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Dugan v. Atlanta Casualty Companies (06/03/2005) sp-5900
Dugan v. Atlanta Casualty Companies (06/03/2005) sp-5900
Notice: This opinion is subject to correction before
publication in the Pacific Reporter. Readers are
requested to bring errors to the attention of the Clerk
of the Appellate Courts, 303 K Street, Anchorage,
Alaska 99501, phone (907) 264-0608, fax (907) 264-0878,
e-mail corrections@appellate.courts.state.ak.us.
THE SUPREME COURT OF THE STATE OF ALASKA
MICHAEL R. DUGAN, )
) Supreme Court No. S-11133
Appellant, )
) Superior Court No.
v. ) 3AN-01-33545 CI
)
ATLANTA CASUALTY )
COMPANIES, ) O P I N I O N
)
Appellee. ) [No. 5900 - June 3, 2005]
)
Appeal from the Superior Court of the State
of Alaska, Third Judicial District,
Anchorage, Mark Rindner, Judge, and John
Suddock, Judge.
Appearances: Jeffrey J. Barber and Steve
Sims, Law Offices of Steve Sims, Anchorage,
for Appellant. James B. Wright, Jerald L.
Marcey and James B. Wright & Associates, and
Rebecca Hozubin, Wilkerson & Associates,
Anchorage, for Appellee.
Before: Bryner, Chief Justice, Matthews,
Eastaugh, Fabe, and Carpeneti, Justices.
CARPENETI, Justice.
I. INTRODUCTION
Michael Dugan seeks coverage under his sons automobile
insurance policy with Atlanta Casualty Co. We are asked to
determine: (1) whether the terms of that policy extend coverage
to all blood relatives of the named insured, regardless of
residency; and (2) if not, whether the superior court erred in
finding that Dugan, for the purposes of the insurance policy, was
not a resident of his sons household. Because we answer both of
these questions in the negative, we affirm the superior courts
judgment in favor of Atlanta Casualty Co.
II. FACTS AND PROCEEDINGS
In the early hours of September 8, 2001 Dugan was
struck as a pedestrian by an uninsured motorist in front of his
son Matts apartment, resulting in severe injuries. He later
attempted to collect as a covered person under the terms of Matts
automobile insurance policy with Atlanta Casualty Co. (Atlanta),
which provides uninsured motorist (UM) coverage of $50,000 per
person / $100,000 per accident for bodily injury. Atlanta filed
a complaint seeking a declaration that Dugan is not entitled to
insurance coverage. Both parties filed motions for summary
judgment.
Superior Court Judge Mark Rindner denied both motions.
Dugans motion argued that the policys terms extended coverage to
literally all blood relatives, without reference to where they
lived. Judge Rindner rejected this reading, requiring the
claimant to reside in the policyholders household. Atlantas
motion asked the court to rule, as a matter of law, that Dugan
was not a resident of his sons household. Judge Rindner noted
that examining residency is a fact-intensive question and that
facts were in dispute regarding Dugans status. Accordingly, he
held that he cannot rule as a matter of law whether Dugan was a
resident of Matthews abode.
That question was the sole focus of a one-day bench
trial, over which Superior Court Judge John Suddock presided.
Judge Suddock found that Dugan was not a resident of his sons
household and thus held that he was not covered by Atlantas
policy. The court dismissed Dugans remaining counterclaims. The
findings of fact, summarized below, were adopted by Dugan on
appeal without qualification. Atlanta does not dispute the
accuracy of the findings.
Michael Dugan, fifty years old at the time of the
accident, has resided in Alaska for most of his life and at all
relevant times maintained an Alaska drivers license and Alaska
residency. Unable to find work in his trade in early 2001, Dugan
traveled to California. He brought with him clothes and camping
gear, and stored the bulk of his possessions with his son Michael
in Anchorage. In the months that followed, Dugan lived in
various motels and worked at three successive refinery jobs in
three different southern California locations. By July or early
August 2001, he quit his job and drove to Montana to meet his
girlfriend, who lived in Anchorage, and to attend her parents
fiftieth anniversary celebration. Dugan sold his car in Montana,
ending his need for automobile insurance, and drove to Anchorage
with his girlfriend, arriving around August 26.
The superior court found that Dugans purpose in
returning to Alaska was to visit his children and grandchildren;
to look for work so that he could remain; and to explore the
possibility of marriage with his girlfriend. He apparently had a
standing offer of employment back in California, to which he
would return if unable to find work in Alaska. The court found
that [h]is duration of stay was undetermined; he at least
intended to remain here until he received two checks from his
employ in California; those checks arrived around October 19,
2001.
