Whenever adult relationships end and separation of families begin, insurance contracts may be impacted. These are always sad revelations, but the impact can be even worse when property is damaged and insurance coverage disputes arise because nobody thought about how property insurance is affected. As a practice pointer for those attorneys practicing family or divorce law, insurance issues should be addressed right away and insurance agents consulted immediately regarding how separation or divorce can affect coverage. Insurance agents and brokers should always be aware of and inquire about the family relationship and who is living where because of coverage implications. Unfortunately and understandably, insurance coverage is often the last item on anybody’s mind during such emotional turmoil.

An article in Claims Magazine, Hell Hath No Fury, indicates just a few coverage considerations that may occur as marital relationships end. The most immediate impact of separation or divorce is usually upon the definitional aspects of who is covered. As explained in the article:

Let’s start at the beginning. The ISO HO 00 03 states that “you” and “your” refer to the “named insured” and  the spouse if a resident of the same household. The definition of “insured” states that residents of the household who are relatives or persons under the age of 21 in the care of any person (an insured) is also an insured.

The article pointed out some scenarios and issues worthy of consideration and demonstrating why insurance coverage must be addressed:

But what about separating spouses? Joint property is always a problem. When the relationship dissolves, both parties may be tremendously attached to the plasma TV or the leather sofa. Most property does not obviously belong to one party or the other except for perhaps jewelry and clothing (in most cases, the silk lingerie does not belong to the gentleman). It’s one thing if a party can prove that they purchased the property. But if the couple had a joint account and bought items jointly, the property belongs to both and the courts may have to make the ultimate decision.

Let’s look at another example. The named insured separated from his spouse and she left the residence. While the insured was away for three weeks, a neighbor was watching the house and pets. The wife talked her way into the house via the neighbor and also broke in on a separate occasion. The wife took all the personal property, appliances, and furniture from the dwelling. After the wife took the property, the insured obtained a judgment granting the dissolution of the marriage and stated that he owned all the property in question. Was the removal of the property a theft or just an ugly disagreement between spouses?

This is one of those situations where the definition is crucial to the solution. The policy doesn’t define theft, so back to the dictionary we go. Merriam Webster Online defines “theft” as the felonious taking and removing of personal property with intent to deprive the rightful owner of it. The wife certainly did take all the property intending to deprive the husband of it, although she might be able to make a case that he did not own everything, even though he obtained a judgment that stated so. Being married doesn’t mean that your actions toward your spouse can’t be nefarious. Since she was no longer a resident at the time of loss, although she was the spouse, she was not an insured. Therefore the intentional-acts exclusion is out. While this is an ugly marital dispute, it is also a theft and should be covered as such.

As you can see, a resident isn’t necessarily an insured. A spouse who moves out is legally still the spouse, but she is no longer an insured person. This is only the tip of the iceberg regarding significant others, but it does illustrate that resident spouses, or resident blood relatives, are considered insureds under the policy, and that non-resident spouses, and resident significant others, are just other people, same as you and me.

Not directly discussed, but implied to be of significant coverage importance in that article is the definition of "residence premises" or "insured premises." Those definitions may affect coverage whenever an insured leaves a home that was the person’s "residence." This is discussed in the FC&S Question and Answers, Named Insured does not Occupy Residence Premises—One and Named Insured does not Occupy Residence Premises—Two. The FC&S discussion notes the following from those:

"The ISO homeowners policy HO 00 03 10 00 states that coverage is available if that part of the "residence premises" rented to others or held for rental is not fit to live in. "Residence premises" is defined as the "one [or two, three, or four] family dwelling where you reside [in at least one of the units], or that part of any other building where you reside."…

"Insured Premises" [under the AAIS form] means, for property coverage, "Described Location: If "you" [the insured named in the declarations] own and reside in the ‘residence’ shown on the ‘declarations’ as the described location, the ‘insured premises’ means: 1) that ‘residence’; and 2) related private structures and grounds at that location." The insuring agreement for Coverage A states that "’We’ [the insurer] cover the ‘residence’ on the ‘insured premises’." "Residence" means a "one to four family house…used mainly for residential purposes."…

The principle of homeowners coverage requiring ownership and occupancy by the named insured appears to be upheld. See, for example, the case of Bolivar v. Blue Ridge Insurance Company, 1999 WL 989585 (Unpublished Conn. Super. 1999), where the Court held: "It is apparent that the subject homeowners policy, when read as a whole, was written to insure premises where the insured resides or dwells, as those terms are most commonly used. The term "homeowners policy," in and of itself, is not ambiguous. Rather, the common usage of the term implies insurance coverage for the insured’s home, residence or dwelling….the requirement that the insured reside in at least a part of the premises is constant."

Likewise, in Heniser v. Frankenmuth Mutual Insurance, 534 N.W. 2d 502 (Mich. 1995), the insured sold a vacation home under a land contract and two months later the property was destroyed by fire. The court held that the "provision in homeowner’s insurance policy definition of ‘residence premises,’ wherein premises was not only required to be shown in policy’s declarations but also was required to be premises ‘where you reside,’ was an unambiguous statement of coverage requiring insured’s residence at premises at time of loss or continuing."

It is obvious that when a separation occurs, there may be implications for insurance coverage. While some insurance adjusters may look the other way and not point out this coverage issue, I have been involved in a number of insurance coverage cases which could have been avoided if the insurance agent was notified and appropriate coverage was obtained following these tragic, but not uncommon, situations.

Tiger Woods and Elin Nordegren may be able to afford any loss because of their enormous wealth; most separated couples can not. A significant property loss can have serious financial implications if not covered and compound an already bad situation. Family law and divorce attorneys have an obligation to raise these insurance consequences to their separated clients because they occur in most marital separations.

  • Dotti

    Outstanding message – all points well-taken.

    In the midst of the emotional and mental turmoil of a divorce this incredibly important issue rarely makes the radar. Family law attorneys are reminded to bring this issue up with their clients early in the process and as part of any pre-divorce planning.

    Thanks, Chip.

  • Outstanding post. Well written and thought out.

    Nathan Anderson,
    Dallas, Texas

  • SHIRLEY HEFLIN

    So sad….can’t insure human feelings. :(

    SHIRLEY HEFLIN