In property insurance coverage disputes, whether or not someone is considered an “Insured” depends on a variety of factors. The first step is to look to the language of the governing insurance policy to see how an “Insured” is defined. Often, however, the answer to this question turns on the facts surrounding any given claim – and may not be as obvious as one may think.

I recently came across a federal court Memorandum and Order in Pennsylvania which demonstrates just how fact-intensive the issue of who is considered an “insured” can be. The case, Ripley v. Brethren Mutual Insurance Company,1 stemmed from an insurance claim for more than $50,000.00 in stolen personal property. During an inspection, the Ripley’s explained to an insurance company investigator that their grandson—who had lived on their thirty-acre working horse farm for over two and a half years—admitted he participated in the theft by letting two men into the house while the Ripley’s were away.

The investigator subsequently issued a letter on behalf of the insurer denying coverage based on the following policy provisions:

We will not pay for loss or damage arising out of any act an “insured” commits or conspires to commit with the intent to cause a loss.

In the event of such a loss, no “insured” is entitled to coverage, even “insureds” who did not commit or conspire to commit the act causing the loss.

* * *

“Insured” means you and, If you are an individual, the following members of your household:

a. Your relatives;….

It was this claim denial which led the Ripley’s to file suit against their insurance carrier for breach of contract and bad faith. Both the Ripley’s and the insurer moved for summary judgment on the issue of whether at that time of the theft the grandson was a member of the Ripley’s household, triggering the policy exclusion relied upon by the insurer.

Establishing who is a resident of a household, the trial cout explained, requires “a fact-specific inquiry that may include (but is not limited to) consideration of (a) the intent of the parties, (b) the amount of time spent in the residence, (c) the nature of the living arrangements, (d) the type of activities undertaken in the residence, and (e) the age and self-sufficiency of the person at issue.” Another “essential inquiry,” under Pennsylvania law, is whether “the family members operated as a single unit and whether the claimant is ‘treated as one would expect a member of the household to be treated.’” The court dove deeper into the facts and circumstances surrounding the relationship between the Ripley’s and their grandson.

Judge Dalzell disagreed with the insurer’s contentions that the grandson’s living arrangement was enough to warrant summary judgment in its favor as the arrangement “was not intimate, but rather was at arm’s length.” In reaching this finding, Judge Dalzell considered Carolyn Ripley’s sworn affidavit stating “that she told her grandson when he sought to reside on the farm that ‘he was going to have to pay his way (and work) to reside in the home, and abide by the rules just like all of her boarders’ and that she had many different boarders at different times.” Judge Dalzell noted that while the Ripley’s grandson paid a reduced rent of $25 per week and bartered work by taking care of horses on the property in exchange for his room, he provided his own food and ate his meals separately from the Ripley’s; did not have permission to use any of the Ripley’s property other than the residence’s appliances and the kitchen; did not have access to the living or dining rooms, office or any bedroom other than his own; paid for his own health insurance and cell phone services; and like other boarders was not permitted to bring anyone into the Ripley residence.

For these reasons, the court agreed that the uncontested facts supported the Ripley’s contention their grandson was not a member of their household at the time of the theft and therefore not an “insured” within the meaning of the policy, and granted summary judgment in the Ripley’s favor.

1 Ripley v. Brethren Mutual Ins. Co., No. 14-4763 (E.D. Pa. Nov. 25, 2014).