Without an apartment of his own, Dugans living
arrangement involved three individuals. The first was his
girlfriend. He stayed at her Peters Creek home the first night
back in Anchorage, but not again because she worked the night
shift as a nurse at the Alaska Native Service Hospital and he
would have been isolated at her home, without a car. On nights
when she was not working, the two went camping. Dugan received
his PFD check at his girlfriends address. The second individual
was his son Michael, the Anchorage homeowner. While Dugan did
not stay with this son, he used the house for long-term storage
and for a primary mailing address, as it provided a stable
homeowner address.
The third individual was his son Matt, who shared a
rented two-bedroom duplex apartment in Anchorage with a male
roommate. On nights when he was not camping with his girlfriend,
Dugan slept on the floor in Matts living room, in his sleeping
bag. Dugan did not have a key and did not pay any rent or
utilities. He had no assigned sleeping space. His girlfriend
normally picked him up after her shift ended, at 6 a.m.; after
spending the day with her, he would return to Matts apartment in
the evening hours. Judge Suddock described Dugans presence as
low impact, noting that he got along well with his son and the
roommate, often left before his sons roommate awoke, and did not
leave his possessions lying around.
The superior court characterized Dugans stay as
follows:
His likely tenure at the apartment was
indeterminate. There was no explicit
understanding as to his exact plans; he in
fact had no exact plans. He was most
analogous to a young traveler, crashing at
the home of more stably situated friends,
with the nuance that the friend was his son.
He would likely stay until his son or the
roommate threw him out (although there was no
evidence of the slightest discord); or he got
tired of sleeping on the floor; or he got a
job at a site providing housing; or he got a
local job and could afford his own room; or
he became discouraged and returned to
California. Depending on the caprice of
circumstance, he could have stayed another
week, or a substantially longer time.
Matt testified that his father was staying at his place off and
on, but that he was not otherwise sure what the father was doing
or how long he intended to stay. Similarly, the roommate did not
convey a sense that the father had become a resident of the
apartment. Matts landlord did not know of or permit Dugans
presence. According to the superior court, if Dugan was in town
for two weeks before the accident, [he] spent about eight nights
at his sons apartment, and about five nights camping.
Based on these findings, the superior court ruled that Dugan was
not a resident of his sons household under the policy. Judgment,
as well as attorneys fees totaling $11,819, was awarded to
Atlanta. Dugan appeals.
III. STANDARD OF REVIEW
We review questions of law and a trial courts
application of law to fact de novo and adopt the rule of law that
is most persuasive in light of precedent, reason, and policy.1
The interpretation of contract language is a question of law we
review de novo.2 We look to four factors when interpreting
contracts: (1) the language of the disputed policy provision; (2)
the language of other provisions in the policy; (3) relevant
extrinsic evidence; and (4) case law interpreting similar
provisions.3
IV. DISCUSSION
A. Dugans Interpretation of the Policy Language Is
Unreasonable.
The printed form of Atlantas policy, held by Matt
Dugan, includes Part C, Uninsured/Underinsured Motorist Coverage,
which obligates Atlanta to pay those damages a covered person is
legally entitled to but otherwise unable to recover from the
owner or operator of an uninsured or underinsured motor vehicle.
Under Part C, a covered person includes, among others, you or any
family member. The term family member is a defined term in the
opening section of the policy, which reads:
Family member means a person related to you by:
1. blood,
2. marriage; or
3. adoption, including a ward or foster child
who is a resident of your household.
Dugan argued below, as he does here, that the phrasing
and punctuation of this provision are ambiguous, leading to two
possible interpretations. The first, urged by Atlanta, is that
the residual clause (who is a resident of your household)
modifies the entire list, thus imposing a residency requirement
on all three types of family members. The second, argued by
Dugan, suggests that the residual clause modifies only the
immediately preceding language (ward and foster child) and that
those related by blood or marriage need not share a residence to
be covered. He argues that because ambiguous insurance policies
are construed against the insurance company and in favor of
coverage, he should be covered by the policy irrespective of
residency. The superior court rejected these arguments and
agreed with Atlanta that the residual clause unambiguously
modified the entire list, requiring residency for all family
members: to read otherwise is not consistent with the other
policy provisions, far-fetched, and would lead to an over-
extension of the policys intended coverage. We agree with the
superior courts analysis.
We interpret ambiguous insurance policies in favor of
the purported insured.4 However, the mere fact that two parties
to an insurance contract have differing subjective
interpretations of that contract does not make it ambiguous.
