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 court finding that home insurance policy language cannot exclude business activity 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 Thornhill while she was on the premises of a day care operation that Hisako Featherston ran from her home.

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

After Hannah's death her parents had sued the Featherston family, who filed a claim with First Protective to provide their defense. The company, however, sought a declaratory ruling that it was not obligated to do so because the injury to the child occurred as part of Ms. Featherston's day care business.

The Featherston policy contained an exclusion for coverage connected to business, as well as an endorsement specifically mentioning day care as an uncovered "business."

The Featherstons, however, claimed the exclusion was ambiguous because the day care endorsement excluded injuries that would otherwise 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 thus ruled in favor of the Featherston family. While agreeing that "ambiguities and conflicts in exclusionary clauses should be construed in favor of the insured," the appellate judges found that the trial court failed to view the exclusion and the day care endorsement as a whole.

The language saying the day care endorsement was not a reduction in coverage, the appeals court said, did not contradict the exclusion because it referred to the already mentioned exclusion.

"The endorsement refers back to the business exclusion under Section II [of the homeowners' policy], which already states that coverage is excluded for bodily injury arising out of, or in connection with, a business engaged in by an insured," the court said in its opinion.

"Because the policy already contains the referred to exclusions and limitations, the endorsement does not constitute a reduction of coverage, but merely a clarification of same. Accordingly, the sentence at the bottom of the endorsement, 'This endorsement does not constitute a reduction of coverage,' does not conflict with the remainder of the endorsement, and the trial court erred in refusing to apply it in the instant case."

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

"This decision recognizes a contract is a contract, and that a clearly written exclusion such as the one at issue here clearly precludes coverage," said Robert J. Hurns, legislative database manager and counsel for the Property Casualty Insurers Association of America (PCI).

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

Attorneys for Ms. Featherston can file a rehearing motion before the court's ruling is final. One of their attorneys, R. Tom Elligett of the Tampa-based firm Schropp, Buell & Elligett, said that the rehearing motion would be filed, although they had not done so yet.

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Florida Court Upholds Home Policy Language

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