Farmers Ins. Exchange v. Smith

Decision Date10 October 2001
Docket NumberNo. 20A03-0011-CV-412.,20A03-0011-CV-412.
PartiesFARMERS INSURANCE EXCHANGE, Plaintiff/Counter-Defendant/Appellee, v. Phyllis SMITH, Tammy and Stacy Wilson, Sr., Individually and as Parents and Natural Guardians of Stacy Wilson, Jr., Defendants/Counter-Claimants/Appellants. Phyllis Smith; Tammy and Stacy Wilson, Sr., Individually and as Parents and Natural Guardians of Stacy Wilson, Jr., Counter-Claimants/Appellants, v. Farmers Insurance Exchange, Counter-Defendant/Appellee.
CourtIndiana Appellate Court

Edmond W. Foley, Foley & Small, South Bend, IN, Attorney for Appellant.

Martin J. Gardner, Huelat & Gardner, South Bend, IN, Attorney for Appellee.


BAKER, Judge

Appellants-defendants Phyllis Smith and Tammy and Stacy Wilson, Sr., (collectively, the Wilsons) individually and as the parents and natural guardians of Stacy Wilson, Jr., (Stacy) appeal the declaratory judgment entered in favor of appellee-plaintiff Farmers Insurance Exchange1 (Farmers Insurance). Specifically, they claim that the trial court erred in determining that the insurance policy's "business pursuits" and "home care services" exclusions denied coverage of Stacy Wilson, Jr.'s injuries.


Smith retired from full-time employment sometime around 1993. After retiring, she began providing childcare in her home. Her name has been on a list of babysitters at Woodland School District for approximately fifteen years. In 1995 the Wilsons registered their son Stacy for school. The school secretary gave the Wilsons a list of prospective childcare providers that included Smith. Tammy telephoned Smith, met with her, and then arranged for Smith to watch Stacy and his younger sister Sosha. That year Stacy attended half-day kindergarten, so he required only half-day childcare. Because Sosha was not yet attending kindergarten, she required full-day childcare.

The following school year, 1996-97, Smith continued to watch the Wilson children. During that school year Sosha was in half-day kindergarten, so Smith provided childcare for her approximately 30 hours per week. R. at 427. Smith also provided before- and after-school childcare for five other children: John and Jessica Roy, Mike and Travis Nolan, and Starla Roberts. These children were at Smith's an hour or so before the bus arrived in the morning and an hour or so after the bus dropped them off at Smith's. In general, Smith received payment for her childcare services in the amount of $55 per week for the Wilson children, $25 per week for Mike and Travis Nolan, and $15 per week for John and Jessica Roy. She did not receive payment for watching Starla.

On the morning of May 6, 1997, Smith was providing childcare services for the Wilson children and other children, including John Roy. That same morning John Roy threw a lawn dart which struck Stacy in the head. At the time of Stacy's injury, Smith was insured under a homeowners policy with Farmers Insurance. When the Wilsons filed suit against Smith, Farmers Insurance denied coverage of Stacy's injuries under the policy's "home care services" exclusion.

The "home care services" exclusion reads as follows:

We do not cover bodily injury or property damage which:
4. results from the legal liability of any insured because of home care services provided to any person on a regular basis by or at the direction of:
a. any insured;
b. any employee of insured;

c. any other person actually or apparently acting on behalf of any insured.

Regular basis means more than 20 hours per week.

Record at 37-38 (emphasis in original). The term "person" is defined on page one of the policy to include the insured "and any other individual, group, corporation, company, firm, association," etc. R. at 34 (emphasis supplied). The insured is defined in the policy as including Smith.

Farmers Insurance filed a claim for declaratory judgment, claiming that Smith's policy excluded coverage of Stacy's injuries. The Wilsons counterclaimed for declaratory judgment, asserting that the policy did not exclude coverage. The parties subsequently agreed to a number of important stipulations. First, the Wilsons dismissed their suit against Smith with the understanding that Farmers Insurance would make payment to them if the trial court found that coverage existed. Second, coverage for Stacy's injuries would exist, unless the "home care services" exclusion applied. Third, the parties admitted all depositions, records, and affidavits into evidence without objection. Thus, the case was presented to the trial court by means of evidentiary submission with no live testimony.

The trial court entered a declaratory judgment in favor of Farmers Insurance. In so doing, the trial court issued findings of fact and conclusions of law. The trial court found that there was no coverage under the policy because of the "business pursuits"2 and "home care services" exclusions. The Wilsons now appeal.

