The parents of a child shot and killed by 16-year-old Phillip Sam sued Phillip’s mother, Dora Sam, alleging negligence in the way she secured her boyfriend’s handgun that Phillip Sam used in the shooting. Dora Sam asked her homeowner’s insurer, American National Property and Casualty Company (“American National”), to defend the lawsuit and American National responded by suing her, seeking a ruling that it had no obligation to cover her. American National argued that coverage was barred due to the “intentional and criminal actions” exclusion because Phillip Sam was a resident of Dora Sam’s household. As an insured resident of the household, he and Dora Sam were subject to the criminal and intentional act exclusion. Thus, no coverage.
The trial court ruled in favor of American National, observing that the policy excludes from its personal liability coverage “intentional and criminal actions by any insured” (emphasis added), and held that Phillip was an insured. The court reasoned that, although Phillip Sam split time between the homes of his divorced parents and was actually staying with his father when the shooting occurred, his mother, Dora Sam, was the “primary residential parent.” The court thus concluded that Phillip Sam a “resident” of Dora’s home and an “insured” under the policy.
On appeal, the Federal appeals court reversed, noting that the term “resident” in the policy was not defined and thus ambiguous. Under Wyoming law, the court stated that ambiguities in insurance policies must be construed against the insurance company, and reasonable interpretations of ambiguous terms that favor insureds should be adopted. In the case of Dora Sam, the evidence demonstrated that Phillip split time between her home and the home of her ex-husband, and that he was actually living with his father at the time of the shooting.
As a result, American National must cover the claims against Dora Sam. This case serves to remind insureds insurance coverage may exist even when an insurance company and a court say it doesn’t.
Experienced and sophisticated insurance counsel can often secure coverage for you or your business even when it seems impossible or improbable.
American Nat’l Property & Cas. Co. v. Burns (United States Court of Appeals, Tenth Circuit).
Evan S. Schwartz
Founder of Schwartz, Conroy & Hack