State Farm loses auto insurance Supreme Court case on appeal

The Kentucky Supreme Court has reversed a lower court ruling in the case of Jessica Hill v. State Farm Mutual Automobile Insurance Company, determining that State Farm must provide coverage for a minor driver involved in a 2020 automobile accident. The decision clarifies the definition of “resident relative” in auto insurance policies and establishes a precedent for cases involving minors with legal guardianship disputes.

The case stems from a serious car accident in Jefferson County, Kentucky, in which 17-year-old Tyler Delonjay was driving his aunt’s vehicle when he collided with another car, injuring Jessica Hill and causing her to suffer the loss of a pregnancy. At the time of the accident, Tyler had been living intermittently with his aunt, Suzanne Small, and various friends, following conflicts with his father, Jason Delonjay, who had sole legal custody of Tyler for nearly a decade.

Read more: CDI says "serious questions" over State Farm's financial condition

Hill sought damages from multiple parties, including State Farm, which insured Tyler’s father. However, State Farm denied coverage, arguing that Tyler did not "primarily reside" with his father at the time of the accident and therefore did not qualify as a “resident relative” under Jason’s auto insurance policy.

State Farm's denial of coverage prompted Jessica Hill to file a lawsuit, seeking a declaratory judgment to determine whether Tyler was covered under his father’s policy. The trial court ruled in favor of State Farm, granting summary judgment and stating that Tyler’s absence from his father’s home in the months before the accident disqualified him from coverage. The Kentucky Court of Appeals affirmed the decision, emphasizing that residency requires actual physical presence, which Tyler did not have at the time.

Read more: Sentry, Dairyland Auto, and Viking win auto insurance case over delays

On appeal, the Kentucky Supreme Court reversed the lower court rulings, finding that the insurance policy’s term “resident relative” was ambiguous and should be interpreted in favor of coverage. The court emphasized several key points:

1. Legal custody matters – Although Tyler had not been physically present at his father’s house for several months, his father had sole legal custody, which established residency for legal purposes.
2. Ambiguous policy language – State Farm’s policy did not clearly define "resides primarily," leaving room for interpretation. The court ruled that ambiguous terms must be interpreted in favor of the insured.
3. Minor status and parental responsibility – Tyler was not legally emancipated and was still a dependent minor at the time of the accident. Kentucky law does not allow minors to be legally homeless, meaning Tyler’s legal residence remained with his father despite temporarily staying elsewhere.
4. Precedent on residency determinations – The ruling cited past Kentucky cases that recognize a person can have more than one residence and that legal domicile is a critical factor in residency determinations for insurance coverage.

The Supreme Court found that Tyler should be considered a resident relative under his father’s policy, making State Farm responsible for providing coverage.

This ruling is significant as it:

• Clarifies insurance coverage for minors who temporarily reside outside their legal guardian’s home.
• Ensures insurers clearly define policy terms like “resident” to avoid ambiguity in future disputes.
• Provides stronger protections for policyholders in Kentucky, reinforcing that insurers must adhere to reasonable interpretations of their contracts.

The case now returns to the trial court, with instructions to enter summary judgment in favor of Jessica Hill, ensuring State Farm provides the required coverage.

Read more: American Family beats State Farm, Allstate in new J.D. Power ranking

The Kentucky Supreme Court’s decision reinforces the principle that insurance policies must be interpreted in favor of coverage when ambiguity exists. By ruling in Jessica Hill’s favor, the court has set a precedent for cases involving minors, legal guardianship, and residency disputes in auto insurance claims.

_{Photo: By Social Woodlands from USA - Frank Stevens State Farm, CC BY 2.0,}