DOES FOSTER CHILD QUALIFY AS RESIDENT?

The Apodoca Family (Apodacas), licensed foster parents, owned a home insured by Farmers Insurance Company of Arizona (Farmers) at the time of a tragic loss. The Apodacas were in custody of a child who was placed in their care by a government agency. The plan for the child was to be returned to relatives once their home situation stabilized. A year into the placement, the child died by drowning in a hot tub. The child’s relatives sued the Apodacas for wrongful death.

Besides the insurer, suit included the agency that oversaw the foster program since the Apodacas were also considered agency employees. The defending parties disagreed over who held primary responsibility to legally defend the Apodacas, whether the deceased child was a resident under the insurance policy, and whether a policy exclusion that barred coverage for the loss applied. Both parties filed for summary judgment in favor of their positions. The agency appealed after a lower court granted the insurer’s filing.

As the lower court based its decision on a determination whether the deceased was a household resident, the higher court also focused on that issue. On that point, the agency argued that Farmers had an obligation to respond to the suit as the policy made no specific mention of foster children. The policy wording did state that persons younger than 21 living in the household on a permanent basis were residents, qualifying as insureds. The policy also contained an exclusion that barred the application of the policy’s bodily injury coverage to any household residents.

The higher court, after considering a number of decisions from other jurisdictions, came to a different understanding of the lower court. In its opinion, undefined words, in different situations, may reasonably be interpreted in more than one way. It concluded that ambiguity existed with regard to what was meant by resident. Without clarity, it doubted that the policy’s resident exclusion could legitimately be applied. Therefore, it reasoned that it was improper of the lower court to have granted a summary judgment in favor of Farmers. The lower court was instructed to gather more information as the dispute involved a matter of fact. The matter was reversed and remanded to the lower court for rehearing.

Risk Management Division of the General Services Department of the State of New Mexico ex rel. James and Kathy Apodaca, Plaintiff-Appellant. V. Farmers Insurance Company of Arizona, Defendant-Appellee. New Mexico CtApp., No. 22.161. Filed May 30, 2003. Reversed and remanded. CCH 2003 Fire and Casualty Cases, Paragraph 6929