Residence – in Wyoming – is an Ambiguous Term
Federal courts follow the law of the state where a case was brought, at least, when interpreting an insurance policy. Because the state’s courts conclude that the term “residence” is ambiguous it must necessarily be construed to favor the insured and against the insurer that drafted the policy, even when the incident is cold-blooded-murder by the insured’s son who just happened to be staying at his divorced father’s house when the murder happened.
In American National Property And Casualty Company v. David James Burns; Robin Burns, as personal representative of Tyler Burns, and Dora Sam, No. 18-8006, (D.C. No. 2:16-CV-00301-ABJ) United States Court of Appeals Tenth Circuit (April 23, 2019) David James Burns and Robin Burns (as representatives of Tyler Burns) (collectively, the “Burnses”) asked the Tenth Circuit to reverse the trial court’s decision in favor of American National Property and Casualty Company (“American National”).
On October 2014, then-sixteen-year-old Phillip Sam shot and killed Tyler Burns. The Burnses brought a wrongful death action in state court against, among others, Phillip’s mother, Dora Sam, alleging that she had negligently stored the handgun used in the shooting. Dora was a named policyholder of an American National homeowner’s policy (the “Policy”) effective at the time of the shooting, and she demanded that American National indemnify and defend her in the wrongful death action. American National then sued in federal court seeking a declaration that there was no coverage.
The district court concluded first that Phillip was a “resident” of Dora’s home at the time of the shooting. Because the Policy defines “insureds” to include relatives who were “resident[s]” of a named insured’s home, and excludes personal liability coverage for intentional and criminal actions by “any insured,” the district court determined that there was no coverage as to Dora for the shooting.
The Burnses argued that Phillip was not a resident of Dora’s household at the time of the shooting because he had been staying with his father, Nathan Sam, at that time and, relatedly, had expressed an intent or desire to live with Nathan.
After Dora and Nathan divorced in 2013, a decree gave them joint legal custody of their minor children, including Phillip, with Dora listed as the “primary residential custodian.” In deference to Nathan’s itinerant work schedule, Nathan was to have physical custody of the children when he was in Cheyenne, Wyoming; Dora was to have the children “all other times.” Consistent with the decree, Dora testified that Phillip lived with her and “sometimes lived with his dad.”
On October 5, Nathan dropped Phillip off at Dora’s house for five or six minutes so Phillip could pick up his work uniform. While he was inside, Phillip did not just grab his work uniform; he also stole Dora’s boyfriend’s semi-automatic pistol from the master bedroom closet.
Early the following morning, Phillip shot and killed Tyler Burns with the pistol he took from Dora’s house. When he was subsequently booked into jail, Phillip provided Nathan’s address as his residence. Phillip was ultimately convicted of first-degree murder and related crimes.
In September 2016, following Phillip’s conviction, the Burnses brought a wrongful death and survival action against Dora, Dora’s boyfriend, and Phillip in Wyoming state court for damages associated with Tyler’s death.
American National thereafter sued naming Dora and the Burnses as defendants and seeking a declaration that insurance coverage did not exist.
The district court granted American National’s motion, ruling first that Phillip was a “resident” of Dora’s home at the time of the shooting because, inter alia, Dora was the “primary residential parent”; a person can have more than one residence at a time and can temporarily leave home without changing residences; and it is unclear whether a minor can form the intent to change residences, if such intent is necessary. Because Phillip was a “resident” of Dora’s household and also her relative, he was an insured under the Policy, and there was thus no coverage as to Dora for Phillip’s intentional or criminal actions.
Under Wyoming law—the substantive law the Tenth Circuit must apply in a diversity action, the language of an insurance policy is ambiguous if it is capable of more than one reasonable interpretation.
To determine whether Phillip was a “resident” of Dora’s household within the meaning of the Policy at the time of the shooting, we first consider whether the term “resident” is ambiguous under Wyoming law. The term “resident” is ambiguous and subject to more than one reasonable interpretation. Because the Tenth Circuit concluded that the term “resident” in the Policy is ambiguous, the appellate court then asked whether that term is “fairly susceptible” to an interpretation under Wyoming law that would be consistent with providing Dora Sam coverage in this case.
First, “resident” may be interpreted such that an individual cannot simultaneously hold multiple residences. If the court reads “resident” in the Policy to allow for only one residence at a time — that term can be further read such that Phillip had two alternating residences, with his residence at any time being a function of which parent he was staying with.
Nathan was in town at the time the gun was stolen and Phillip had been staying with him. When a child spent time in both of his parents’ households (but primarily his mother’s) pursuant to a divorce decree, that the home the child was at “on the day of the accident” was relevant to determining the child’s residence under an insurance policy.
Furthermore, Phillip’s actions both shortly before and shortly after the shooting help confirm that, to the extent that Phillip only had one residence at the time, that residence was Nathan’s home. Another manifestation of Phillip’s understanding of his residence is the fact that Phillip wrote down Nathan’s home as his residence when he was booked immediately following the shooting.
The interpretation of this term here reflects the court’s adherence to Wyoming law’s command for courts to construe ambiguities in insurance policies strictly in favor of coverage.
In that regard, the Tenth Circuit’s reading of the Policy term “resident” — to the effect that an individual may only have one residence at a time, and further that an individual periodically alternating between his parents’ homes would be, at a given point in time, a resident of the home he or she is staying at — is a fair and reasonable one. It is an interpretation that in fact favors coverage for Dora: because Phillip was not a “resident of [Dora’s] household” under the Policy at the time of the shooting, he was not a Policy “insured,” and his intentional, criminal actions would thus not fall within the “any insured” exclusion when determining Dora’s coverage eligibility. Under this reasoning, the district court reached the wrong result in interpreting the Policy.
Because Phillip was not a “resident” of Dora’s household at the time of the shooting, the district court’s entry of summary judgment was reversed,
Since Wyoming considers the term “resident” to be ambiguous, the court was able to choose where Phillip resided at the time of the shooting. He would not be covered under a similar policy issued to his father nor would he be covered under his mother’s policy for his intentional conduct if he was a resident of her house at the time of the murder. His mother, who was sued for her negligence in failing to lock up the gun, was entitled to defense and indemnity under her policy.
© 2019 – Barry Zalma
This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States. The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.
Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.
“Arson-For-Profit Fire at the Cowboy Bar & Grill”
A true crime novel based on the experience of the author, Barry Zalma, who for more than 51 years has acted for insurers who were faced with arson-for-profit, one of the most dangerous insurance fraud schemes. The book explains how an insurance claims adjuster, working with a fire cause and origin expert, a forensic accountant and insurance coverage lawyer, were able to defeat an arson-for-profit scheme and obtain a judgment requiring the perpetrator to take nothing and repay the insurer all of its expenses in defeating the claim.