Blue Ridge Ins. Co. v. Newman

• Decision Date: 16 November 1982
• Docket Number: No. 82,82
• Citation: 423 So.2d 1
• Parties: BLUE RIDGE INSURANCE COMPANY and Willie Dixon v. Robert S. NEWMAN, Patricia Childers Newman and Cambridge Mutual Fire Insurance Company. CA 0084.
• Court: Court of Appeal of Louisiana — District of US

Page 1

423 So.2d 1

BLUE RIDGE INSURANCE COMPANY and Willie Dixon v. Robert S. NEWMAN, Patricia Childers Newman and Cambridge Mutual Fire Insurance Company.

No. 82 CA 0084.

Court of Appeal of Louisiana First Circuit.

Nov. 16, 1982.

Writ Granted Jan. 21, 1983.

John W. Perry, Jr., Baton Rouge, for plaintiff-appellant Blue Ridge Ins. Co. and Willie Dixon.

W. Luther Wilson, Baton Rouge, for defendant-appellee Cambridge Mut. Fire Ins. Co.

Ronald R. Thompson, Baton Rouge, for defendants-appellees Robert S. Newman and Patricia Childers Newman.

Before COVINGTON, LEAR and LANIER, JJ.

LANIER, Judge.

On July 31, 1980, a large tree growing on the property of Robert S. Newman and Patricia Childers Newman, located on Oakwood Drive in the Glen Oaks Subdivision in Baton Rouge, Louisiana, fell onto a house on the adjoining property owned by Willie Dixon and caused severe damage. Dixon made a claim against his insurer, Blue Ridge Insurance Company (Blue Ridge), and was paid $33,331.00. This suit for damages in tort was subsequently filed against Mr. and Mrs. Newman and their homeowners insurance carrier, Cambridge Mutual Fire Insurance Company (Cambridge), by Blue Ridge seeking $33,331.00 pursuant to a subrogation from Dixon, and by Dixon seeking $1,455.07 for damages not paid by Blue Ridge. Cambridge answered and denied coverage under the "business pursuits" exclusion of its policy claiming that the Newmans used the property for rental purposes. The Newmans filed a third party demand against Cambridge alleging that it provided coverage for the damages to the Dixon house and for the cost of defense of the claims by Blue Ridge and Dixon against them. The trial court rendered judgment on the main demand in favor of Blue Ridge and Dixon against the Newmans in the sums of $33,331.00 and $1,455.07 respectively. The trial court ruled that the "business pursuits" exclusion of the Cambridge policy was applicable under the facts of this case and dismissed the main demand by Blue Ridge and Dixon and the third party demand by the Newmans against Cambridge. This devolutive appeal followed. ¹

I. LIABILITY COVERAGE BY CAMBRIDGE

The first issue presented by this appeal is whether or not the "business pursuits" exclusion of the Cambridge policy is applicable. Under Section II of the Cambridge policy, personal liability coverage is afforded to the Newmans by the following language:

"This Company agrees to pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury or property damage, to which this insurance applies, caused by an occurrence. This Company shall have the right and duty, at its own expense, to defend any suit against the Insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, but may make such investigation and settlement of any claim or suit as it deems expedient. This Company shall not be obligated to pay any claim or judgment or to defend any suit after the applicable limit of this Company's liability has been exhausted by payment of judgments or settlements."

The policy then excludes from coverage "property damage arising out of business pursuits" in the following manner:

"This policy does not apply:

1. Under Coverage E--Personal Liability and Coverage F--Medical Payments to Others:

* * *

d. to bodily injury or property damage arising out of business pursuits of any Insured except activities therein which are ordinarily incident to non-business pursuits; ..."

In Section 8 of the General Conditions portion of the policy, the term "business" is defined as follows "When used in this policy the following definitions apply: ...

d. 'business' means

* * *

(2) the rental or holding for rental of the whole or any portion of the premises by any Insured;

but business shall not include:

(a) the occasional rental or holding for rental of the residence premises for dwelling purposes; ..."

