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Nodak Mutual Ins. Co. v. Koller – Auto Insurance Step-Down Provisions

Auto insurance policies can contain complex legalese that can be difficult to sift through, particularly in the wake of a devastating auto accident. 

These policies are purchased not just because they are often required by law, but also because they offer necessary financial protections to to those who survive and also to those who survive them. However, establishing insurance liability when there are so many caveats to coverage can be a challenge.

In the recent case of Nodak Mutual Ins. Co. v. Koller, the guardian of a child whose mother perished in an all-terrain vehicle accident sought to establish maximum coverage from the insurer. The insurer, however, fought to establish that only the lesser “step-down” coverage was applicable. The outcome hinged on whether decedent driver was a household resident of the insured, his stepfather.

According to North Dakota Supreme Court records, the two decedents, boyfriend and girlfriend, were killed in an auto accident when the boyfriend lost control of an all-terrain vehicle.

The vehicle was registered to the boyfriend’s mother and insured by a policy purchased by his stepfather.

The policy provided coverage for any “family member” of the insured for up to $100,000 per incident. “Family member” was defined in the policy as anyone related by blood or marriage who is a resident of the insured’s household. There was also a step-down provision that included a reduced policy limit of $25,000 when the vehicle was operated by a non-family member.

Court records showed the driver had moved out of his mother/ stepfather’s home in 2003, and he hadn’t been listed as a dependent on their tax returns since a year earlier. He had also been dropped as an authorized driver from the stepfather’s insurance policies in 2005. The accident occurred in 2011.

Testimony established that in 2010, decedent driver rented an apartment. However, when he got a new job closer to his mother and stepfather’s home, he began staying at their home, rent-free. There, he kept limited personal items for himself, his girlfriend and her child from a previous relationship. His mother often babysat the child. The intention was for him to move out by the end of the summer.

After the accident, the insurer filed a lawsuit seeking to establish that decedent driver was not a resident family member of insured, and therefore only the $25,000 policy limit was applicable. Both the parents of the driver and a guardian for the insured filed their own lawsuits to establish the $100,000 policy applied because decedent driver was a resident of insured’s household.

The claim of the child guardian was severed from that of decedent driver’s parents. Child guardian sought summary judgment, and this was granted.

Insurance company appealed on the basis of a recent state supreme court decision dealing with a similar case that established a certain criteria for establishing family member residence.

Under this criteria, the phrase “resident of household” means a person who dwells with the insured for a sufficient length of time. The factors considered include:

  • Intent of parties;
  • Formality of relationship between the person and insured;
  • Permanence or transient nature of the residence;
  • Absence or existence of another place of lodging;
  • Age and self-sufficiency of that person.

Based on these factors, the appeals court reversed, finding the lower limit applied, and the state supreme court affirmed.

Call Freeman Injury Law — 1-800-561-7777 for a free appointment to discuss your rights. Now serving Orlando, West Palm Beach, Port St. Lucie and Fort Lauderdale.

Additional Resource:

Nodak Mutual Ins. Co. v. Koller, June 7, 2011, North Dakota Supreme Court

More Blog Entries:

Gores v. Miller – Car Accident Release of Liability, Feb. 27, 2016, Fort Lauderdale Accident Lawyer Blog

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