                                                                                        12/21/2016




               IN THE COURT OF APPEALS OF TENNESSEE
                            AT JACKSON
                              November 17, 2016 Session

 TENNESSEE FARMERS MUTUAL INSURANCE COMPANY v. ESTATE
        OF RICHARD M. ARCHIE AND JESSICA COSSITT

                  Appeal from the Circuit Court for Shelby County
                    No. CT-002164-14 Rhynette N. Hurd, Judge
                     ___________________________________

                           No. W2016-01287-COA-R3-CV
                       ___________________________________

This appeal involves a dispute regarding a household exclusion clause in an automobile
insurance policy. Following a motorcycle accident in which the defendant was injured
while riding as a passenger of the insured, the insurance company filed suit seeking a
declaratory judgment that the exclusion relieved it of liability for the defendant’s claims
because the defendant was residing in the insured’s household at the time of the accident.
Following a bench trial, the trial court found that the defendant was not residing in the
insured’s household at the time of the accident for purposes of determining liability
coverage and denied the insurance company’s request for declaratory relief. The
insurance company appealed. We affirm.

Tenn. R. App. P. 3 Appeal as of Right: Judgment of the Circuit Court Affirmed and
                                    Remanded

ARNOLD B. GOLDIN, J., delivered the opinion of the Court, in which KENNY
ARMSTRONG, J., and DAVID R. FARMER, SP. J., joined.

Andrew H. Owens and Ashleigh C. Kiss, Memphis, Tennessee, for the appellant,
Tennessee Farmers Mutual Insurance Company.

Matthew Porter, Memphis, Tennessee, for the appellee, Jessica Cossitt.

Dawn Davis Carson and Jason R. Hollingsworth, Memphis, Tennessee, for the appellee,
State Farm Mutual Automobile Insurance Company.
                                            OPINION

                         BACKGROUND AND PROCEDURAL HISTORY

        On December 20, 2013, Jessica Cossitt and Richard Archie were involved in a
single vehicle accident when a motorcycle owned and operated by Mr. Archie, on which
Ms. Cossitt was a passenger, hit a pothole and veered out of control. Mr. Archie died as a
result of his injuries; Ms. Cossitt survived but sustained serious personal injuries. At the
time of the accident, Mr. Archie had an automobile insurance policy with Tennessee
Farmers Mutual Insurance Company (“Tennessee Farmers”). The policy contained the
following household exclusion clause: “We do not provide coverage . . . for any person
or entity for bodily injury or property damage to any covered person or any person
residing in the covered person’s household.”

       In May 2014, Tennessee Farmers filed a complaint for declaratory judgment in the
Shelby County Circuit Court against Ms. Cossitt and Mr. Archie’s estate. Tennessee
Farmers asserted that the household exclusion clause in Mr. Archie’s insurance policy
applied to Ms. Cossitt’s injuries because she was residing in Mr. Archie’s household at
the time of the accident. It requested the entry of an order declaring that it had no
obligation to defend or pay claims filed by Ms. Cossitt against Mr. Archie’s estate arising
from the accident.1 Ms. Cossitt responded, asserting that the exclusion did not apply
because she was not residing in Mr. Archie’s household at the time of the accident.2 The
case proceeded to a bench trial in May 2016.

        The facts established at trial are largely undisputed. In 2005, Ms. Cossitt was
living in a house that she rented from her mother for $600 per month. Around that time,
she met Mr. Archie while working as a waitress in a restaurant that he frequented.
Although their relationship was never romantic, the two became close friends. In 2011,
Mr. Archie also moved into the house that Ms. Cossitt was renting from her mother. He
lived there for approximately six months and paid Ms. Cossitt’s mother $200 per month
in rent. In mid-2012, Mr. Archie moved out and began renting a two-story, three-
bedroom house on Ivawood Drive in Bartlett, Tennessee. Shortly thereafter, Ms.
Cossitt’s mother decided to sell the house she had been renting to her daughter. As a

1
  In December 2014, Ms. Cossitt filed a separate lawsuit against Mr. Archie’s estate claiming personal
injuries and damages caused by Mr. Archie’s negligence.
2
  The trial court granted the motion of Ms. Cossitt’s insurance carrier, State Farm Mutual Automobile
Insurance Company (“State Farm”), to intervene as a defendant.



