes the claims of D.D. and A.J. from coverage under the Falgousts' homeowner's policy. Allstate thus has no further obligation to defend the Falgousts against those claims. [18]