Opinion ID: 1194203
Heading Depth: 2
Heading Rank: 1

Heading: liability of reserve

Text: The pertinent provisions of the Reserve policy are as follows: The Company will pay on behalf of an insured all damages which the insured becomes legally obligated to pay because of bodily injury or property damage arising out of the ownership, maintenance or use of [Pisciotta's boat].... This section does not apply: ... to bodily injury to the insured or to any member of the family of the insured residing in the same household as the insured. [1] (1a) At the outset, we must decide whether the language of the exclusion is sufficiently definite to exclude Tyler as a member of Pisciotta's family. Because we conclude that it is not, the exclusion is inapplicable. We begin with established principles applicable to the interpretation of insurance policies. (2) Words used in an insurance policy are to be interpreted according to the plain meaning which a layman would ordinarily attach to them. Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists. (Civ. Code, § 1638; Pacific Employers Ins. Co. v. Maryland Casualty Co. (1966) 65 Cal.2d 318, 323 [54 Cal. Rptr. 385, 419 P.2d 641], disapproved on another point in Herzog v. National American Ins. Co. (1970) 2 Cal.3d 192, 199 [84 Cal. Rptr. 705, 465 P.2d 841]; see also California State Auto. Assn. Inter-Ins. Bureau v. Hoffman (1978) 77 Cal. App.3d 768, 775 [143 Cal. Rptr. 835]; Farmers Ins. Exch. v. Harmon (1974) 42 Cal. App.3d 805, 809 [117 Cal. Rptr. 117].) (3) On the other hand, any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer and ... if semantically permissible, the contract will be given such construction as will fairly achieve its object of providing indemnity for the loss to which the insurance relates. ( Harris v. Glens Falls Ins. Co. (1972) 6 Cal.3d 699, 701 [100 Cal. Rptr. 133, 493 P.2d 861]; see also Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 269 [54 Cal. Rptr. 104, 419 P.2d 168]; Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 437 [296 P.2d 801, 57 A.L.R.2d 914].) The purpose of this canon of construction is to protect the insured's reasonable expectation of coverage in a situation in which the insurer-draftsman controls the language of the policy. ( Century Bank v. St. Paul Fire & Marine Ins. Co. (1971) 4 Cal.3d 319, 321 [93 Cal. Rptr. 569, 482 P.2d 193]; Gray v. Zurich Insurance Co., supra, 65 Cal.2d at pp. 269-270; Atlantic Nat. Ins. Co. v. Armstrong (1966) 65 Cal.2d 100, 112 [52 Cal. Rptr. 569, 416 P.2d 801].) Its effect differs, depending on whether the language to be construed is found in a clause providing coverage or in one limiting coverage. (4) Whereas coverage clauses are interpreted broadly so as to afford the greatest possible protection to the insured [citations], exclusionary clauses are interpreted narrowly against the insurer. [Citations.] ( State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94, 101-102 [109 Cal. Rptr. 811, 514 P.2d 123]; accord, Tencza v. Aetna Casualty & Surety Company (1974) 21 Ariz. App. 552 [521 P.2d 1010, 1012-1013].) [A]n insurer cannot escape its basic duty to insure by means of an exclusionary clause that is unclear. As we have declared time and again, `any exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect' [citation]; thus, `the burden rests upon the insurer to phrase exceptions and exclusions in clear and unmistakable language.' [Citation.] ( State Farm Mut. Auto. Ins. Co. v. Jacober (1973) 10 Cal.3d 193, 201-202 [110 Cal. Rptr. 1, 514 P.2d 953].) (1b) The interpretation of the word family as used in the Reserve policy turns on whether that word is ambiguous with reference to a stepson of the insured. If ambiguous, settled principles dictate that the term be construed against Reserve and in favor of coverage. There are no California cases directly on point. Moore S. Corp. v. Industrial Acc. Com. (1921) 185 Cal. 200 [196 P. 257, 13 A.L.R. 676], cited by Reserve, is inapposite. Moore interpreted a workers' compensation law which provided benefits to members of the family or household of injured employees; it held that the daughter of a woman cohabiting with the injured employee was entitled to benefits as a member of his family. The court was not reviewing a private insurance contract and merely adopted an expansive definition of the word family in order to effectuate the purposes of the statute. Two cases in other jurisdictions have held that the family member exclusion does apply to stepchildren. Both interpreted exclusions worded similarly to the Reserve policy's exclusion. In Zipperer v. State Farm Mutual Automobile Ins. Co. (5th Cir.1958) 254 F.2d 853, 855, the court excluded coverage for the insured's stepson without discussing whether the stepson was a member of the family of the insured. In LeRoux v. Edmundson (1967) 276 Minn. 120 [148 N.W.2d 812], the two stepdaughters of Edmundson were injured in an automobile accident while he was driving. Edmundson's insurer invoked its family member exclusion to avoid indemnifying Edmundson for the injuries to his stepdaughters. The LeRoux court first looked to the factual details of the relationship between Edmundson and his stepdaughters and concluded that it closely approximated the relationship between a parent and his natural children. The court then considered the purpose of the exclusionary clause  to exempt the insurer from liability to insureds likely to be partial to the injured party because of the close ties commonly existing among family members residing together  and attempted