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The Rogak Report: 04 October 2004 ** Disclaimers - Business Pursuits **

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  • Lawrence Rogak
    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
    Message 1 of 1 , Oct 4, 2004
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      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
      Division.

      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.
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