Rather, ambiguity exists only when the contract, taken as a
whole, is reasonably subject to differing interpretations.5 We
determine the existence of an ambiguity by determining the
reasonable expectations of the contracting parties.6 We discern
reasonable expectations from the language of the disputed
provisions, other provisions, and relevant extrinsic evidence,
with guidance from case law interpreting similar provisions.7
Dugan finds ambiguity in the grammar and layout of the
provision. Specifically, he points out the puzzling use of
punctuation within the list a comma after blood, a semi-colon
after marriage, a comma after adoption, then nothing after foster
child. He also emphasizes the fact that the final clause has
been indented, appearing to be aligned with the third item of the
list. Dugan contends that such drafting implies that the
residency language applies only to wards and foster children and
thus the meaning of the provision is, at least, ambiguous.
We agree that the drafting is sloppy and careless.
Throughout the policy, Atlanta inconsistently formats lists
e.g., sometimes indenting residual language while other times
placing it flush with the left margin. We can easily imagine
scenarios in which such erratic punctuation and pagination make a
provision ambiguous, resulting in a finding of coverage where
perhaps none was intended. This provision, however, does not
present such a case. The language simply cannot support Dugans
position. It is well settled that in situations in which
reasonable interpretation favors the insurer, and any other would
be strained and tenuous, no compulsion exists to torture or twist
the language of the contract.8 This is such a situation.
In viewing the policy, it is clear that the residency
language is not the mere continuation of the adoption language,
despite the lack of punctuation, because it has been placed
squarely on the line below. If it were solely qualifying the
adoption language, that portion of the residency language which
could have fit on the same line as the adoption language before
reaching the right margin would have occupied that space.9
More importantly, Dugans reading leads to absurd
results. First, it would create coverage for all blood
relatives, including unknown or long-lost relatives living
thousands of miles away. We have seen no evidence that any
insurance company has ever offered such vast coverage.10 Second,
it would require residency for wards and foster children, but not
for blood relatives. Such an arbitrary distinction cannot be the
intent of the provision.11 Dugans reading also leads to a
potential redundancy: Because shared residency is an inherent
aspect of the foster parent-child relationship, it would be
particularly unnecessary to include language requiring residency
in those relationships. In contrast to all of these unlikely
situations, Atlantas reading produces results that seem well in
line with normal industry practice.12
An Illinois appellate court came to the same conclusion
in Yarbert v. Industrial Fire and Casualty Insurance Co.13 In
that case, a mother making a claim on her sons insurance policy
argued that use of the word relative in the UM/UIM section was
not restricted by an earlier sections definition of the word that
required residency, thus allowing her to claim that the policy
covered all of his relatives, wherever found.14 The court
rejected her contention, finding this construction patently
unreasonable and leading to absurd consequences.15
Because we find that Dugans interpretation of the
policy is not a reasonable one, we reject his contention that the
provision is ambiguous.16 Accordingly, we agree with Atlanta that
the policy unambiguously requires a family member to be a
resident in the policyholders household to be covered under its
terms.17
B. The Superior Court Did Not Err in Finding that Dugan
Was Not a Resident of His Sons Household.
Dugan next contends that the superior court erred by
adopting and applying an improper legal test in determining
whether Dugan was a resident of his sons household under the
insurance policy. Dugan does not appeal the superior courts
findings of fact. The question presented is therefore one solely
of law.18
After a one-day bench trial on residency, Judge Suddock
issued an order with findings of fact, a discussion of the
relevant law, and a conclusion that Dugan was not a resident.
The superior court noted that we have declined to adopt a fixed
legal test for determining whether a person is a resident of an
insureds household. Instead, the superior court determined the
named insureds reasonable expectations as to whether coverage
extends to a relative, in light of the factual situation
presented, the policy language as construed by the Court, and
relevant precedent. After reviewing cases from Alaska and other
jurisdictions, it concluded that a reasonable person in the
position of the son would not have expected that his automobile
insurance policy provided coverage for his visiting father, who
was living out of a back pack and sleeping on the floor, who had
not arranged for a stay of any particular duration, and who might
depart at any day. Accordingly, it awarded judgment to Atlanta.
Dugan alleges that, in doing so, the court improperly
adopted a test that required permanency or a set intended length
of duration in order to find a person to be a resident of a
household, and that it gave undue weight to such factors as the
visitor having a separate bedroom, a lease agreement, and
sophisticated communication between the father and son about
their plans.
