Live-in Partner Sustains On-Premises Theft – Claims Magazine

ISSUE

The named insured, a man of 35, filed a claim for theft of men's jewelry stolen from the residence premises. The property stolen belonged to another man of 32. The two men lived together at the residence premises, sharing responsibilities and expenses. The named insured identified the other man as his partner. Is there coverage for the partner's jewelry under the HO 00 03 04 91?

ANALYSIS

Could the live-in partner be considered an "insured," as that term is defined in the policy? To be an "insured," the partner must be a resident of the named insured's "household" and also, be either a relative or a person under 21 who is "in the care" of the named insured.

Webster's New Collegiate Dictionary 550 (1980) defines "household," in relevant part, as "a social unit comprised of those living together in the same dwelling." A social unit may be identified by the mutual dependency of its members. According to ordinary usage, the named insured and his partner comprise a "household."

However, the partner is not a relative, nor is he under 21. Even if he were under 21, he is not "in the care" of the named insured. The policy requirement that the individual be under 21 suggests a parent-child or guardian-ward relationship. Further, "Webster's" at 166 (1980) defines "care," in relevant part, as "charge, supervision." The partner is not under the supervision of the named insured.

Since the partner is not an insured, we must look for coverage under the following provision:

"At your request, we will cover personal property owned by others while the property is on the part of the residence premises occupied by any insured." The subsequent policy provision also gives the insured the right to request coverage for "personal property owned by a guest . . . while the property is in any residence occupied by any insured." It is unnecessary to consider whether the partner might be a "guest" because he is an "other" and the property was stolen from the residence premises. Moreover, we stated above that the partner was part of the insured's household. It would be contradictory to also consider him a guest.

Some claimspeople are reluctant to apply the coverage for property of others to property not owned or used by the insured himself. They question whether the insured has an insurable interest in such property.

The policy clearly contemplates coverage for property of others which the insured does not own or use. It states: "We cover personal property owned or used by any insured while it is anywhere in the world." It then states: " At your request, we will cover personal property owned by others . . . ." If the drafters intended coverage only for property owned or used by the insured, the sentence concerning property of others would be surplusage.

What about the requirement that an insured have an insurable interest in property covered under the policy? There are four recognized bases for the existence of an insurable interest in property of others. For three of these to exist, the insured must stand to lose by the destruction of the other's property. Examples of these three are where the insured is the creditor of the other person, where the insured could be legally liable for destruction of the other person's property, and where the insured expects to inherit or otherwise profit from the other's property in the future.

For the fourth basis for an insurable interest in property of others to exist, the insured need not have an independent insurable interest in damage to the property. Instead, the insured derives a representative insurable interest from his relationship with the person he represents. "If it can be shown . . . that insurance was obtained for the protection of others, the validity of the policy is not jeopardized by the fact that the entity obtaining it does not have an insurable interest in the covered property." C. Williams, Jr., G. Head, R. Horn, G.Glendenning, Principles of Risk Management and Insurance, Vol. IIat 37 (1981).

Can the insured request coverage for property of others after a loss, or must he notify the insurer before the loss that coverage for property of others is desired? We discussed this issue in this column of Claims Magazine, November (1994). We concluded that neither the language of the policy nor the underwriting practices justify a requirement of pre-loss notification.

Further, we observed that such a requirement would require a phone call to the insurer each time an unexpected guest dropped by. Having established that the property of the live-in partner falls within the insuring agreement for property of others, we need to consider whether the property falls within any of the categories of Property Not Covered. The only category of property not covered which might apply to the partner's property is "property of roomers, boarders and other tenants . . . ." The partner is not a tenant. A tenancy involves exclusive possession. Even the landlord is excluded unless the lease allows his entry for specified purposes. Black's Law Dictionary 1313 (1979). Nor would we categorize the partner as a roomer or boarder. A roomer is a lodger; one who rents a room or rooms. A boarder is one that is provided with regular meals, with or without lodging. Black's at 1194, 158. Each of these relationships involves the exchange of living space or food for monetary consideration or its equivalent. Although the relationship between the insured and his partner involves the sharing of living expenses, the primary basis for the partner's occupancy of the premises is grounded on the insured's desire for his companionship. As discussed above, the named insured and partner comprise a "household," a term incompatible with categorization as "roomer,""boarder," "tenant," or "guest."