A U.S. Court of Appeals for the 10th District this week ruled that a Wyoming man convicted of a 2014 murder was not an insured “resident” under his mother’s homeowners insurance policy, and it turns out that finding doesn’t favor the insurer.
In October 2014, Phillip Sam, age 16 at the time, shot and killed Tyler Burns. The family of Burns brought a wrongful death action in state court against Phillip’s mother, Dora Sam, alleging that she had negligently stored the handgun used in the shooting.
Dora Sam was a named policyholder of an American National homeowners policy in effect at the time of the shooting, and she demanded that American National indemnify and defend her in the wrongful death action.
American National filed an action in federal court seeking a declaration that there was no coverage.
The district court granted summary judgment for American National, concluding in part that that Phillip Sam was a “resident” of Dora’s home at the time of the shooting.
And because the policy defines insureds to include relatives who were “residents” of a named insured’s home, and excludes personal liability coverage for intentional and criminal actions by “any insured,” the district court determined that there was no coverage as to Dora Sam for the shooting.
The court also ruled that this result was not unsettled by the policy’s inclusion of a severability clause, concluding that to determine otherwise would render the “any insured” exclusion meaningless.
Attorneys for the Burnses then argued that Phillip Sam was not a resident of Dora’s household at the time of the shooting because he had been staying with his father, Nathan Sam, at that time. They also argued that there is an ambiguity introduced by including both an “any insured” exclusion and a severability clause in the same policy, and that this ambiguity must be construed in favor of coverage for Dora.
The appeals court on Tuesday issued a decision that concludes that “resident” as contained in the policy is an ambiguous term that might reasonably be construed in favor of coverage for Dora Sam, and it reversed and remanded the prior decision on that basis.
“Relatedly, when insurance coverage is dependent upon how a term in a policy is defined and that term is fairly susceptible of [multiple] constructions, the one favorable to the insured will be adopted,” the court noted in its decision. “To determine whether Phillip was a ‘resident’ of Dora’s household within the meaning of the Policy at the time of the shooting, we first consider whether the term ‘resident’ is ambiguous under Wyoming law. Based on statements from the Wyoming Supreme Court, we conclude that it is.”
The court noted that its decision should not be understood as a definitive pronouncement on the best or most reasonable reading of the term “resident,” but that its interpretation of this term reflects its adherence to Wyoming law’s command for courts to construe ambiguities in insurance policies strictly in favor of coverage.
“In that regard, our reading of the Policy term “resident”—to the effect that an individual may only have one residence at a time, and further that an individual periodically alternating between his parents’ homes would be, at a given point in time, a resident of the home he or she is staying at—is a fair and reasonable one,” the court wrote in its decision. “And it is an interpretation that in fact favors coverage for Dora: because Phillip was not a ‘resident of [Dora’s] household’ under the Policy at the time of the shooting… he was not a Policy ‘insured,’ and his intentional, criminal actions would thus not fall within the ‘any insured’ exclusion when determining Dora’s coverage eligibility. Under this reasoning, the district court reached the wrong result in interpreting the Policy. We are constrained to reverse.”
Was this article valuable?
Here are more articles you may enjoy.