In 1987, Daryl Stephenson moved into his grandmother's home after she had moved into his parents' home because of physical conditions which required her daughter's care. The grandmother had secured an HO policy from Erie Exchange, and the record showed that she still retained her home and the policy, which contained the usual coverage for "members of household." Her home and her daughter's home were about one-fourth of a mile apart.

Daryl paid the utility bills but did not pay rent, and his grandmother paid the real estate taxes.

On July 4, 1990, Daryl, then age 24, was entertaining some friends at the residence. He laid bottle rockets on the street in front of the house and launched them horizontally in an attempt to shoot them between the legs of a friend who was standing some distance away. Dawn Huser, who was 16 at the time, joined in the activities and was struck in the eye by one of the rockets, receiving a serious injury.

On June 17, 1994, after Dawn reached her majority, she filed suit against Daryl to recover for her injuries. He forwarded the summons and complaint to Erie. This was the first notice given to Erie of the accident. Erie filed this action for declaratory judgment contending it was not liable since Daryl was not covered by the policy, and also because the policy required notice of any accident within a reasonable time. The trial court entered a summary judgment in favor of Daryl, and Huser and Erie appealed.

Erie denied liability saying that the grandmother was the named insured and that because she had moved from the house, Daryl was not a member of her household. The relevant provision in the policy stated that "anyone we protect means you and the following residents of your household: (1) relatives and wards; (2) other persons in the care of anyone we protect . . . " On appeal, the court noted that "household" was not defined in the policy. The court concluded that there was no requirement that members of a household live under the same roof, and added that if Erie had wanted to add that definition, it could have defined "household" in its policy. Since it did not, the court construed the term against Erie. Therefore, the policy protected Daryl.

Erie also argued that it was not liable because neither the insured nor Daryl had notified it of the injuries to Dawn Huser "as soon as possible" as was required by the policy. It was also provided that "any papers that relate to the accident or occurrence" be forwarded to Erie "promptly." Neither party disputed this portion of the notice requirement. The higher court agreed that Daryl did not satisfy his duty to give notice "as soon as possible" and that the four-year delay between the accident and notification to Erie was unreasonable as a matter of law. Daryl argued that he did not expect Huser to hold him legally liable for her injuries. The court said this did not relieve him of the duty to give Erie notice. However, his failure to give notice would not relieve Erie unless Erie was prejudiced by that delay. Prejudice was not shown and, as a matter of law, prejudice was a question for the trier of fact, and summary judgment was not proper.

Inasmuch as there were conflicting inferences, the entry of summary judgment in favor of Daryl and Huser was erroneous, and the action was remanded for proceedings consistent with this opinion. (One justice concurred in part and dissented in part, and filed a separate opinion.)

Erie Insurance Exchange, Appellant v. Daryl Stephenson and Dawn M. Huser--No. 32A01-9606-CV-207--Court of Appeals of Indiana--December 30, 1996--674 North Eastern Reporter 2d 607.