Oral Argument Preview: Determining Domicile. Peggy Spaeth, et. al. v. State Automobile Mutual Insurance Company

Update: On October 14, 2014, the Supreme Court of Ohio handed down a merit decision in this case.  Read the analysis here.

On November 6, 2013, the Supreme Court of Ohio will hear oral argument in the case of Peggy Spaeth, et. al. v. State Automobile Mutual Insurance Company, 2012-1866. The issue is how to determine domicile in a case arising out of an insurance coverage dispute.

 Case Background

In 1993, James Schill moved from Ohio to Florida with his wife Jean. After purchasing the Florida residence in Jean’s name, the Schills moved all their belongings, vehicles, voter registrations, driver’s licenses, and bank accounts to Florida, and found new doctors there. Jean (who is not a party to this case) received a homestead exemption for the Florida residence. James files his federal income taxes based on a post office box address in Bonita Springs, Florida. However, James remains active in the business of his two Ohio companies, and returns to Ohio for significant amounts of time each month to oversee business.

During trips to Ohio, James stays at a home in Burton, Ohio which is jointly owned by his wife and his son Robert. James also keeps a car at the Burton residence for use during his trips to Ohio; that car is titled and registered in Florida. From August 24, 2007 to August 24, 2008, James maintained Personal Umbrella Liability insurance through Appellant Cincinnati Insurance Company (“CIC”), which granted coverage for incidents caused by automobiles to the named insured policy holders and “‘ [y]our resident relatives’ for any ‘occurrence’, involving an ‘automobile’ they own, lease, rent, or use.’” Resident relative is defined by the policy to mean, “a person related to [the policy holder] by blood, marriage, or adoption that is a resident of ‘your’ household and whose legal residence of domicile is the same as yours.” (emphasis added). The policy does not provide a definition of “domicile.”

On August 16, 2008, Dr. Miles Coburn was riding his bike in Newburn Township, Ohio, when he was struck by an SUV driven by Robert Schill.  Robert had insurance with State Farm with liability limits of $500,000. Dr. Coburn died as a result of the accident; his widow, Appellee Peggy Spaeth, filed a wrongful death lawsuit and sought additional coverage from Robert under his parents’ personal umbrella policy with CIC.

In the trial court, Spaeth argued Robert was a definitional insured under the policy as a “resident relative” who shares the same domicile with James. She argued that James could be “domiciled” in Florida for some purposes and “domiciled” in Ohio “for insurance coverage purposes.” However, the trial court disagreed, finding that Robert did not meet the definition of “resident relative” since he did not have the same domicile as either of his parents, the named insureds, which was required under the CIC policy.

The Eighth District Court of Appeals reversed, finding James was domiciled in Ohio for insurance company purposes. The appeals court found the acquisition of a new domicile requires two elements: the residence itself, and the intention to remain at the residence. The appeals court listed fourteen factors to support its conclusion that despite his wife’s ownership of a second home in Florida, James had never abandoned his Ohio domicile, and that Spaeth was entitled to the coverage under the CIC policy.

Key Statute and Precedent

R.C. 5747.24, governs whether an individual owes Ohio income tax. Under the statute, a person is presumed not to be domiciled in Ohio if the individual is in the state less than 182 days. But the statute also requires the filing of an affidavit or verified statement with the Ohio Department of Taxation  attesting to this fact.  If the individual fails to file the statement as required, the individual is presumed to have been domiciled in this state the entire taxable year.

Sturgeon v. Korte, 34 Ohio St. 525 (1878), established two requirements for obtaining a new domicile: the fact that the person in question is actually removing to a new location, and his or her intention to remain at that location. A temporary residence may become a domicile by a change of purpose and election to remain at that location as a home.

In re Estate of Hutson, 156 Ohio St. 115 (1956), states that in order to change one’s domicile, there must be actual abandonment of the first domicile, intention not to return to the first domicile, and acquisition of a new domicile in another place with the intention of making the new domicile a permanent home. The acts of the person must correspond with the purpose of changing one’s domicile.

CIC’s Argument

CIC argues James’ admission that he has considered his home to be the house in Florida since 1993 and the steps he has taken to give the impression his home is in Florida, should be enough to prove his domicile is in Florida, not Ohio. Because James sold his home, moved all of his belonging from Ohio to Florida, let his Ohio driver’s license expire, found new doctors, changed his voter registration, manages his finances through Florida bank accounts, and is careful not to stay in Ohio long enough to trigger tax consequences, his intent to be domiciled in Florida is clear. Under Korte, the question of domicile must be resolved by looking at the facts, to see if the person actually moved to a new location, and intends to stay at that location, and this must be determined by a preponderance of the evidence. CIC argues the Eighth District Court of Appeals was wrong to ignore James’ stated intent and reject the trial court’s factual determination.

Spaeth’s Argument

Spaeth argues that by his own admission James “flunked retirement” and has always lived in Ohio with his son Robert for up to half or more of each month while continuing to work at and run his Ohio businesses. His personal and professional contacts remain largely in Ohio. He is a CPA, and understands tax law, and yet has never filed with the Ohio Tax Commissioner a verified statement or affidavit confirming that he is not domiciled  in Ohio.

Spaeth’s position is grounded in contract law, and looks to the policy issued by CIC as being one that specifically insures James as an Ohio resident at an Ohio home. Because the contract fails to define “legal residence of domicile,” and because there is no mention of the Florida home within the contract, Spaeth argues the language is exclusively for coverage in Ohio.  Spaeth contends the Court should focus on the language of the contract instead of the domicile question.

As a second argument, Spaeth agrees with the Eighth District Court of Appeals that the Korte standard is incorrect in light of R.C. 5747.24, which would give James a presumptive residence in Ohio for Ohio tax purposes. According to Spaeth, that statute requires CIC to rebut the presumption of James’ domicile in Ohio.

Finally, Spaeth argues that the court of appeals did not create a new domicile test, but rather applied the test set forth in Hutson, and that CIC has changed its position in its merit brief from that set forth in its jurisdictional memorandum, and now concedes that Hutson controls in this case, not Korte.  Subjective intent alone is not determinative of the issue of domicile.  Rather, the Supreme Court has held that a person’s actions must correspond to one’s claimed intent—there can be no change of domicile without both act and intent. Spaeth contends that James always intended to be in Ohio for business approximately half of the year, and therefore he never intended to change his domicile from Ohio to Florida.

CIC’s Proposed Proposition of Law

A person has only one domicile: where the person resides and has the intent to remain permanently and return to when away temporarily. (Sturgeon v. Korte 34 Ohio St. 525 (1878), affirmed and restated.)

Student Contributor: Rebecca Campbell

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