Lack of a Definition Creates Coverage for UIM Coverage

Posted on June 21, 2021 by Barry Zalma

“Regular” Found to be Ambiguous and Domicile to be Residence

Luis Montano, sued seeking a declaratory judgment that he was entitled to underinsured motorist coverage under an insurance policy issued to his father and stepmother by Erie Insurance Exchange. The circuit court granted summary judgment in favor of plaintiff. In Luis Montano v. Erie Insurance Exchange, No. 1-20-1306, 2021 IL App (1st) 201306-U, Appellate Court Of Illinois First Judicial District First District Fifth Division (June 11, 2021) the Court of Appeal was asked to conclude that a relative who had his own apartment was still a regular resident of his parents home and entitled to UIM coverage.

FACTS

Plaintiff alleged that he was injured when a vehicle in which he was a passenger was involved in a collision on April 15, 2015. Another insurer provided coverage for the collision in a total amount of $100,000 per occurrence, and plaintiff ultimately recovered $41,000 under that policy for his injuries. In addition, Erie had issued an insurance policy to plaintiff’s parents, Angel and Elana Montano, that was effective at the time of the collision. That policy provided up to $250,000 per person in underinsured motorist coverage to plaintiff’s parents and their “relatives.” Under the policy relatives were defined as:

“residents” of the Montano’s household related to them by “blood, marriage [or] adoption.” Finally, the policy defined residents as follows: “a person who physically lives with “you” in “your” household on a regular basis. “Your” unmarried, unemancipated children attending school full time, living away from home, will be considered ‘residents” of “your” household.” (italics added)

After alleging that he was the son of the Montanos and a resident of their household, plaintiff asserted that Erie had improperly denied him underinsured motorist coverage on the basis that he was not a relative of the Montanos, as defined by the policy.

Erie then filed a motion for summary judgment. Attached to the motion was a transcript of an examination under oath plaintiff sat for. Therein, plaintiff generally confirmed the factual allegations contained in Erie’s affirmative defense. In addition, however, plaintiff stated during his examination under oath that he lived with his father in Wisconsin when he graduated high school in 2012. He then attended college in Wisconsin for two years, living on campus except for his return to his father’s home for the summer break following his first year, until he received an academic suspension following the spring semester of 2014. After the collision and a more than two-month stay in the hospital, plaintiff returned to live with his father. By that time, plaintiff’s father had moved to Naperville, Illinois.

Plaintiff had his own bedroom in each house occupied by his parents, and the newly constructed home had a fifth bedroom with a private bathroom that was intended for plaintiff’s use and which he still occupied. Plaintiff washed his laundry in Naperville, most of his possessions were kept in his family home in Naperville, and he “lived with [his] family there on many weekends.” Plaintiff also “spent the Christmas/New Year’s holidays in 2014 in [the] family home in Naperville.” Finally, plaintiff explained that he was financially dependent upon his father, he received his mail at his family’s home, and used the address of his family home as his permanent address for his driver’s license, voter registration, bank accounts, tax returns, college correspondence and employment.

ANALYSIS

In construing an insurance policy, a court determines the intent of the parties to the contract by construing the policy as a whole, with due regard to the risk undertaken, the subject matter that is insured and the purposes of the contract. Where the words in the policy are clear and unambiguous, a court must afford them their plain, ordinary, and popular meaning. However, any ambiguities in the language of an insurance policy will be interpreted in favor of the insured.

The parties conceded that no material question of fact exists and that there is only a question of law which the court may decide on the basis of the record. The Court of Appeal relied on the uncontested fact that plaintiff—the son of Angel and stepson of Elana—was related to the Montanos by “blood, marriage [or] adoption.” As such, the question of plaintiff’s entitlement to coverage under Erie’s policy coverage exists if plaintiff was a resident of the Montanos’ household because he physically lived with them on a regular basis.

The court concluded that the insurer ignored plaintiff’s affidavit, in which he specifically discusses the various times he stayed at the family home in Naperville prior to the collision. The policy language contained in the Erie policy required plaintiff to “physically live[]” in the Montanos’ household on a “regular” basis.

The court’s function was to ascertain and give effect to the intention of the parties, as expressed in the policy language. Where a term in an insurance policy is not defined, an appellate court must afford that term its plain, ordinary and popular meaning. If a term has multiple reasonable definitions or is subject to more than one reasonable interpretation within the context in which it appears the term is ambiguous, and such ambiguous terms will be strictly construed against the insurer who drafted the policies.

The word “regular” can be defined strictly as an event or action that occurs in a fixed pattern, with even or similar amounts of time between one and the next. However, “regular” can also be defined more broadly to simply mean “often.” Considering these multiple, reasonable definitions, the word “regular” as used in the Erie policy is ambiguous and must be strictly construed against Erie.

Here, it is uncontested that plaintiff did not physically live in the Montanos’ household full-time at the time of the collision. However, it is also uncontested that plaintiff always had a key to the family home in Naperville, had his own room in that home with an attached bathroom, kept most of his possessions there, and washed his laundry there. While these facts might not be sufficient to satisfy the narrowest definition of the word “regular,” they clearly establish that plaintiff physically lived in the Montanos’ household “often” at the time of the collision.

Summary judgment in favor of plaintiff was affirmed, because plaintiff was a resident of his parents’ household and was therefore entitled to underinsured motorist coverage.

ZALMA OPINION

Plaintiff was able to establish that his domicile was his parents home. He also often lived in his parents home even when he was away at college and when he maintained an apartment when he worked in a factory. Since he lived in his parents home “often” that fact was sufficient for the Illinois Court of Appeal to conclude he was a “regular” resident of the parents household and could tap into the $250,000 available UIM coverage that, since he spent two months in hospital, could easily take the limits. It appears that the insurer needs a definition of “regular” in its UIM coverage.

© 2021 – Barry Zalma

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and [email protected].

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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