DISCLAIMER UPHELD WHERE CHILD WAS KICKED BY HORSE ON FARM NOT COVERED
BY HOMEOWNER'S POLICY
Maroney v. New York Central Mutual Fire Insurance Company, NYLJ
10/04/04 (3rd Dept 2004)
In June 1997, plaintiff made arrangements for her 6 year-old son,
Mark, to be cared for during the day at the home of John J. Morris
and Deborah A. Morris, by Deborah Morris's 14-year-old daughter,
Ashley. Plaintiff dropped off Mark for what was scheduled to be the
first day that Ashley watched him. After plaintiff left, Deborah
Morris indicated that she had to go across the road to the barn,
which contained their horses, as well as other horses boarded for a
fee, to do some chores before she left for work. Since Ashley was
still dressing, Deborah Morris asked Mark if he would like to go with
her. The child agreed and accompanied Deborah Morris while she, among
other things, fed the horses. As she was leading one of the boarded
horses out of the barn to the pasture, Mark got behind the horse and
was kicked in the forehead, suffering a fractured skull with lasting
physical and mental effects.
Initially, the Morrises' entire property was insured under a
homeowner's policy issued by New York Central. When the Morrises
built the barn on the east side of the highway (their house was
located on the west side), NYC's policy was amended to cover farming
operations east of the highway. However, once John Morris and his
cousin, third-party defendant Thomas C. Morris, started a horse
boarding business1 at the barn, the policy was amended on May 28,
1997, deleting coverage for all property east of the highway as NYC
will not insure a horse boarding business. As a result, the Morrises
obtained a separate policy issued by the Broome County Cooperative
Fire Insurance Company for the east side of the highway.
The Morrises provided notice of the accident to both insurance
companies and NYC sent a disclaimer letter based on (1) "The accident
occurred as a result of business pursuits," (2) "The accident
occurred on premises you own which is not an insured location" and
(3) "[H]ome day care services are considered to be a business, which
is excluded as outlined above."
In September 2001, plaintiff commenced this action against NYC
seeking a declaration that NYC is obligated to defend and indemnify
the Morrises from any claims arising out of Mark's injury. Supreme
Court, Otsego County, determined that none of the disclaimers applied
and declared that, under the terms of the policy that NYC issued to
the Morrises, defendant was required to defend and indemnify them.
The Appellate Division reversed.
"We reverse because we are of the view that defendant has met its
burden with respect to two of the exclusions," held the Appellate
Division. "We disagree with Supreme Court's conclusion that the
disclaimer letter denying coverage on the basis that 'the accident
occurred as a result of business pursuits' was referring only to the
day care services exclusion and not the horse boarding business....
When the letter is read in its entirety, it is clear that the
insurance company is referring to separate provisions of the policy.
Both the body of the letter and the summary contain the same format:
(1) there is a business exclusion, (2) there is a location exclusion,
and (3) day care falls within the business exclusion also. Any other
reading makes (1) and (3) redundant. Given the very recent amendment
to defendant's policy excluding from coverage the premises on which
the horse boarding business was being conducted, there can be no
doubt that the insureds knew that defendant was disclaiming on the
basis of three exclusions in the policy...."
The exception to the business pursuits exclusion for non-business
activities does not apply, held the Court because "It was precisely
because Deborah Morris was engaged in her business pursuit - leading
a boarded animal from the barn - that she was allegedly inattentive
to the child and the child was injured." Hence, the exclusion, and
not the exception to the exclusion, is applicable.
Supreme Court had concluded that since the child was initially left
at the house, insured by NYC, before being taken across the road, the
accident arose out of an insured location. This view was rejected on
appeal. "There is simply no view of the facts, nor is one alleged,
that the insured premises were in any way defective or that personal
tortious conduct of an insured occurred on the insured premises. The
sole allegation is that Deborah Morris negligently supervised the
child while in the uninsured barn. There exists no causal connection
between the injury and the insured premises," held the Appellate
Lastly, "although rendered academic by this decision," ruled the
Court, "the home day care services exclusion does not apply. Assuming
arguendo that Ashley was engaged in a business pursuit, she is not a
party in any of the lawsuits and, significantly, she was not
supervising Mark at the time of the accident. There is no real
dispute here that Deborah Morris was watching Mark for a short time
that morning to be 'nice' to a little boy she liked, as well as to
give Ashley a chance to 'get dressed,' and did not involve a 'profit
motive'. Deborah Morris was not engaged in the provision of
babysitting services as a business pursuit."
As a result, the Court held that there was no coverage.
Comment: This is one of those cases which turned on semantics. Not
only Supreme Court, but indeed, a dissenting judge in the Appellate
Division, believed that the disclaimer was not specific enough with
regard to the horse boarding business and therefore created coverage
by default. Note here that the Court says that because of the recent
amendment to the policy which excluded the horse boarding business,
knowledge of that exclusion is, in effect, "read into" the disclaimer
letter and imputed to the insured.