A ruling just released from the New Jersey Appellate Division highlights the importance of having proper renter's insurance, especially for singles living with roommates.
Patricia Barnaba owns a condominium in a building in Bradley Beach.
Mary Ann Iaeck has lived, since 2008, with Barnaba in her condominium. Iaeck had a verbal lease with Barnaba and paid her rent. Both parties shared the use of parts of the condominium, including the kitchen, the garage, the mailbox, and the space where the washing machine and dryer were located. Iaeck used the bedroom and bathroom on the fourth floor of the condominium.
On March 20, 2019, Iaeck fell down a flight of steps in the condominium.
As a result of her fall, Iaeck suffered "injuries to her left leg, including a displaced fracture of [her] tibia and fibula and compartment syndrome with compartment pressures of [ninety]." Those injuries have required multiple surgeries, which have left her with permanent scarring. The damage totalled $766,303.07.
At the time of the accident, Barnaba had a "Masterpiece" homeowner's insurance policy with personal liability coverage issued by Federal Insurance Company. The policy covered Barnaba's "home" and provided her with "personal liability coverage." The personal liability portion of the policy provided coverage for damages Barnaba was legally obligated to pay for personal injuries.
On September 3, 2019, Iaeck sent Federal a letter stating that she had fallen at Barnaba's condominium and requesting Federal to "open a Bodily Injury claim" under its policy.
Iaeck's claim with Federal asserted that Barnaba was negligent in causing her fall. She claimed that she tripped because "the lights were out, the handrail was loose and [Barnaba] had [placed] boxes and other things on the steps."
Following an investigation, on January 27, 2020, Federal sent Barnaba a letter denying any obligation to provide her with coverage related to Iaeck's injuries. Federal stated that Barnaba's personal liability coverage was excluded under the policy's "Covered person's or dependent's personal injury" exclusion.
In that regard, the policy stated:
We cover damages a covered person is legally obligated to pay for personal injury or property damage which takes place [any time] during the policy period and are caused by an occurrence, unless stated otherwise or an exclusion applies. Exclusions to this coverage are described in Exclusions.
The policy defined "occurrence" as "an accident which begins within the policy period resulting in bodily injury, shock, mental anguish, mental injury, or property damage[.]"
The policy's numerous exclusions included the following clause:
Covered person's or dependent's personal injury
We do not cover any damages for personal injury for any covered person or their dependents where the ultimate beneficiary is the offending party or defendant. We also do not cover any damages for personal injury for which you or a family member can be held legally liable, in any way, to a spouse, a family member, a person who lives with you, or a person named in the Coverage Summary. We also do not cover any damages for personal injury for which a spouse, a family member, a person who lives with you, or a person named in the Coverage Summary can be held legally liable, in any way, to you or a family member.
Meanwhile, on December 11, 2019, Iaeck sued Barnaba in New Jersey Superior Court in Monmouth County, alleging that Barnaba had been negligent in causing her to fall and, therefore, was responsible for her injuries. On February 27, 2020, (after Federal denied her insurance claim), Iaeck amended her complaint to assert direct claims against Federal and sought a declaratory judgment that the policy issued by Federal to Barnaba provided coverage for plaintiff's injuries.
On June 13, 2022, the trial court granted summary judgment to Federal and declared that Federal did not have any indemnity or defense obligations related to Iaeck's personal injury claims against Barnaba because the exclusion in Federal's policy was clear and unambiguous and applied because Iaeck lived with Barnaba.
Iaeck appealed to the Appellate Division.
In a written ruling just released, Judges Gilson, DeAlmeida, and Bishop-Thompson were unpersuaded and affirmed the lower court's decision.
The controlling issue on this appeal is whether the "Covered person's or dependent's personal injury" exclusion in the Federal policy applies to plaintiff's personal injury claims because plaintiff lived with Barnaba.
We hold that the "Covered person's or dependent's personal injury" exclusion applies because plaintiff lived with Barnaba at the time of the accident.
The Federal policy is clear in explaining that Barnaba, as the covered person, would not have coverage for "any damages for personal injury for which [Barnaba] . . . can be held legally liable, in any way, to . . . a person who lives with [her]." That language is plain and unambiguous. It applies to the personal injury suffered by plaintiff because plaintiff was living with Barnaba at the time of the accident.
Even if we read the exclusion narrowly, its plain language applies to plaintiff's personal injury claims. There is no ambiguity. In defining its coverage, the policy clearly states that the coverage applies unless an exclusion applies. The exclusions are clearly written and although there are numerous exclusions, the "Covered person's or dependent's personal injury" exclusion is clearly set forth in the policy. The exclusion, therefore, is specific, plain, and clear. It is also not contrary to public policy because it is reasonable for an insurer to exclude coverage for liability for personal injuries to people who live with the covered person.
No New Jersey case has analyzed the meaning of the phrase "lives with" in the context of an insurance exclusion. Cases from other jurisdictions have consistently interpreted the phrase "lives with" as unambiguous and plain in its meaning. In State Farm Mut. Auto. Ins. Co. v. Quinn, the 3rd Circuit of Appeals determined that "lives with" in an insurance policy was unambiguous.
In short, the Federal policy is clear and unambiguous in excluding from coverage Barnaba's liability for plaintiff's personal injuries. The trial court, therefore, correctly granted summary judgment to Federal and denied summary judgment to plaintiff.
Plaintiff asserts that the "Covered person's or dependent's personal injury" exclusion should be read to apply to individuals who are part of the covered person's household or have a romantic or familial relationship with the covered person. We reject this argument as inconsistent with the plain language of the exclusion. The exclusion does not use the term "household" members. Instead, it expressly explains that there is no liability coverage for personal injuries to "a person who lives with" the covered person.
Plaintiff's argument is also inconsistent with the language of Federal's exclusion clause. Federal's exclusion clause excludes liability for personal injuries "to a spouse, a family member, a person who lives with you, or a person named in the Coverage Summary." If the exclusion only applied to household members or family members, there would be no need to separately list "a spouse, a family member, [or] a person who lives with you[.]"
In other words, by separately listing "a person who lives with you," Federal was clearly stating that the exclusion applied to people who were not in a familial relationship. There is also nothing in the terms "a person who lives with you" that requires that there be a romantic relationship between that person and the covered person.
Plaintiff puts forward an alternative contention that the exclusion is ambiguous because it could be interpreted in two ways. Plaintiff contends that because she was a tenant, there is some ambiguity. We reject that contention because even if plaintiff is a tenant, she was still "a person who live[d] with" Barnaba and, therefore, there is no ambiguity. We also reject plaintiff's contentions that the exclusion was "inconspicuous and obscured by fine print." As we have already explained, the Federal policy had a clear section listing its various exclusions. The exclusion section was referenced throughout the policy and the "Covered person's or dependent's personal injury" exclusion was clearly set forth as one of the exclusions, the Appellate judges concluded.
The winning attorneys are Timothy M. Jabbour and Neli Kharbedia Esq. of Tressler LLP.
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