Hoepp v. State Farm Ins. Co.

• Decision Date: 18 July 1997
• Docket Number: No. 95-755,95-755
• Citation: 142 N.H. 189,697 A.2d 943
• Parties: Lawrence M. HOEPP v. STATE FARM INSURANCE COMPANY.
• Court: New Hampshire Supreme Court

Page 943

697 A.2d 943

Lawrence M. HOEPP v. STATE FARM INSURANCE COMPANY.

No. 95-755.

Supreme Court of New Hampshire.

July 18, 1997.

Wadleigh, Starr, Peters, Dunn & Chiesa, of Manchester (Theodore Wadleigh on the brief and orally), for plaintiff.

Bouchard & Mallory, P.A., of Manchester (Paul B. Kleinman on the brief, and Jeanine P. McConaghy on the brief and orally), for defendant.

BROCK, Chief Justice.

The plaintiff, Lawrence M. Hoepp, filed a declaratory judgment action to determine coverage under a personal liability umbrella policy issued by the defendant, State Farm Insurance Company. He appeals the decision of the Superior Court (Groff, J.), denying coverage under the policy's "business operations" exclusion. We reverse.

The plaintiff and John Nightingale became acquainted as members of a ski club in Waterville Valley. On Nightingale's invitation, the plaintiff joined him in three real estate investments between 1987 and 1990. Because the plaintiff is a surgeon with a very active practice, he wanted no role in managing the investments. Consequently, the plaintiff merely provided a portion of the start-up money required for each project, while Nightingale was the managing partner and made all decisions.

The third project ultimately failed, the bank foreclosed on the property, and the plaintiff lost his investment. When the plaintiff learned that Nightingale had mishandled funds in the third project, he reported the misconduct to the attorney general's office. Although the State initiated criminal proceedings against Nightingale, the charges were later dismissed. Nightingale responded to the criminal action by suing the plaintiff for malicious prosecution.

The plaintiff filed a declaratory judgment action, seeking coverage for the malicious prosecution action under the personal liability umbrella policy issued by the defendant. The trial court determined that the policy's "business operations" exclusion barred coverage because "the purchasing, holding, and developing of real property is a business operation under the policy." The plaintiff appeals.

The sole issue on appeal is whether the "business operations" exclusion bars coverage for the malicious prosecution action. On appeal, the interpretation of the exclusionary language is a question of law for this court to decide. Concord Gen. Mut. Ins. Co. v. Mitchell, 138 N.H. 229, 231, 637 A.2d 903, 904 (1994). "If the policy language is ambiguous or where conflicting interpretations exist, we construe the policy in favor of providing coverage to the insured." Weaver v. Royal Ins. Co. of America, 140 N.H. 780, 781-82, 674 A.2d 975, 977 (1996). The doctrine that ambiguities in an insurance policy must be construed against the insurer "is rooted in the fact that insurers have superior understanding of the terms they employ." Heniser v. Frankenmuth Mut. Ins., 449 Mich. 155, 534 N.W.2d 502, 506 (1995). Additionally, interpreting the language in favor of the insured and against the insurer is particularly applicable when ambiguities are found in an exclusionary clause. Cf. M. Mooney Corp. v. U.S. Fidelity & Guaranty Co., 136 N.H. 463, 470-71, 618 A.2d 793, 797 (1992); see Merchants Ins. Group v. Warchol, 132 N.H. 23, 27, 560 A.2d 1162, 1164 (1989).

We turn first to the language of the policy itself. The policy expressly excludes coverage "for any loss caused by your business operations or arising out of business property." "Business" is defined in the policy as a "trade, profession, or occupation"; "operations," however, is undefined. Although we have previously interpreted the "business pursuits" exclusion commonly found in homeowners' policies, see Haley v. Allstate Ins. Co., 129 N.H. 512, 514, 529 A.2d 394, 396 (1987), the interpretation of the "business operations" exclusion in the umbrella policy here is an issue of first impression, cf. Allstate Ins. Co. v. Crouch, 140 N.H. 329, 331, 666 A.2d 964, 966 (1995) (applying "business pursuits" exclusion analysis to "business activities" exclusion, where parties agreed that analysis was identical).

The defendant asserts in its brief that "[t]he business operations exclusion is for all intents and purposes identical to the business pursuits exclusion found in homeowners' policies." Consequently, the defendant maintains, because the plaintiff's involvement in the real estate investments contained the critical elements of profit motive and continuity, see Haley, 129 N.H. at 514, 529 A.2d at 396, the exclusion applies. See, e.g., Vallas v. Cincinnati Ins. Co., 624 So.2d 568, 571-72 (Ala.1993) (concluding "business pursuits" includes passive...