Is a Foreign Exchange Student a ‘Ward’ for Purposes of UM/UIM and Medical Payments Coverage?

Uninsured and underinsured motorist (UM/UIM) coverage typically involves three classes of insureds. The named insured, including residents of the household, typically qualify for Class I insured status. Class I insured status is a portable type coverage and is not dependent upon vehicle occupancy. Class II insureds are those insureds who are occupying a covered vehicle at the time of the accident. Class III insureds are individuals who take coverage derivatively because of injuries to Class I or Class II insureds. The question of whether a foreign exchange student could qualify for coverage as a Class I insured was recently considered by the Oklahoma Supreme Court in Serra v. Estate of Broughton, 2015 WL 8154964 (Okla., filed Dec. 8, 2015).

In Serra, a foreign exchange student, Sandra Vilarrubias Serra, from Spain was injured while riding as a passenger in a friend’s vehicle. Serra filed a claim for her injuries against the UM/UIM and medical payments provisions of an automobile policy that was issued to Serra’s host family. When the claim was denied Serra sued.

Under the facts of the case, Serra was living with a host family as a foreign exchange student from Spain who was attending high school for one year in the Oklahoma. The host family was insured by State Farm Mutual Automobile Insurance Company (State Farm). When Serra was involved in the car accident she presented her claim to State Farm which was denied. State Farm asserted that Serra did not qualify as an “insured” under the policy definition of “resident relative” which included a “ward” or “foster child.” In order to qualify as a resident relative, Serra needed to be a ward or a foster child of the named insured.

The Court quickly determined that Serra was not a “foster child” of the named insured. Therefore, the analysis focused on whether Serra could be considered a “ward” of the named insured. The term “ward” was undefined in the policy. The Oklahoma Court of Civil Appeals had held that Serra was not Robertson’s ward after reviewing various cases in the country and affirmed the trial court’s summary judgment in favor of State Farm. However, the Oklahoma Supreme Court reversed and remanded for further findings.

The Court of Civil Appeals used a definition of “ward” that involved the individual being “under the care and protection of the insured” and “within the domestic circle of, and [was] economically dependent on” the named insured was not applicable to the situation involving Serra. The Supreme Court disagreed. First the Court noted that it was undisputed that Serra’s parents had the ultimate responsibility for her support, education, and her physical care and well-being. At the time of the accident Serra was 18 years old. Although Serra did not live independently, she was assigned to a host family where she could be integrated into the home life of the host family, and on a larger scale, the culture of the United States. Within the context of the foreign exchange program, the policy insured, the host family, was designated as the person in the United States to whom Serra and her parents looked to provide “care and protection” while Serra attended high school. Although Serra had not severed her dependent relationship with her parents in any way, for a period of time, Serra had become a member of the named insured’s household and, by doing so, received indirect economic benefits from the named insured as well as the intended educational and cultural benefits for which the Mutual Education and Cultural Exchange Program was enacted.

The Court found that there was no technical definition of “ward” specified by the policy. Notwithstanding the short time that Serra lived with the named insured, she was under the named insured’s care and protection while she lived under their roof. Serra understood that she was to follow the named insured’s rules and looked to the named insured for guidance and supervision. Serra did not consider herself to be under her own care and protection as an adult at the time of the accident.

The Oklahoma Supreme Court held that the terms used in the insurance policy were ambiguous as to a definition of “ward” and, therefore, the Court could not determine, as a matter of law, that summary judgment was properly entered in favor of State Farm. The Court reached its conclusion of ambiguity from the fact that the term “ward” was not defined in the policy and was found in close proximity to the term “foster child.” Therefore, reference to “ward” was ambiguous and needed to be interpreted in favor of insured status. The case was then remanded to the trial court for further proceedings.