Florida Court Upholds Home Policy Language

By Matt Brady

NU Online News Service, April 22, 3:25 p.m.EDT?A Florida appeals court has reversed a trial courtfinding that home insurance policy language cannot exclude businessactivity on the property from coverage.[@@]

The ruling by the Second District Court of Appeals in Lakeland,Fla., resulted from the 1999 death of 14-month-old Hannah Thornhillwhile she was on the premises of a day care operation that HisakoFeatherston ran from her home.

Ruling in the case of Protective Insurance Co. v.Featherston, the court found that there was an exclusioncontained in Ms. Featherston's homeowners policy barring coveragefor any claims relating to business conducted by the insured andthat the exclusion was clear and unambiguous.

After Hannah's death her parents had sued the Featherstonfamily, who filed a claim with First Protective to provide theirdefense. The company, however, sought a declaratory ruling that itwas not obligated to do so because the injury to the child occurredas part of Ms. Featherston's day care business.

The Featherston policy contained an exclusion for coverageconnected to business, as well as an endorsement specificallymentioning day care as an uncovered "business."

The Featherstons, however, claimed the exclusion was ambiguousbecause the day care endorsement excluded injuries that wouldotherwise be covered and also included the contradictory line,"This endorsement does not constitute a reduction of coverage."

A trial court agreed that the provision was ambiguous, and thusruled in favor of the Featherston family. While agreeing that"ambiguities and conflicts in exclusionary clauses should beconstrued in favor of the insured," the appellate judges found thatthe trial court failed to view the exclusion and the day careendorsement as a whole.

The language saying the day care endorsement was not a reductionin coverage, the appeals court said, did not contradict theexclusion because it referred to the already mentionedexclusion.

"The endorsement refers back to the business exclusion underSection II [of the homeowners' policy], which already states thatcoverage is excluded for bodily injury arising out of, or inconnection with, a business engaged in by an insured," the courtsaid in its opinion.

"Because the policy already contains the referred to exclusionsand limitations, the endorsement does not constitute a reduction ofcoverage, but merely a clarification of same. Accordingly, thesentence at the bottom of the endorsement, 'This endorsement doesnot constitute a reduction of coverage,' does not conflict with theremainder of the endorsement, and the trial court erred in refusingto apply it in the instant case."

The insurance industry hailed the ruling, noting itsreinforcement of contract law.

"This decision recognizes a contract is a contract, and that aclearly written exclusion such as the one at issue here clearlyprecludes coverage," said Robert J. Hurns, legislative databasemanager and counsel for the Property Casualty Insurers Associationof America (PCI).

PCI filed an amicus brief in the case. "The policy clearlystated that coverage was not provided for bodily injury arising outof a business engaged in by the insured. The evidence showed thatthe insured was providing day care services in exchange for a fee,hence a business was being conducted on the premises," according toPCI.

Attorneys for Ms. Featherston can file a rehearing motion beforethe court's ruling is final. One of their attorneys, R. TomElligett of the Tampa-based firm Schropp, Buell & Elligett,said that the rehearing motion would be filed, although they hadnot done so yet.