                                                -2-
result, Ms. Cossitt moved into a room at the house of another friend. Ms. Cossitt testified
that she planned to live with the friend temporarily until she found a better place. She did
not pay rent and put the majority of her furniture in storage. Despite having a room at the
friend’s house, she spent most nights at her boyfriend’s house because it was closer to the
restaurant where she worked. This arrangement lasted for only a few months, however,
as Ms. Cossitt’s friend subsequently needed the room for a family member. Although she
had been staying at her boyfriend’s house most nights, Ms. Cossitt testified that she was
not ready to move in with him at the time. When Mr. Archie offered to let her rent an
extra bedroom at the house he was renting, she accepted.

       In January 2013, Ms. Cossitt moved into the house that Mr. Archie was renting on
Ivawood Drive. Ms. Cossitt testified that she only planned to live at Mr. Archie’s house
temporarily until she was financially stable. Apart from a bed, she did not bring any of
her furniture to the house. She paid Mr. Archie $200 per month in rent. She had her own
bedroom on the second floor and unlimited access to all common areas of the house.
Although she listed the Ivawood Drive address on her driver’s license, she did not receive
her mail there. She did not share personal expenses with Mr. Archie and continued to
spend most nights at her boyfriend’s house. Ms. Cossitt testified that she had been
looking for another place to live at the time of the accident but had not yet found one.

       The trial court announced its findings from the bench after the close of proof:

              Now, Ms. Cossitt lived at this address, but it appears to the Court
       that she was not, as contemplated by Tennessee law in the language of the
       policy, residing in the insured’s household.

              Ms. Cossitt rented a room at the insured’s house. She resided at the
       house, but she was not part of the household. She was not a member of any
       group. There was no intimacy between her and the insured.

              There was no family-like relationship. She testified they didn’t
       watch television together. She could come and go as she pleased without
       letting Mr. Archie know she was coming or going. She had access
       independently with her own key.

              The fact that she has repeatedly said this was her address, it was just
       a place she was living at the time. It doesn’t mean necessarily that she was
       a member of the household, which I think is the important language. Not
       whether she was residing there, she was living there.


                                           -3-
               The question was, was she residing as a member of the household.
         They rarely engaged in activities together.

                The fact that she paid only two hundred dollars in rent is reasonable,
         this was what she could afford at the time, and it was a temporary
         residence. She had one small room, although she had access to the rest of
         the house. It makes sense, and the rent is reasonable in light of the
         circumstances.

               It’s clear also to the Court that she was going to stay only so long as
         she had to before she could find a place of her own. She testified she was
         looking for somewhere else to live.

                She was independent and able to come and go as she pleased, and as
         such, I do find Tennessee Farmers owes a duty to cover her, or to cover Mr.
         Archie under the policy.

The trial court’s oral findings were incorporated by reference into its final order denying
the request for declaratory judgment. Tennessee Farmers timely filed a notice of appeal
to this Court.

                                            ISSUE

         Tennessee Farmers raises the following issue on appeal, restated from its appellate
brief:

         1. Whether the trial court erred in ruling that Ms. Cossitt was not residing
            in Mr. Archie’s household so as to invoke the insurance policy’s
            household exclusion clause.


                                   STANDARD OF REVIEW

       The issue presented on appeal requires us to ascertain the meaning of a household
exclusion clause in an insurance policy. At their core, insurance policies are contracts.
Allstate Ins. Co. v. Tarrant, 363 S.W.3d 508, 527 (Tenn. 2012) (Koch, J., dissenting). A
question regarding the scope of insurance coverage is an issue of law involving the
interpretation of contractual language. Garrison v. Bickford, 377 S.W.3d 659, 663 (Tenn.
2012). As such, our standard of review is de novo with no presumption of correctness
afforded to the trial court’s conclusion. U.S. Bank, N.A. v. Tenn. Farmers Mut. Ins. Co.,
277 S.W.3d 381, 386 (Tenn. 2009).
                                             -4-
                                        DISCUSSION

