Written by Gary Reinhardt, Esq.
As we enter the “endemic” phase of COVID-19, many things changed in our society. For instance, after a couple of years of being isolated, it seems people want to gather more. Further, with the multi-year moratorium on indoor weddings caused by the pandemic, the rush to book those venues created a logjam for the foreseeable future, pushing back planned matrimonial bliss. These situations result in even more living together arrangements.
As for insurance, how does this situation impact who qualifies as an “insured” in a homeowners’ or tenant policy and along with that, who has coverage? For example, consider an insured with a live-in girlfriend. Suppose she is not on a lease or deed (and moved in after application, to avoid the easy argument of rate evasion). An insured may attempt coverage for his girlfriend in two aspects, either by claiming she is “family” or a “family member” or invoking the “personal property of others” clause.
Initially, the typical policy requires for coverage that “The personal property must be owned or used by you, or your family members who reside with you . . .” What happens when a person, not the named insured (“you”), suffers a loss of his/her exclusive property like clothes or some sort of family heirloom?
Many property insurance policies do not define “family member.” However, auto policies, like the standard specimen policy posted to its website by the Virginia Bureau of Insurance, does:
“Family member” means a person related to you by blood, marriage or adoption who is a resident of your household. This includes a ward or foster child.
Likewise, the dictionary definition of “family” matches up to the auto policy definition. It requires either a blood or legal relationship.
However, many insurance policies contain additional coverage. These policies provide coverage beyond that available for the “family” with the following policy language:
At “your” option, “we” cover personal property owned by:
a). a guest while the property is in that part of residential premises occupied by an “insured”
b). “domestic employee” engaged in the service of an “insured” while the property is:
1) in that part of residential premises occupied by an “insured”; or
2) in the physical custody of the “domestic employee.”
c.) others while the property is in that part of the “insured premises” occupied by an “insured”.
This broad coverage also lacks a timing element in which to exercise this “option.”
First, returning to our scenario, these love birds intend to be married and would be married if not for the pandemic. They plan to be married soon. Regardless, they are not yet “family” and coverage would not apply to her as a “family member.” Although an uninsured motorist insurance (UM) coverage action, the case of Northern Neck Ins. Co. v. Hutchinson, 97 Va. Cir. 455 (Northumberland Cir. Ct. 2015), provides some guidance. In Hutchinson, a plaintiff sought UM coverage, claiming to be a “family member” of his father’s ex-wife. The plaintiff continued to live with his former stepmother after his father divorced her. The Court recognized that this was “a sympathetic case” because the former stepmother raised the child as if he were her own. However, “The Court finds that under the agreed facts, even though EH was a resident of DB’s household, he was not at the time of the accident related to DB by blood, marriage or adoption nor was he her ward or foster child.” Id. at 457. Because there was no legal or blood relationship, the plaintiff did not meet the definition of “family member” and had no coverage.
This holding correctly interprets “family member” and the coverage available. More importantly, it provides guidance on when a person is NOT a member of the family. Without law or blood binding the two, the “family relationship” could begin or end on a whim or a temper tantrum. As such, a live-in girlfriend, regardless of how long a resident before the loss, is not a “family member.”
Personal Property of Others
This inquiry does not end the coverage question. Since we know the girlfriend is not a “family member,” could the insured get coverage for her property, post-loss, by exercising his “option” in the policy?
On the one hand, as stated above, the policy does not place a time requirement on when an insured can exercise this option, meaning the policy does not specifically require that this be done pre-loss. An insured will certainly argue that this lack of limitation allows his live-in’s property to be covered after a loss.
First, we need to distinguish between “guest” and a long-term resident. Once again, the policy is little help other than the fact that it does provide two separate categories; a “guest” and then “others.” Since a “guest” is a temporary resident, then the “others” of part c. means someone else, more long term, like the live-in girlfriend in our example.
Virginia has yet to address this question regarding the resident as opposed to the guest. However, the Eleventh Circuit Court of Appeals ruled on essentially this exact issue in Thrasher v. State Farm Fire & Cas. Co., 734 F.2d 637 (11th Cir. 1984). The plaintiff in Thrasher sought coverage for his furniture that burned up in a fire at his friend’s apartment where he was storing it. State Farm refused coverage because its insured, the friend, never requested that State Farm provide coverage for Thrasher’s furniture being stored there. The Court interpreted the above language to require that the insured “must request that the personal property of another be covered under the policy. This provision guarantees that before liability attaches, the named insured must give the insurance company notice of the insured’s desire to have another’s property covered under the policy. This notice provides the insurance company with the opportunity to adjust the policy’s premiums accordingly.” Thrasher, 724 F.2d at 639. Because Thrasher’s friend never requested coverage for Thrasher’s furniture prior to the loss, Thrasher had no coverage under the “personal property of others” coverage and State Farm prevailed.
A case out of Oregon further explained the Thrasher Court rationale. Davtian v. Safeco Ins. Co., 2014 U.S. Dist. Lexis 32634 (US Dist. Ct. Oregon). In this case, Davtian suffered a fire of suspicious origin and submitted an extensive contents list. At his E.U.O., Davtian admitted that he owned, at most, 5% of the contents contained on his inventory yet he and his public adjuster continued to demand coverage for the entire list. Davtian eventually settled on the “personal property of others” language of the policy, claiming that his submission of the post-loss inventory satisfied the requirement to request coverage for property of others.
The Oregon Court disagreed with Davtian’s attempts to recover. The Court ruled that “A contents inventory, however, is not a request for coverage, which
must be made prior to liability attaching. . . the insured must submit such a coverage request before the property was damaged, in part to provide the insurer notice and an
opportunity to adjust the insured’s premium.” Davtian, 2014 US Dist. at 12. (emphasis in the original). The Court refused coverage and found for the insurer.
Davtian addressed not only the timing of the request but also the potential fraudulent use of this coverage by an insured. By requiring a request for coverage before a loss, it eliminates the insured’s ability to create or pad a contents claim by asserting a large inventory containing property of others.
In Virginia, in order for someone other than an “insured” to recover under a property policy, that person must be family or, if not family, the insured must request coverage for this resident of the household before a loss. It is important to determine if a non-family member is a resident of the household or just a guest.