Arkansas Supreme Court Finds Ambiguity in Business Pursuits Exclusion in Homeowner’s Policy and Reverses Lower Courts
January 18, 2008
The July 2007 Insurance Law Report reported that the Arkansas Court of Appeals had held that babysitting is within a business pursuits exclusion in a homeowner's policy. Zulpo v. Farm Bureau Mut. Ins. Co. of Arkansas, Inc., 2007 WL 1080136 (Ark. App. April 11, 2007). However, the Supreme Court of Arkansas has reversed, holding that the business pursuits exclusion is ambiguous. McGrew v. Farm Bureau Mut. Ins. Co. of Arkansas, Inc., 2007 WL 4200413 (Ark. Nov. 29, 2007).
The insured regularly babysat a child in her home for a fee. On one occasion, she left the child with her husband and the child died while in his care. The parent of the deceased child sued the couple, who sought a defense under their homeowner's policy. The insurer brought a declaratory judgment action seeking a declaration of no coverage on the basis of a business pursuits exclusion. The policy defined "business" as a trade, profession or occupation, but it did not include newspaper delivery, caddying, lawn care nor any similar activity that minors normally perform unless the activity is the insured's full-time occupation. The deceased child's parent, who was named in the suit, filed a counterclaim for a declaration that the insureds were entitled to coverage because the babysitter was not engaged in her full-time occupation at the time of the child's death. The parties filed cross-motions for summary judgment.
The parent and the insureds argued that the babysitting was not a "business" under the policy and, in the alternative, that even if it were within the category of activities listed, it was excepted from the definition of "business." Pointing out that the husband was a full-time mechanic and the wife was a nurse's assistant, the parent and insureds contended that the definition of "business" in the policy did not apply to part-time incidental money-making activities such as babysitting. The trial court granted the insurer's summary judgment, and the Court of Appeals affirmed. The Arkansas Supreme Court granted the insureds' and parent's petition for review.
The Supreme Court reversed. While agreeing that babysitting, although not the insured's principal vocation, was a "trade or business," the Supreme Court found ambiguity in the exception to the exclusion for "activity that minors normally perform" because such a phrase might lead a reasonable person to believe that the policy covered minors, as well as adults, who were performing activities such as child care or babysitting. The case was remanded for factual findings by a jury to resolve the perceived ambiguity.