        Parties to an insurance contract are free to contract as they see fit so long as they
remain within the bounds of the law and public policy. Setters v. Permanent Gen.
Assurance Corp., 937 S.W.2d 950, 953 (Tenn. Ct. App. 1996). In that vein, the court
should construe insurance policies using the same principles that guide the construction
of any other contract. Garrison, 377 S.W.3d at 664. Accordingly, the court’s primary
goal is to ascertain and give effect to the parties’ intent. Id. To that end, the court should
look first to the plain language of the policy and give the words used their usual and
ordinary meaning. West v. Shelby Cnty. Healthcare Corp., 459 S.W.3d 33, 41-42 (Tenn.
2014). Importantly, the “ordinary meaning” contemplated is “the meaning which the
average policy holder and insurer would attach to the policy language.” S. Trust Ins. Co.
v. Phillips, 474 S.W.3d 660, 667 (Tenn. Ct. App. 2015). More precisely, “[t]he language
of an insurance contract ‘must be read as a layman’ would read it.” Id. (quoting Paul v.
Ins. Co. of N. Am., 675 S.W.2d 481, 484 (Tenn. Ct. App. 1984)); see also Harrell v.
Minn. Mut. Life Ins. Co., 937 S.W.2d 809, 814 (Tenn. 1996) (“[A]n insured should not
have to consult a long line of case law or law review articles and treatises to determine
the coverage he or she is purchasing under an insurance policy.”). If the provisions of the
policy are clear and unambiguous, the court should avoid favoring either party or
construing the policy in a manner that would artificially restrict or extend the scope of
coverage. Mass. Mut. Life Ins. Co. v. Jefferson, 104 S.W.3d 13, 20 (Tenn. Ct. App.
2002).

       In determining the scope of coverage under a liability insurance policy, the court
should start by considering the insuring agreement. Id. at 20. The insuring agreement
sets forth the outer limits of what the insurance company will cover under the policy.
Merrimack Mut. Fire Ins. Co. v. Batts, 59 S.W.3d 142, 148 (Tenn. Ct. App. 2001). The
exclusions then “help define the shape and scope of coverage” by excluding coverage in
certain circumstances. Travelers Indem. Co. of Am. v. Moore & Assocs., Inc., 216
S.W.3d 302, 305 (Tenn. 2007) (quoting Standard Fire Ins. Co. v. Chester-O’Donely &
Assocs., Inc., 972 S.W.2d 1, 7 (Tenn. Ct. App. 1998)).

      The insuring agreement in Mr. Archie’s automobile insurance policy appears
under the heading “What is Covered.” In part, that section provides that Tennessee
Farmers “will pay compensatory damages . . . for bodily injury and property damage for
which any covered person becomes legally liable to pay because of an automobile
accident[.]” It also provides that Tennessee Farmers will “defend with attorneys hired
and paid by us, any claim or suit seeking damages against a covered person for which
coverage is provided.” The exclusions in Mr. Archie’s automobile insurance policy
appear under the heading “What is Not Covered.” In part, that section provides that
Tennessee Farmers does not provide liability coverage for “bodily injury or property
                                            -5-
damage to . . . any person residing in the covered person’s household.” There is no
dispute that Mr. Archie was the “covered person” under the policy. The only question is
whether Ms. Cossitt was residing in his household at the time of the accident. If she was,
then the foregoing household exclusion clause applies and Tennessee Farmers is not
obligated to pay or defend her claims against Mr. Archie’s estate.

       Household exclusion clauses similar to the one in Mr. Archie’s automobile
insurance policy appear often in insurance contracts. See Nat’l Ins. Ass’n v. Simpson, 155
S.W.3d 134, 138 (Tenn. Ct. App. 2004). Their purpose is to safeguard the insurance
company against collusion by relieving it from the obligation to cover claims filed by
persons to whom the insured, on account of close family ties, would be naturally partial
in case of injury. See Dressler v. State Farm Mut. Ins. Co., 376 S.W.2d 700, 702 (Tenn.
Ct. App. 1963); 8 Steven Plitt et al., Couch on Insurance § 114:26 (3d ed. 2000).
Tennessee courts have consistently held that such exclusions are valid and not contrary to
public policy. Purkey v. Am. Home Assurance Co., 173 S.W.3d 703, 709 (Tenn. 2005);
Dockins v. Balboa Ins. Co., 764 S.W.2d 529, 530 (Tenn. 1989); Holt v. State Farm Mut.
Ins. Co., 486 S.W.2d 734, 735 (Tenn. 1972). Additionally, Tennessee courts have
determined that household exclusion clauses similar to the one at issue in this case are not
ambiguous. VanBebber v. Roach, 252 S.W.3d 279, 287 (Tenn. Ct. App. 2007) (holding
that the phrase “resident of your household” is not ambiguous); Gredig v. Tenn. Farmers
Mut. Ins. Co., 891 S.W.2d 909, 914 (Tenn. Ct. App. 1994) (holding that the phrase
“residing in your household” is not ambiguous). To the extent that such clauses are not
defined in the insurance policy, the courts have held that the definition is supplied by case
law. Gredig, 891 S.W.2d at 909. Nevertheless, they have recognized that the legal
meaning of such clauses must be viewed flexibly given the numerous factual settings to
which they may apply. Simpson, 155 S.W.3d at 139; see also Gredig, 891 S.W.2d at
914-15 (“[T]he fact that the words may be difficult to apply to a given factual situation
does not make those words ambiguous.”).