We recently considered who qualifies as a resident of a
household under an insurance policy. In Simmons v. Insurance Co.
of North America19 we explicitly declined to formulate a fixed
rule, and instead required that the facts of each case must be
examined to determine whether the named insured . . . and his
relatives have ceased to be residents of the same household. 20
Thus, we remanded the factual issues of when residency ended to
the trial court for appropriate findings.21
We have also construed these terms in two other cases.
In Lumbermens Mutual Casualty Co. v. Continental Casualty Co.,22
we held that a wife killed in an automobile accident had been a
resident of the same household as her husband, even though the
husband and wife had been separated for over two months, the wife
had filed suit for divorce, and the husband had obtained the
insurance policy after his wife had filed suit for divorce.23
During the separation, the wife remained in the family home with
the couples children, while the husband stayed with relatives or
at a hotel, regularly visited his wife and children at the home,
paid all house, utility and grocery expenses for the family, and
ultimately wished to reconcile with his wife.24 We rejected the
insurers request to limit resident of the same household to those
who are literally under the same roof, but rather examined the
facts of the particular case and determined that, despite the
husbands temporary absence, the couple remained residents of the
same household at the time of the accident.25
We came to a similar conclusion in Wainscott v.
Ossenkop.26 In Wainscott, the father had moved out of the family
home into an apartment, continued to pay bills and insurance
premiums, and believed that reconciliation was still conceivable.27
The wife, on the other hand, stayed in the family home with the
daughter, filed for divorce and intended her separation . . . to
be permanent.28 The issue in the case was whether the daughter,
who had died in an automobile accident, could qualify as a
resident of her fathers household.29 We found that while the
inter-spousal relationship may have been permanently severed, the
separation in the parent-child relationship which was the
essential relationship in the case may have been only temporary.30
We noted that a child of divorced parents may, depending on the
facts, be regarded as being in the household of both.31
Without overruling Lumbermens, we adopted a rule of
construction that the policy must be construed so as to provide
that coverage which a layman would reasonably have expected given
his lay interpretation of the policys terms. 32 We then deemed it
reasonable for a father to expect that his insurance covered his
minor children who continued to live in a household for which he
was the sole source of support during the interim period
between the initial separation and establishment of the final
provisions for care and custody.33 Accordingly, we affirmed
summary judgment to the father.34
In the present case, the superior court correctly
applied this reasonable expectations test. It did not purport to
alter or modify this test in any way. After making factual
findings and examining how other jurisdictions have handled
similar cases, the court concluded that a reasonable person in
Dugans sons position would not have expected coverage for Dugan,
who was living out of a back pack and sleeping on the floor, who
had not arranged for a stay of any particular duration, and who
might depart any day. Because the court correctly identified and
applied the proper legal test in making its analysis, it did not
err.
We also note that the courts conclusion that the son
did not have reasonable expectations that his father was a
resident of his household comports with the ordinary dictionary
definition of resident. Websters Third New International
Dictionary gives two definitions that are relevant, and both
stress permanency: dwelling or having an abode for a continued
length of time; one who dwells in a place for a period of some
duration.35 Similarly, under reside this dictionary provides a
synonym note distinguishing residing from staying: reside
signifies a fixed, settled, or legal abode and stay connotes a
temporary habitation or visits with friends and relatives.36
These dictionary definitions may be somewhat rigid and
unhelpful as applied to certain unusual situations, such as where
a couple is breaking up and the husband moves into a hotel but
still claims coverage for his children.37 But the definitions do
seem to speak directly to whether Dugan crossed the line from
being a visitor/guest to being a resident. With these
definitions in mind, the superior courts findings of fact in this
matter lead naturally to the conclusion that Dugan was merely a
visitor or guest.
We also reject Dugans arguments that the court
considered improper factors and that it gave undue weight to
other factors. The superior courts conclusion was amply
supported by its factual findings that Dugan had no key or
assigned space within the apartment, that his mail went
elsewhere, that his stay was far from exclusive or lengthy, and
that his stay had no intended duration. No one factor was
treated as dispositive; rather, the court came to its conclusion
because there was little to nothing in the record to suggest that
Michael Dugan, Matt Dugan, or anyone else considered Michael to
be a resident of the household. By not appealing the superior
courts factual findings, Dugan accepts those findings, which
include, among other things, findings that Dugan was a transient
merely crashing at his sons for about eight nights in a two-week
period. Consideration of these facts is proper under the
reasonable expectations test.
