Plaintiff Mary Ann Iaeck lived with Patricia Barnaba in a condominium owned by Defendant Barnaba. Plaintiff fell down a flight of stairs in the condominium and sued Barnaba, claiming that Barnaba’s negligence caused her fall. Barnaba had a homeowner’s insurance policy with personal liability coverage with Federal Insurance Company (“Federal”). The issue in Iaeck v. Barnaba, 2023 N.J. Super. Unpub. LEXIS 1768 (App. Div. Oct. 16, 2023) was whether the Federal insurance policy provided coverage for this personal injury claim or whether the exclusion for liability to persons who live with the policyholder was triggered.
Plaintiff had lived with Barnaba in the condominium since 2008. She had a verbal lease with Barnaba and paid Barnaba rent. However, it was undisputed that they shared parts of the condominium, including the kitchen, the garage, the mailbox and the space where the washing machine and dryer were located. Plaintiff used the bedroom and bathroom on the fourth floor of the condominium.
After living with Barnaba for about 11 years, plaintiff fell down the stairway in the condominium. She claimed that she tripped because the lights were out, the handrail was loose and Barnaba had placed boxes and other things on the steps.
As a result of her fall, plaintiff suffered a fracture of her left leg and compartment syndrome. Plaintiff was required to have multiple surgeries, which left her with permanent scarring.
At the time of the accident, Barnaba had a homeowner’s insurance policy with Federal. The policy did cover Barnaba’s home and provided her with personal liability coverage which provided coverage for damages Barnaba was legally obligated to pay for personal injuries.
However, the policy contained numerous exclusions. The pertinent one was entitled “Covered person’s or dependent’s personal injury.” According to that exclusion, Federal stated that it would not cover damages for personal injuries for any covered person or their dependents where the ultimate beneficiary is the offending party or defendant. Further, the exclusion stated that Federal would not cover any damages for personal injury “for which you or a family member can be held legally liable in any way, to a spouse, a family member, a person who lives with you, or a person named in the Coverage Summary.”
After the plaintiff’s fall, counsel for plaintiff sent Federal a letter advising of the fall and asking Federal to open a bodily injury claim under its policy. Thereafter, Federal denied any obligation to provide Barnaba with coverage for plaintiff’s injuries. Federal advised that Barnaba’s personal liability coverage was excluded under the policy’s “Covered person’s or dependent’s personal injury exclusion.”
Thereafter, plaintiff sued Barnaba with plaintiff claiming that Barnaba was negligent in causing her injuries. Thereafter, plaintiff amended her complaint to assert a direct claim against Federal and sought a declaratory judgment that the policy issued by Federal to Barnaba provided coverage for plaintiff’s injuries. She also requested a default against Barnaba. Sometime later the trial court conducted a proof hearing concerning plaintiff’s injuries, for which Barnaba did not appear. A judgment in the amount of $766,330 was entered in favor of plaintiff against Barnaba.
Cross-motions for summary judgment were filed between Federal and plaintiff as to the coverage issue. The trial court granted summary judgment to Federal and declared that Federal did not have any indemnity or defense obligations as to plaintiff’s personal injury claims against Barnaba and dismissed all claims against Federal with prejudice. That order was appealed to the Appellate Division.
The issue upon appeal was whether the “Covered person’s or dependent’s personal injury” exclusion applied to plaintiff’s personal injury claims because plaintiff lived with Barnaba. The Appellate Division noted the well settled concepts that coverage provisions are to be read broadly and exclusions are to be read narrowly with any potential ambiguities being resolved in favor of the insured. Further, the policy is to be read in a manner that fulfills the insured’s reasonable expectations. However, if the plain language of the policy is unambiguous, the court is not to engage in a strained construction to support the imposition of liability or write a better policy for the insured than the one purchased.
In applying these principles, the Appellate Division found that the “Covered person’s or dependent’s personal injury” exclusion did apply. The Appellate Division explained that Barnaba’s liability to plaintiff for her personal injuries was excluded under the policy because plaintiff did live with Barnaba at the time of the accident. It found that the language was “plain and unambiguous.” The Court found that the exclusion applied to personal injury suffered by plaintiff because plaintiff was living with Barnaba at the time of the accident. It found no ambiguity in this exclusion, even if read narrowly, and also found that it was not contrary to public policy because “it is reasonable for an insurer to exclude coverage for liability for personal injuries to people who live with the covered person.”
One of the arguments made by plaintiff upon appeal was that the exclusion should be read to apply only to individuals who are part of the covered person’s household or who have a romantic or familial relationship with the covered person. The Appellate Division rejected that argument as inconsistent with the plain language of the exclusion. It noted that the exclusion did not use the term “household” members. Rather, it stated that there was no liability coverage for personal injuries to “a person who lives with” the covered person.
Further, the Appellate Division found that if the exclusion was meant only to apply to household members or family members, there would be no need to list “a spouse, a family member or a person who lives with you.” By separately listing “a person who lives with you,” the Court found that “Federal was clearly stating that the exclusion applied to people who are not in a familial relationship.” There was nothing in the terms “a person who lives with you” that require that there be a romantic relationship between that person and the covered person.
The Court rejected all of the plaintiff’s other arguments and upheld the trial court’s decision. Thus, the summary judgment entered in favor of the Federal Insurance Company dismissing the case against it was affirmed.
