When a child dies on someone’s property as the result of negligence, the property owner and other responsible parties may be held liable for millions in damages. Many property owners take out insurance policies to protect them against such judgments. But how far do these policies extend? A recent federal case arising from the death of a Georgia toddler helps illustrate how insurance helps (or does not help) in such situations.
Moon v. Cincinnati Insurance Company
In March 2009, a two-year-old child died after drowning in a swimming pool located at on a property in Buford. At the time, the child was under the care of a babysitter, who was watching multiple children on the property, where she also lived. The babysitter’s father owned the property.
The parents of the deceased child sued the babysitter, her father and her husband (who also lived at the property) in Georgia state court. At this point the babysitter and her husband asked her father’s insurance company, which issued a policy covering the property, to defend them against the lawsuit. The insurance company initially agreed to do so, but later denied coverage and withdrew its defense. The parents of the deceased child won their claim in state court, receiving a damage award of nearly $10 million, 78% of which was assessed against the babysitter and her husband.
The couple then sued the insurance company in federal court for breach of contract and other allegations related to its denial of coverage. In 2013, U.S. District Judge Thomas W. Thrash, Jr., rejected the couple’s arguments and ruled for the insurance company. The U.S. Eleventh Circuit Court of Appeals affirmed the District Court in a January 2015 decision.
The key issue in this case was whether or not the babysitter and her husband were eligible for coverage under a clause in the father’s insurance policy that applied to “any person while acting as [the father’s] real estate manager.” The insurance company denied coverage after determining the babysitter and her husband were not acting as “real estate managers” for the father. They were simply tenants living on his property. The policy only covered the landlord or his agents, not tenants, as, say, a renter’s insurance policy might.
In response, the babysitter and her husband argued the term “real estate manager” is not precisely defined in the policy. If there is an ambiguity in the wording of an insurance contract, courts generally resolve such ambiguity in favor of the insured. But the courts disagreed. Judge Thrash said “there is no indication the term is ambiguous,” and that under Georgia law, a “real estate manager” is defined as someone “involved in selling or renting houses rather than maintaining and residing in a house.”
The Eleventh Circuit, in its own opinion upholding Judge Thrash, said that to accept the babysitter’s definition of real estate manager “would render meaningless the policy’s stated lack of coverage for tenants of the property.” It would make the insurer liable for “every tenant, family member or friend living in another’s home, who cuts the yard or paints a wall.” Indeed, even the father who owned the property did not consider his daughter and son-in-law to be his “real estate managers.” He had actually purchased the house from them to avoid foreclosure and allowed them to continue living there.