"Business pursuits" exclusions substantially similar to that in the Cambridge policy have been upheld and applied in numerous Louisiana cases. ² The purpose of the "business pursuits" exclusion is to provide homeowners with lower insurance rates because insuring the risks attendant to commercial enterprises requires specialized rating and underwriting and is more expensive. LeBlanc v. Broussard, 396 So.2d 535 (La.App. 3rd Cir.1981); Sandoval, Construction and Application of "Business Pursuits" Exclusion Provision in General Liability Policy, 48 ALR 3rd 1096. If there is any doubt or ambiguity as to the meaning of a provision in an insurance policy, it must be construed liberally in favor of the insured and against the insurer. When the ambiguity relates to a provision which limits liability under the policy, the law requires that the contract be interpreted liberally in favor of coverage. Insurance Company of North America v. Solari Parking, Inc., 370 So.2d 503 (La.1979); Credeur v. Luke, 368 So.2d 1030 (La.1979); 70th Street Food Store, Inc. v. Northeastern Fire Insurance Company of Pennsylvania, 408 So.2d 958 (La.App. 2nd Cir.1981).

The evidence shows that Robert Newman's mother and father acquired the property in 1965 and commenced living there with their six children. The elder Mrs. Newman passed away in 1971. In 1978, the property interests of Robert Newman's father, brothers and sisters were transferred to him and his wife and they became the sole owners of the property. During the period from 1965 to 1979, the Newman children reached maturity and left the family home at different intervals. In the fall of 1979, the last two children left the family home and the elder Mr. Newman also left to reside with a son in Memphis, Tennessee.

Robert and Patricia Newman began renting the family house and lot to Stephanie Olivia in October of 1979 for $200 per month. Ms. Olivia remained on the Newman property and paid rent through May of 1980 when she moved out without giving any notice. Robert Newman testified that he felt that she owed him rent for the month of June, even though she was not living on the premises because she left some of her things in the house. The incident which is the subject of this suit occurred on July 31, 1980. In approximately September or October of 1980, the Newmans rented the premises to a Mrs. Brooks, apparently at the rate of $200 per month for a period of three months. ³ Thus, it appears that during the period of October of 1979 through December of 1980, the Newmans collected rent from their property for eleven of these fifteen months.

The appellants argue on appeal that the above facts show that the rental of the Newman property was "occasional" and that pursuant to the definition of "business" contained in the policy, this rental did not qualify as a "business pursuit" and coverage was not excluded. The word "occasional" is defined in Webster's New International Dictionary, Second Edition, as follows:

"a) Occurring now and then;

b) Made or happening as opportunity requires or admits;

c) Casual;

d) Incidental; and

e) Occurring at irregular intervals, infrequent."

The antonym of "occasional", "continuous", is defined in Black's Law Dictionary (5th Ed. 1979), at page 291 as follows:

"Continuous. Uninterrupted; unbroken; not intermittent or occasional; so persistently repeated at short intervals as to constitute virtually an unbroken series. Connected, extended, or prolonged without cessation or interruption of sequence."

Appellants cite as authority American Family Mutual Insurance Company v. Richardson, 517 F.Supp. 125 (E.D.Mo.1981), wherein a Federal District Court ruled that when there were lapses of time between the occupancy of rental property by tenants, the rental was occasional and thus the "business pursuits" exclusion was not applicable. This analysis is not correct. The term "business" as defined in the policy includes, among other things, "the rental or holding for rental " of the premises. "Rental" refers to the actual leasing of the insured premises to a third person. At the time of the occurrence in the instant case, the property was not being rented (leased). The term "holding for rental" is separated from the word "rental" by the conjunction "or" which is a disjunctive particle used to "indicate an alternative between different or unlike things." ⁴ The verb "to hold" used in its usual legal sense means to possess. ⁵ Thus, the term "holding for rental" means possessing for the purpose of renting the premises when the premises...