Accordingly, we uphold the superior courts conclusion
that Dugan was not a resident of his sons household under the
insurance policy.38
V. CONCLUSION
Because the policy did not extend coverage to blood
relatives of the policy holder who were not residents of his
household, and because the courts finding that Michael Dugan was
not a resident of his sons household was not erroneous, we AFFIRM
the superior courts judgment.
_______________________________
1 Rausch v. Devine, 80 P.3d 733, 737 (Alaska 2003).
2 Simmons v. Insurance Co. of N. America, 17 P.3d 56, 59
(Alaska 2001).
3 Id.
4 Id. at 62.
5 U.S. Fire Ins. Co. v. Colver, 600 P.2d 1, 3 (Alaska
1979) (quoting Modern Constr., Inc. v. Barce, Inc., 556 P.2d 528,
529 (Alaska 1976)) (emphasis added).
6 Simmons, 17 P.3d at 62 (citing Zito v. Zito, 969 P.2d
1144, 1147 n.4 (Alaska 1998)).
7 Id. (quoting Williams v. Crawford, 982 P.2d 250, 253
(Alaska 1999)).
8 Ness v. Natl Indem. Co. of Neb., 247 F. Supp. 944, 947
(D. Alaska 1965).
9 After reviewing the policy, it is clear that at least
the first three words of the residency clause (who is a) would
have easily fit within the margins had it been placed on the same
line as the adoption language.
10 In many UM/UIM cases, the meaning of the terms resident
and household is debated, because in those cases residency is a
precondition for a relative to collect under the policy. See,
e.g., 9 Couch on Ins. 123:11 (3d ed. 2004) (Household Coverage
and Exclusions, Generally Who Are Relatives or Members of
Household). There appears to be no case law regarding any UM/UIM
policy that did not require residency in the primary insureds
household for coverage of a relative.
11 Even Dugan concedes that [t]he reason for the
distinction may not be clear and that a person who knew something
about insurance might think [this distinction] unusual.
12 It is also worth noting that there is no evidence that
the policy holder, Matt Dugan, read the policy to cover his
father. When questioned on the issue, Matt responded, I never
read my policies. I dont know what they cover. Matt Dugan last
renewed his automobile insurance policy on or around April 30,
2001, at a time when his father was still living in California.
13 372 N.E.2d 886 (Ill. App. 1978).
14 Id. at 887.
15 Id.
16 In doing so, we also reject a fortiori his contention
that the provision unambiguously extends coverage to all family
members.
17 Dugan also argues that residency should not be required
because the terms resident and household themselves are
ambiguous. To negate residency, however, Dugan must prove that
the phrasing or sentence structure is ambiguous such that it is
unclear whether or not the qualification applies not that the
terms of residency themselves are ambiguous. The requirements of
the terms resident and household are addressed infra in Part
IV.B.
18 Rausch v. Devine, 80 P.3d 733, 737 (Alaska 2003).
19 17 P.3d 56 (Alaska 2001).
20 Id. at 64 (quoting Wainscott v. Ossenkop, 633 P.2d 237,
240 (Alaska 1981)). This case, of course, involves whether the
relative had commenced, not ceased, residency.
21 Id.
22 387 P.2d 104 (Alaska 1963).
23 Id. at 106-07.
24 Id. at 106.
25 Id. at 106-07.
26 633 P.2d 237 (Alaska 1981).
27 Id. at 239.
28 Id.
29 Id.
30 Id. at 240-41.
31 Id. at 241.
32 Id. at 243-45 (quoting Contl Ins. Co. v. Bussel, 498
P.2d 706, 710 (Alaska 1972)).
33 Id. at 244.
34 Id. at 245.
35 Websters Third New International Dictionary, Unabridged
1931 (1961).
36 Id.
37 See, e.g., Wainscott, 633 P.2d at 239.
38 Dugans briefing concludes by noting that [w]hen . . .
Dugan had an intent to get a job in Alaska and resided with his
son, his Alaska residency was established from that point
forward. Coverage is in order. However, Dugan fails to
appreciate the distinction between legal domicile and residency
in a household for the purposes of an insurance contract. As the
Wisconsin Supreme Court noted, [e]very person has a domicile but
not every person is a member of a household. Pamperin v.
Milwaukee Mut. Ins. Co., 197 N.W.2d 783, 788 (Wis. 1972). A
transient visitor does not become the resident of a household
merely because he has no other abode. Id. at 787. Dugans
residency within the State of Alaska, or his legal domicile, is
analytically and legally distinct from his residency within his
sons household. Thus, the fact that Dugan was an Alaska resident
has no bearing on whether he was a resident of his sons
household.
