Gibson v. Callaghan

• Decision Date: 08 July 1999
• Citation: 158 N.J. 662,730 A.2d 1278
• Parties: Dorothy P. GIBSON and John A. Gibson, her husband, Plaintiffs-Appellants, v. Marcella CALLAGHAN, Defendant and Third Party Plaintiff-Appellant, v. County of Essex, a body politic of the State of New Jersey, Defendant and Third Party Defendant, v. Allstate Insurance Company, a foreign corporation registered to conduct business in the State of New Jersey, Third Party Defendant-Respondent.
• Court: New Jersey Supreme Court

730 A.2d 1278

158 N.J. 662

Dorothy P. GIBSON and John A. Gibson, her husband, Plaintiffs-Appellants, v. Marcella CALLAGHAN, Defendant and Third Party Plaintiff-Appellant, v. County of Essex, a body politic of the State of New Jersey, Defendant and Third Party Defendant, v. Allstate Insurance Company, a foreign corporation registered to conduct business in the State of New Jersey, Third Party Defendant-Respondent.

Supreme Court of New Jersey.

Argued May 3, 1999.

Decided July 8, 1999.

Stephen J. McCurrie, Kearny, for defendant and third party plaintiff-appellant Marcella Callaghan (McCurrie McCurrie & McCurrie, attorneys).

William J. O'Day, Florham Park, for plaintiffs-appellants Dorothy P. Gibson and John A. Gibson (Hack, Piro, O'Day, Merklinger, Wallace & McKenna, attorneys).

John P. McGee, Short Hills, for third party defendant-respondent (McDermott & McGee, attorneys).

The opinion of the Court was delivered by STEIN, J.

This appeal requires us to interpret a clause in a homeowners' liability insurance policy that provides a defense and indemnification to relatives of the named insured who are residents of the named insured's household. The dispute arises from the fact that the named insured and the relative seeking coverage do not reside together, nor did they ever reside together. The insured, an elderly woman, moved out of the house she owned after suffering an injury, but continued to maintain her homeowners' insurance policy and intended to return to her house when she was physically able to do so. Three years later, the insured's grandson and his wife moved into the vacant house. The issue is whether the insured's grandson and his wife are residents of the insured's household, thereby qualifying them as "insured persons" under the policy.

I

In 1931, Mary Maccia purchased a one-family house located at 14 Hyde Road, Bloomfield, New Jersey. Maccia resided there until 1990 when she sustained an injury in a fall that required her to move to her daughter's home in Kearny so that her daughter could care for her. Because Maccia intended to return to 14 Hyde Road when her health improved, she did not sell her house. When she moved in with her daughter, Maccia left many of her belongings, including her furniture, kitchenware, china, silverware set, garden and household tools, wedding dress, and "personal knickknacks" in the house at 14 Hyde Road. She continued to have her mail, checking account statements, pension checks, social security checks, health plan notices, property tax assessments, and Medicare benefits statements sent to 14 Hyde Road. Maccia took only her clothing and other essential items with her to her daughter's home in Kearny.

In 1993, because she was concerned about the risk of burglary and vandalism to her vacant house, Maccia asked her grandson, Donald Callaghan, and his wife, Marcella, to move into and care for her house. Donald Callaghan offered to purchase the property from his grandmother but she declined because she intended to return to her house when her health improved. The Callaghans agreed to pay Maccia $600 per month and to maintain the property. They also paid the electric, gas, heating, phone, and water bills. The Callaghans received their mail at 14 Hyde Road and were registered to vote at that address.

Maccia continued to pay the property taxes for her house. She also maintained her homeowners' liability insurance policy issued by Allstate Insurance Company. Although the Callaghans had maintained a homeowners' insurance policy in their names at their previous residence, they did not purchase a policy when they moved to 14 Hyde Road.

The parties stipulated that Maccia intended to return to her house when her health permitted. However, from the time she moved in with her daughter until the filing of this appeal, she was unable to return to her house and was confined to her daughter's home in Kearny.¹ Nevertheless, the Callaghans still considered one of the bedrooms in the house to be Maccia's. The Callaghans visited Maccia at her daughter's home approximately once each month. The underlying action giving rise to this appeal is a tort claim filed against Marcella Callaghan. In September 1994, plaintiff, eighty-eight-year-old Dorothy Gibson, was seriously injured when she was knocked down by Marcella Callaghan's dog while walking in Brookdale Park in Montclair. After Gibson and her husband filed a complaint against Marcella Callaghan, Marcella Callaghan filed a third-party complaint against Allstate, asserting that, because she resided in Maccia's house, she was entitled to a defense and indemnification under Maccia's homeowners' policy. Marcella Callaghan also filed a third-party complaint against the County of Essex. That complaint has been dismissed and is not implicated in this appeal.