I. Standard of Review

Where a trial court conducts an evidentiary hearing, we give its factual findings and judgment deference. Menard, Inc. v. Dage-MTI, Inc., 726 N.E.2d 1206, 1210 (Ind.2000). However, where the trial court rules on a paper record without conducting an evidentiary hearing, then no deference is afforded the trial court's factual findings or judgment because under those circumstances a court of review is in as good a position as the trial court to determine the force and effect of evidence. See GKN Co. v. Magness, 744 N.E.2d 397, 401 (Ind.2001)

(citing with approval the proposition that "where a case is tried wholly upon documents or stipulations, the appellate tribunal is in as good a position as the trial court to determine the force and effect of evidence"); 3 William F. Harvey, Indiana Practice: Rules of Procedure Annotated § 52.9, at 404-05 (2d ed. 1988) ("In a `documents case,' there are no `live witnesses,' whose demeanor might be correctly judged and added to the trial court's finding of fact. There is no scene to view, there is no witness to observe it, no demeanor to measure, no solid `gut-hunch' about veracity or truth."). Thus, based as they were on a paper record, we will review de novo the trial court's findings and rulings in favor of Farmer's Insurance. See id.; Degussa Corp. v. Mullens, 744 N.E.2d 407, 412, 415 (Ind.2001) ("Where facts are in dispute but the trial court rules on a paper record without an evidentiary hearing, we review the trial court's ruling de novo."); cf. Houser v. State, 678 N.E.2d 95, 98 (Ind.1997) ("Because both the appellate and trial courts are reviewing the paper record submitted to the magistrate, there is no reason for appellate courts to defer to the trial court's finding that a substantial basis existed for issuing the warrant.").

However, even though our supreme court styled this review "de novo," it established a presumption in favor of the trial court's findings and judgment. As our supreme court explained:

In so doing, we will affirm the judgment of the trial court on any legal theory the evidence of record supports. However, the ruling of the trial court is presumptively correct, and we will reverse on the basis of an incorrect factual finding only if the appellant persuades us that the balance of evidence is tipped against the trial court's findings.

GKN Co., 744 N.E.2d at 401; accord Degussa, 744 N.E.2d at 412, 415


II. The Wilsons' Claims

The Wilsons claim that the "home care services" exclusion in Smith's insurance policy is ambiguous, thus entitling them to coverage for Stacy's injuries. As they correctly observe, courts construe ambiguous terms in an insurance policy in favor of the insured, especially where those terms limit or exclude coverage. Meridian Mut. Ins. Co. v. Auto-Owners Ins. Co., 698 N.E.2d 770, 773 (Ind.1998). Construing ambiguous terms in favor of the insured promotes the policy's basic purpose of indemnity. Id. "Under Indiana law, an insurance policy is ambiguous if reasonable persons may honestly differ as to the meaning of the policy language." Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d 467, 470 (Ind.1985). Reasonable persons might differ if the term is susceptible to more than one interpretation. Meridian Mut.,698 N.E.2d at 773.

Where terms are unambiguous, however, they should be given their plain and ordinary meaning. Id. Failure to define a term in an insurance policy does not necessarily make it ambiguous. Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 667 (Ind.1997). Furthermore, courts will make all attempts to construe the language in a contract so as not to render any words, phrases, or terms ineffective or meaningless. Am. Family Life Assurance Co. v. Russell, 700 N.E.2d 1174, 1177 (Ind. Ct.App.1998), trans. denied. The meaning of a contract can only be gleaned from a consideration of all its provisions, not from an analysis of individual words or phrases read alone. Evansville-Vanderburgh Sch. Corp. v. Moll, 264 Ind. 356, 363, 344 N.E.2d 831, 837 (1976); Mich. Mut. Ins. Co. v. Combs, 446 N.E.2d 1001, 1004 (Ind. Ct.App.1983).

A. "Regular Basis" and "20 Hours Per Week"

The Wilsons first argue that the "home care services" exclusion is ambiguous because of the terms "regular basis" and "20 hours per week." The policy excludes coverage if legal liability results from Smith providing coverage to any person on a "regular basis." R. at 37. Immediately beneath the exclusion, "regular basis" is defined as "more than 20 hours per week." R. at 38. The Wilsons claim that "per" means "each and every." Appellants' brief at 18. Therefore, they conclude, coverage would be excluded only if Smith provided childcare for more than 20 hours each and every week.

In Morris v. Mut. Benefit Life Ins. Co., a federal district court addressed a similar phrase: "30 hours per week." 258 F.Supp. 186, 187 (N.D.Ga.1966). The insurance contract in Morris provided group life insurance for "full-time" employees. Id. The insurance contract stated that any employee who "works...

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