      In Simpson, this Court outlined the historical understanding of residence in a
household as reflected in case law:

              Residence in a household contemplates both a relationship to a place
       and membership in a group. It includes the common types of close
       relationships, varying greatly in detail, where persons live together as a
       family in a closely knit group, usually because of close relationship by
       blood, marriage, or adoption, and deal with each other intimately,
       informally, and not at arm’s length.

             Earlier definitions of “household” limited its application to groups of
       persons living together “under one head.” However, the legal significance
                                            -6-
       of paterfamilias has given way in modern times to a broader concept of
       family. The courts cannot force people to live in narrowly defined family
       patterns. We now recognize that “[o]ut of choice, necessity, or a sense of
       family responsibility, it has been common for close relatives to draw
       together and participate in the duties and satisfactions of a common home.”
       Thus, the prevailing understanding of “household” today does not
       necessarily require the existence of a family head. For the purposes of this
       opinion, we, like a majority of jurisdictions, recognize a household as a
       group or set of persons who dwell together as a family under the same roof.

              Residence in a household also requires a degree of permanence and
       intention to remain in the household for an indefinite period of time. It
       connotes a settled or permanent status. Thus, a temporary visit by a relative
       does not make the relative a resident of the household because it is
       temporary and there is no melding of the family unit. Likewise, a landlord-
       tenant relationship or a simple roommate arrangement does not create a
       household.

Simpson, 155 S.W.3d at 139 (internal citations and footnotes omitted). Additionally, we
discussed five non-exclusive factors to consider in determining whether an individual is a
resident of a household:

       (1) the person’s subjective or declared intent to remain in the household
       either permanently or for an indefinite or unlimited period of time, (2) the
       formality or informality of the relationship between the person and the
       other members of the household, (3) whether the place where the person
       lives is in the same house or on the same premises, (4) whether the person
       asserting residence in the household has another place of lodging, and (5)
       the age and self-sufficiency of the person alleged to be a resident of the
       household.

Id. at 139-140 (citations omitted).

       In its brief, Tennessee Farmers asserts that Ms. Cossitt’s statement that she
planned to live with Mr. Archie until she was “more financially stable” is indicative of
her intent to continue living in his house indefinitely. As the evidence clearly
demonstrates, however, both Ms. Cossitt and Mr. Archie understood the arrangement to
be temporary. Ms. Cossitt only moved in with Mr. Archie after her two prior living
arrangements became unavailable. Although Ms. Cossitt listed the Ivawood Drive
address on her driver’s license, she did not receive her mail there. Apart from a bed, Ms.
Cossitt kept her furniture in storage while living with Mr. Archie. The two were not
                                           -7-
related, and their relationship was not intimate. Although they were close friends, there
is no evidence of any other relationship between them. Each had their own bedroom,
paid their own personal expenses, and lived independently of the other with the exception
of their shared house and social activities. Neither party had any supervisory or
disciplinary responsibility for the other. Ms. Cossitt was not in any way under Mr.
Archie’s control and was free to move out at any time. Perhaps most notably, Ms. Cossitt
paid Mr. Archie $200 per month in rent. Although Tennessee Farmers suggests that this
rental rate fell below the fair market value, the arrangement was economically beneficial
to both parties. Ms. Cossitt received a suitable place to live that allowed her to save
money, and Mr. Archie received extra money each month for allowing an individual that
he knew and trusted to use an otherwise unused bedroom.

       In light of these facts, it is clear that Ms. Cossitt and Mr. Archie lived together as a
matter of economic expediency and not in any sense as a family. Although they
physically occupied the same house at the time of the accident, there is no evidence to
indicate that they intended to form a social unit beyond that of a landlord-tenant or simple
roommate arrangement. As such, we conclude that the trial court did not err in finding
that Ms. Cossitt was not residing in Mr. Archie’s household at the time of the accident
and that the household exclusion clause does not relieve Tennessee Farmers of its
obligation to defend or pay claims filed by Ms. Cossitt against Mr. Archie’s estate.

                                        CONCLUSION

       In light of the foregoing, we affirm the judgment of the trial court denying
Tennessee Farmers’ request for declaratory judgment. Costs of this appeal are taxed to
the appellant, Tennessee Farmers, and its surety, for which execution may issue.


                                                   _________________________________
                                                   ARNOLD B. GOLDIN, JUDGE




                                             -8-
