The opinion of the court was delivered by: Stein, J.
On certification to the Superior Court, Appellate Division.
This appeal requires us to interpret a clause in a homeowners' liability insurance policy that provides a defense and indemnification to relatives of the named insured who are residents of the named insured's household. The dispute arises from the fact that the named insured and the relative seeking coverage do not reside together, nor did they ever reside together. The insured, an elderly woman, moved out of the house she owned after suffering an injury, but continued to maintain her homeowners' insurance policy and intended to return to her house when she was physically able to do so. Three years later, the insured's grandson and his wife moved into the vacant house. The issue is whether the insured's grandson and his wife are residents of the insured's household, thereby qualifying them as "insured persons" under the policy.
In 1931, Mary Maccia purchased a one-family house located at 14 Hyde Road, Bloomfield, New Jersey. Maccia resided there until 1990 when she sustained an injury in a fall that required her to move to her daughter's home in Kearny so that her daughter could care for her. Because Maccia intended to return to 14 Hyde Road when her health improved, she did not sell her house. When she moved in with her daughter, Maccia left many of her belongings, including her furniture, kitchenware, china, silverware set, garden and household tools, wedding dress, and "personal knickknacks" in the house at 14 Hyde Road. She continued to have her mail, checking account statements, pension checks, social security checks, health plan notices, property tax assessments, and Medicare benefits statements sent to 14 Hyde Road. Maccia took only her clothing and other essential items with her to her daughter's home in Kearny.
In 1993, because she was concerned about the risk of burglary and vandalism to her vacant house, Maccia asked her grandson, Donald Callaghan, and his wife, Marcella, to move into and care for her house. Donald Callaghan offered to purchase the property from his grandmother but she declined because she intended to return to her house when her health improved. The Callaghans agreed to pay Maccia $600 per month and to maintain the property. They also paid the electric, gas, heating, phone, and water bills. The Callaghans received their mail at 14 Hyde Road and were registered to vote at that address.
Maccia continued to pay the property taxes for her house. She also maintained her homeowners' liability insurance policy issued by Allstate Insurance Company. Although the Callaghans had maintained a homeowners' insurance policy in their names at their previous residence, they did not purchase a policy when they moved to 14 Hyde Road.
The parties stipulated that Maccia intended to return to her house when her health permitted. However, from the time she moved in with her daughter until the filing of this appeal, she was unable to return to her house and was confined to her daughter's home in Kearny. *fn1 Nevertheless, the Callaghans still considered one of the bedrooms in the house to be Maccia's. The Callaghans visited Maccia at her daughter's home approximately once each month.
The underlying action giving rise to this appeal is a tort claim filed against Marcella Callaghan. In September 1994, plaintiff, eighty- eight-year-old Dorothy Gibson, was seriously injured when she was knocked down by Marcella Callaghan's dog while walking in Brookdale Park in Montclair. After Gibson and her husband filed a complaint against Marcella Callaghan, Marcella Callaghan filed a third-party complaint against Allstate, asserting that, because she resided in Maccia's house, she was entitled to a defense and indemnification under Maccia's homeowners' policy. Marcella Callaghan also filed a third-party complaint against the County of Essex. That complaint has been dismissed and is not implicated in this appeal.
The Allstate policy lists Maccia as the named insured and identifies 14 Hyde Road as the insured property. The policy provides:
Allstate will pay all sums arising from an accidental loss which an insured person becomes legally obligated to pay as damages because of bodily injury or property damage covered by this part of the policy.
We may investigate or settle any claim or suit for covered damages against an insured person. If an insured person is sued for these damages, we will provide a defense with counsel of our choice, even if the allegations are groundless, false or fraudulent. We are not obligated to pay any claim or judgment after we have exhausted our limit of liability.
The "Definitions" section of the policy provides:
1. "You" and "your" -- means the person named on the declarations page as the insured and that person's resident spouse.
2. "Allstate", "We", "Us" or "Our" -- means the company named on the ...