to fulfill that purpose by holding that stepchildren are within the scope of the word family. When confronted with standardized provisions in a form insurance contract, the primary focus of our inquiry is on the reasonable expectations of the insured at the time he purchased the coverage. The ordinary expectation of one who purchases liability insurance is that he will be covered for any liabilities incurred as a result of the activity to which the policy relates. The insurance company's obligation to provide coverage can be limited only by exclusions phrased in language which clearly and unmistakably communicates to the insured the specific circumstances under which the expected coverage will not be provided. The LeRoux court erred in relying heavily on the particular facts of the case evidencing a close relationship between the father and his stepchildren at the time of trial. Such factual analysis diverted the court's focus away from the essential issue of whether the insured could reasonably have been expected to know at the time he obtained coverage whether his stepchildren would be excluded. Furthermore, the analysis left open the possibility that the same clause, when applied to a different  e.g., a cool or distant  stepchild-stepparent relationship, might yield a different result. LeRoux also considered the purpose of the family exclusion as an aid to interpretation of the word family, correctly discerning the probable intent of the insurance company in inserting that clause into its policies. However, courts are unable to effectuate that intent unless the insurer chooses language which is clearly adequate to inform the insured of the precise restrictions it intends to place on the scope of the policy's coverage. [2] Turning to the facts of the case at bar, we have little doubt that the evidence presented at trial shows the relationship between Tyler Campbell and John Pisciotta was close. But that fact is not determinative. Before we can conclude that Pisciotta is not covered for liability to Tyler, we must be able to state with some certainty that the language of the Reserve exclusion was sufficiently clear to inform a reasonable insured in Pisciotta's position that the exclusion would apply to his stepson. [3] The various dictionary definitions of the word family illustrate the wide range of meanings which may be attributed to the word. For example, the Oxford English Dictionary contains these definitions: 2. The body of persons who live in one house or under one head, including parents, children, servants, etc.... 3. The group of persons consisting of the parents and their children, whether actually living together or not; in a wider sense, the unity formed by those who are nearly connected by blood or affinity.... 4. Those descended or claiming descent from a common ancestor. (6 Oxford Eng. Dict. (1933) p. 55.) In State Farm Mutual Automobile Ins. Co. v. Thompson (9th Cir.1967) 372 F.2d 256, 258, the court held that a putative spouse was not a member of the insured's family, stating: The term `family,' which is not defined in the policy, is at best imprecise and having in view the possible meanings which may be given to it, may fairly be said to be ambiguous. Our function is not to select one particular definition of family, but rather to imply from among the range of reasonable meanings the definition which most favors coverage for the insured. We conclude that a reasonable insured could have believed that the term family did not encompass his stepchildren. Our conclusion is bolstered by the fact that Reserve used the word household in a conjunctive sense with family. [4] The use of both terms raises the inference that they were not intended to be synonymous. The term household may encompass a group of totally unrelated yet mutually interdependent individuals residing in close physical proximity to one another. Family, however, connotes a proximity of relationship apart from cohabitation. (See Hicks v. Hatem (1972) 265 Md. App. 260 [289 A.2d 325, 328].) This case presents two well-balanced sets of countervailing factors. On the one hand, a married person may regard his stepchildren as part of his family. Additionally, most decisions from other jurisdictions have interpreted the family member exclusion to extend beyond blood relationships, following analyses similar to that of LeRoux. (See, e.g., Perry v. Southern Farm Bureau Casualty Ins. Co. (1965) 251 Miss. 544 [170 So.2d 628] (mother-in-law); Hunter v. Southern Farm Bureau Casualty Ins. Co. (1962) 241 S.C. 446 [129 S.E.2d 59] (meretricious spouse); Third National Bank v. State Farm Mut. Auto. Ins. Co. (Ky. 1960) 334 S.W.2d 261 (sister-in-law).) On the other hand, our past decisions have consistently embraced the notion that ambiguities in an insurance policy are to be strictly construed against the insurer. This rule applies with particular impact to the text of exclusions. Because the word family is susceptible of several reasonable definitions, the most appropriate resolution is to construe the term narrowly, i.e., in favor of the insured. In this manner, we formulate a clearcut rule which avoids the uncertainty engendered in ad hoc factual determinations of whether particular stepparents and their stepchildren have a close, personal and affectionate enough relationship to be considered members of the same family. A different result would rescue a draftsman from the consequences of the imprecise terminology he has chosen and potentially defeat the reasonable expectations of the insured.