Court's discussion as to Residing in your Household

From time to time the question arises in policies providing general liability cover whether a claim is excluded because the claimant is a person living or residing in the same household of the insured.

Obviously the purpose of those types of exclusion clauses is to prevent insureds and family members residing in the household from making collusive claims against each other with the intention being to provide an indemnity in respect of claims by "true third parties”, that is to parties other than the insured not residing in the household of the insured.

The question was dealt with by the Supreme Court of British Columbia in Royal Sun Alliance Insurance Co. of Canada v Araujo 2012 BCSC 203 CANLII. The claimant was the 15 year old grandson of the insured who suffered serious injuries when his grandparent’s house (which was also the house in which the grandson’s father resided) was fire-bombed by third party arsonists.

The grandparent’s insurers declined liability on the basis of the policy exclusion for coverage for "bodily injury to You or to any person residing in Your household other than a resident’s employee”, with the word "You” defined as "You or Your means the person(s) named as Insured on the Coverage Summary Page and, while living in the same household; his or her spouse; the relatives of either; any person under 21 in their care”.

The parties agreed that "living” and "residing” meant the same thing. The court could consider the exclusion clauses.

There was doubt that the plaintiff’s grandson, when in his grandparent’s home, was treated as part of the household but the question was whether he resided there.

The court said that one can have more than one residence for insurance purposes, depending on the interpretation of residence in the policy.

The plaintiff’s grandson lived with his mother and sister in a townhouse which was a twenty minute walk from his grandparent’s house. The grandson’s father in turn lived with his parents, the grandparents, at the grandparent’s house.

The court found the visits to the father were regular but short. He did not have his own room. Nor did he have any belongings at the house. He slept on a sofa in the living room. He did not have a key to the house. He did not know the access code for the security system so he could only visit when others were home. He was not required to do any chores around the home and time was devoted primarily there to recreational activities such as watching television or going out for a meal with his father.

The grandson was neither a You under the exclusion clause, nor a person residing in the household. He was a true third party and a person not in the position to assess the risk of a fire-bombing incident taking place.

The court therefore found that the insurer was obliged to defend and indemnify the grandparents of any and all claims made.