Single-Family Home + One Mailbox + One Meter + One Gas Bill + One Policy = One Household

HOMEOWNERS – BODILY INJURY TO INSURED EXCLUSION – "HOUSEHOLD" – LEAD POISONING CLAIM
Korson v. Preferred Mut. Ins. Co.
(2nd Dept., decided 10/28/2008)

Homeowners insurance policies exclude liability coverage for "bodily injury to you [the named insured(s)], and if residents of your household, your relatives, and persons under the age of 21 in your care or in the care of your resident relatives."  I've never seen a definition of the term "household" in a homeowners policy.  The purpose of this "BI to insured" exclusion is to disincentivize collusive lawsuits that target the HO policy and its indemnification dollars.

Plaintiff Steven Korson and his brother, Dean, resided in a single-family house located in Warwick, New York. Dean, his wife Brenda, his stepdaughter Crystal Wise, and Crystal's daughter, Dean's step-granddaughter, Aaliyah Powell lived on the second floor, while Steven resided on the first floor and in the basement.  In 2005, Crystal brought an action against Steven and Dean to recover damages for injuries allegedly sustained by Aaliyah as a result of lead poisoning while Aaliyah and Crystal resided in the house.

Both Steven and Dean were named insureds under a homeowners policy issued by Preferred Mutual for the residence.  Preferred Mutual denied liability coverage for the underlying lead poisoning claim based on the policy's exclusion of coverage for "bodily injury to you, and if residents of your household, your relatives, and persons under the age of 21 in your care or in the care of your resident relatives."  The policy did not define "household".

Steven commenced this declaratory judgment (DJ) action for coverage and moved for summary judgment.  Affirming the Orange County Supreme Court's denial of that motion with leave to renew upon the completion of discovery, the Second Department previously held that in order to prevail on the motion, Steven was required to "establish either that Aaliyah was not in Dean's care" or "that Dean did not reside with the plaintiff," and that Steven's moving papers established neither. After completion of discovery, which included the parties' depositions and a full inspection of the premises by Preferred Mutual, Steven renewed his summary judgment motion, seeking, in addition to a declaration of coverage in the underlying action, attorney's fees incurred in both that action and this one.  Orange Supreme denied the renewed motion and Steven appealed.  Again.

On this second appeal, the Second Department MODIFIED the order appealed from by affirming the denial of summary judgment to Steven, but granting reverse summary judgment (when the record shows that any party other than movant is entitled to summary judgment, the nisi prius judge or an appellate court may "search the record" and grant such judgment without the necessity of a cross-motion, even to a nonappealing party, pursuant to CPLR 3212[b]) to Preferred Mutual, holding:

The issue presented is whether or not Dean resided with the plaintiff in the latter's household. The term "household," as used in insurance policies, has been characterized as ambiguous and devoid of any fixed meaning. Its interpretation requires an inquiry into the intent of the parties (see Auerbach v Otsego Mut. Fire Ins. Co., 36 AD3d 840, 841; Matter of Hartford Ins. Co. of Midwest v Casella, 278 AD2d 417, 418; General Assur. Co. v Schmitt, 265 AD2d 299, 300; Schaut v Fireman's Ins. Co. of Newark, 130 AD2d 477, 478-479). The interpretation must reflect the reasonable expectation of the ordinary business person and the circumstances particular to each case must be considered (see Auerbach v Ostego Mut. Fire Ins. Co., 36 AD3d at 841; Matter of Hartford Ins. Co. of Midwest v Casella, 278 AD2d at 418; General Assur. Co. v Schmitt, 265 AD2d at 300; Schaut v Fireman's Ins. Co. of Newark, 130 AD2d at 479).

In this case, it was incumbent upon the plaintiff to make a prima facie showing that he maintained a separate household from his brother Dean; he failed to do so. For example, the plaintiff's papers revealed that at the relevant time, the subject house was a single-family home, with a single mailbox, and one electric meter. There was one gas bill for the subject address. There was unrestricted access between the areas of the home in which the plaintiff lived, and in which Dean and his family lived. Furthermore, the homeowner's policy indicates that both the plaintiff and Dean are named insureds with respect to "12 Orchard Street" in Warwick, New York. There is no indication in that document that their reasonable expectation was to insure anything other than one household. Accordingly, the Supreme Court correctly denied the plaintiff's motion for summary judgment.

Furthermore, under the circumstances, the record warrants granting the defendant's request, which it made in the Supreme Court and makes again in this Court, that summary judgment be awarded in its favor, upon searching the record (see CPLR 3212[b]). Since the plaintiff is not entitled to the subject coverage, his claims for attorney's fees incurred in the underlying personal injury action and in this action likewise fail.

Ordinarily it is the insurer's burden to prove the applicability of an exclusion but in this case, the named insured was moving for summary judgment, which explains the Second Department's statement that "[i]t was incumbent upon the plaintiff to make a prima facie showing that he maintained a separate household from his brother Dean [but] he failed to do so."