The Allstate policy lists Maccia as the named insured and identifies 14 Hyde Road as the insured property. The policy provides:

Losses We Cover:

Allstate will pay all sums arising from an accidental loss which an insured person becomes legally obligated to pay as damages because of bodily injury or property damage covered by this part of the policy.

We may investigate or settle any claim or suit for covered damages against an insured person. If an insured person is sued for these damages, we will provide a defense with counsel of our choice, even if the allegations are groundless, false or fraudulent. We are not obligated to pay any claim or judgment after we have exhausted our limit of liability.

The "Definitions" section of the policy provides:

1. "You" and "your"—means the person named on the declarations page as the insured and that person's resident spouse.

2. "Allstate", "We", "Us" or "Our"— means the company named on the declarations page.

3. "Insured person"—means you and, if a resident of your household:

a) any relative; and

b) any dependent person in your care.

[Emphasis supplied.]

Under the Family Liability Protection section of the policy, "insured person" also means "any person or organization legally responsible for loss caused by animals or watercraft covered by this policy which are owned by an insured person...." Significant for purposes of this appeal, the policy does not define the term "household."

Allstate filed an answer to Marcella Callaghan's third-party complaint, denying her the right to a defense and indemnification because she did not, according to Allstate, qualify as an "insured person" under Maccia's policy. Allstate moved for summary judgment and, in January 1996, the Law Division granted Allstate's motion. Plaintiffs filed a successful motion for reconsideration, and subsequently the court granted Allstate's motion to sever the coverage issue from the tort action. After a bench trial, the court issued a written opinion concluding that Marcella Callaghan did not qualify as an insured under Maccia's Allstate policy, noting that "[s]uch matters as residence in the same abode, financial support or dependence, sharing of meals, socialization and teaching supervision ... are elements which determine whether a person is a member of a household."

Following unsuccessful motions for reconsideration and leave to file an interlocutory appeal, Marcella Callaghan withdrew her defense to the tort action and a default was entered against her. After a proof hearing, judgment was entered in favor of plaintiff Dorothy Gibson in the amount of $190,000 plus interest, and in the amount of $40,000 plus interest in favor of Gibson's husband.

In an unpublished per curiam opinion, the Appellate Division affirmed the trial court's denial of coverage. The Appellate Division relied on the definition of "household" contained in Black's Law Dictionary:

Household, n. A family living together. Schurler v. Industrial Commission, 86 Utah 284, 43 P.2d 696, 699. Those who dwell under the same roof and compose a family.

Term "household" is generally synonymous with "family" for insurance purposes, and includes those who dwell together as a family under the same roof. Van Overbeke v. State Farm Mut. Auto. Ins. Co., 303 Minn. 387, 227 N.W.2d 807, 810. Generally, the term "household" as used in automobile policies is synonymous with "home" and "family." Bartholet v. Berkness, 291 Minn. 123, 189 N.W.2d 410, 412.

[Black's Law Dictionary 740 (6th ed.1990).]

Because Marcella Callaghan and Maccia had never lived together, the court held that they were not members of the same household.

We granted the petition for certification of plaintiffs Dorothy and John Gibson and the petition for certification of defendant/third-party plaintiff Marcella Callaghan. 156 N.J. 426, 719 A.2d 1024 (1998).

II

A

Insurance policies are contracts of adhesion and, as such, are subject to special rules of interpretation. Longobardi v. Chubb Ins. Co., 121 N.J. 530, 537, 582 A.2d 1257 (1990); Meier v. New Jersey Life Ins. Co., 101 N.J. 597, 611-12, 503 A.2d 862 (1986). As this Court noted in Allen v. Metropolitan Life Insurance Co., 44 N.J. 294, 305, 208 A.2d 638 (1965), an insurance company is "expert in its field and its varied and complex instruments are prepared by it unilaterally whereas the assured or prospective assured is a layman unversed in insurance provisions and practices." Therefore, when called on to interpret insurance policies, we "assume a particularly vigilant role in ensuring their conformity to public policy and principles of fairness." Voorhees v. Preferred Mut. Ins. Co., 128 N.J. 165, 175, 607 A.2d 1255 (1992); see also Sparks v. St. Paul Ins. Co., 100 N.J. 325, 335, 495 A.2d 406 (1985) (noting that terms of insurance policies are subject to "careful judicial scrutiny to avoid injury to the public").

Certain well-established rules for interpreting insurance policies have developed from that understanding of the nature of insurance policies. Generally, the words of an insurance policy are to be given their plain, ordinary meaning. Voorhees, supra, 128 N.J. at 175, 607 A.2d...