In contemporary Canadian society, a multitude of different
living arrangements exist as a result of increased divorce rates,
the return of adult children to the home, extended family residing
together, and the rise of maintaining residences abroad. If the
fluctuating nature of residents in a home is not adequately
contemplated by an insurance policy, this can lead to coverage
disagreements between the insurer and the insured.
The BC Court of Appeal in Royal & SunAlliance Insurance
Company of Canada v. Araujo, 2013 BCCA 324, looked at one such
case involving a child whose divorced parents maintained a shared
custody living arrangement. The child's mother maintained his
primary residence, but he stayed with his father at the paternal
grandparents' house between two and three times per month
for one night, usually from Friday evening to Saturday morning.
The residence in issue was insured by Royal & SunAlliance.
The grandparents owned and lived in the home and were the named
insureds under the insurance policy. Their two adult sons (one of
which is the child's father) also lived in the home on a
In the early morning hours of Saturday, August 14, 2004, the
insured home was firebombed by arsonists. The child was injured,
suffering serious burns as a result of the ensuing fire.
Ultimately, the child sued his grandparents, his father and his
uncle for damages, alleging they were negligent in not knowing such
an attack would occur, following a more minor incident the night
The insurer sought a declaration that it was not obligated to
defend the action, taking the position that the child was an
unnamed insured in the policy. As an unnamed insured, his claim was
excluded from coverage.
The court reviewed the following policy wording:
We will pay all sums which you become legally liable to pay as
compensatory damages because of unintentional bodily injury or
property damage arising out of:
your personal actions anywhere in the world
your ownership, use or occupancy of the premises defined in
We do not insure claims made against you arising from ...
bodily injury to you or to any
person residing in your household other than a
The word "you" is given the same meaning as that
defined in Section I:
You or Your means the person(s) named as Insured on the Coverage
Summary page and, while living in the same
his or her spouse;
the relatives of either;
any person under 21 in their care;
[Emphasis added by trial judge.]
The trial judge followed the approach taken by the Court of
Appeals of Indiana in Indiana Farmers Mutual Ins. Co. v
Imel, 817 N.E. 2d 299 (2004) (Ind. CA), which stated as
... in order to be a resident... we consider the following
elements: 1) whether the claimant maintained a physical presence in
the insured's home; 2) whether he had the subjective intent to
reside there; and 3) the nature of his access to the insured's
home and its contents.
In Royal & SunAlliance Insurance Company of Canada v.
Araujo, the child did not maintain a physical presence in his
grandparents' home as he had no room of his own and kept none
of his possessions there (he routinely slept on the living room
sofa during these overnight visits). He did not have the subjective
intent to reside there, and his access to the home was dependent on
those who lived there on a continuous basis (for example, he did
not have a key or the security alarm code to the home). Although
his visits were of a certain frequency, the court did not find that
approach to be particularly compelling in determining residency
Ultimately, the Court of Appeal upheld the trial judge's
decision, finding that the child was not a resident of the home
and, therefore, he did not satisfy the definition of
"you" under the exclusion clause. He was a "true
third party who was in no position to assess the risk of a fire
bombing incident taking place" and, therefore, the insurer had
a duty to defend the other parties in the action.
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