Industrial Indem. Co. v. Goettl, 1
| Decision Date | 01 September 1983 |
| Docket Number | CA-CIV,No. 1,1 |
| Parties | INDUSTRIAL INDEMNITY COMPANY, a California corporation, Plaintiff-Appellee, v. Gust GOETTL; Adgus Properties, a partnership composed of Adam D. Goettl and Gust Goettl; and Billy Clyde Hartman, Defendants-Appellants, v. GREAT AMERICAN INSURANCE COMPANY, a foreign corporation, Defendant-Appellee. GREAT AMERICAN INSURANCE COMPANY, a foreign corporation, Crossclaimant-Cross-Appellant, v. ADGUS PROPERTIES, a partnership composed of Adam D. Goettl and Gust Goettl, Defendant-Cross-Appellee. 5729. |
| Court | Arizona Court of Appeals |
The issues raised in this appeal involve questions concerning coverage under several insurance policies for an accident which occurred on premises conveyed by the insured 16 years before the accident. The facts giving rise to this litigation are as follows.
From 1950 to 1960, Gust and Adam Goettl were officers and sole stockholders in International Metal Products Co. and partners in Adgus Properties. During this period, International Metal constructed a warehouse for Adgus Properties which then leased the building back to International Metal. In 1960 the Goettls sold their interest in International Metal, and, as partners in Adgus, sold the building to McGraw-Edison Co. Sixteen years later Billy Hartman, an employee of McGraw-Edison, fell through the roof of the warehouse and sustained permanent quadriplegic injuries. Hartman's subsequently filed action against the Goettls and Adgus Properties alleges that the Goettls had negligently constructed the roof and had negligently sold the building without disclosing the dangerous condition of the roof to McGraw-Edison.
The insurance policies involved in this appeal were in effect when Hartman was injured. Industrial Indemnity Insurance Company (Industrial Indemnity) had issued a "Comprehensive Personal Catastrophe Liability Policy" to Gust Goettl. Great American Insurance Company (Great American) had issued two policies: (1) a homeowners insurance policy to Gust Goettl; and (2) a policy providing owners', landlords', and tenants' liability insurance coverage to Adam and Gust Goettl doing business as Adgus Properties. The Goettls presented the complaint to both insurers; Great American refused to defend and Industrial Indemnity offered to defend with a reservation of all rights to withdraw.
Subsequently, Industrial Indemnity filed a complaint for declaratory relief seeking an order declaring that no coverage existed under its policy and that there was no duty to defend. In a counterclaim against Industrial Indemnity and a cross-claim against the Goettls, Great American similarly sought an order declaring that no coverage existed under its policies and that there was no duty to defend.
The trial court entered summary judgment for Industrial Indemnity and found no obligation pursuant to its insurance policy to defend or provide liability coverage for Hartman's claims against Gust Goettl. The trial court also entered summary judgment in favor of Great American on one of its policies, finding no obligation to defend or provide liability coverage pursuant to the homeowners policy. Both Goettl and Hartman (appellants) have appealed from these summary judgments.
On the remaining policy, Great American's owners', landlords', and tenants' liability policy, the trial court entered summary judgment against the insurer and found an obligation to defend and provide coverage for the Hartman accident. Great American has filed a cross-appeal from that judgment.
We proceed to discuss the contentions raised on appeal by the parties relating to each of the insurance policies.
In support of the trial court's judgment denying coverage under its homeowners policy, Great American contends that the accident arose out of "business pursuits" and that coverage was excluded by a provision which stated that the policy did not apply:
"(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."
Appellants recognize the existence of the "business pursuits" exclusion, but contend that it only excludes coverage for liability arising from business pursuits in which the insured was engaged during the policy term, and that it does not exclude liability arising from business pursuits engaged in by the insured prior to the term of the policy. They point out that the policy does not define "business pursuits" or specifically establish a time frame relating to the excluded coverage. They urge that because the coverage actually extended by the policy is limited to injuries caused by an "occurrence" during the policy term, similarly, the exclusion should be limited to business pursuits engaged in during the policy term. They then argue that because Goettl in 1960 had sold his interest in International Metal, which constructed the warehouse, and the building itself, he was no longer involved in that "business pursuit" within the meaning of the exclusion when Hartman was injured.
We find no support in the policy for the limitation which appellants would engraft on the unambiguous, unlimited language used in the exclusionary clause. We first note that the exclusion is stated without any time limitation and that there are no other provisions in the policy which expressly or impliedly limit the exclusion to business pursuits engaged in by the insured during the policy term. An exclusion is intended to negate all coverage for injuries arising from the particular conduct of the insured described in the exclusionary clause. The fact that the coverage actually extended under the policy is limited to "occurrences" during the policy term has no relevance to non-coverage of excluded conduct. The function of the "occurrences" limitation is to set a temporal limit on the insurer's liability for the insured's culpable conduct otherwise admittedly covered. If coverage for certain conduct is excluded, the time of the "occurrence" is simply immaterial. We conclude that the "business pursuits" exclusion contained in Great American's homeowners policy precludes coverage for injuries arising out of a business pursuit regardless of when the insured engaged in such activity.
Appellants next contend that the exclusion does not apply because Hartman's injuries did not arise out of business pursuits by Goettl. They argue that Goettl's ownership and rental of the warehouse through the Adgus partnership and the subsequent sale of the building did not constitute a business pursuit. Appellants compare Goettl's involvement to an investment which they urge is outside the scope of a "business, trade, profession, or occupation." Alternatively, appellants contend that the term "business pursuits" is ambiguous and must be construed against the insurer.
Appellants' restriction of "business pursuits" to a "business, trade, profession, or occupation" is too narrow a definition. Rather, "business pursuits" denotes "a continued or regular activity for the purpose of earning a livelihood such as a trade, profession or occupation, or a commercial activity." Annot., 48 A.L.R.3d 1096, 1100 (1973). Many jurisdictions have adopted this interpretation, requiring continuity and profit motive.
" 'To constitute a business pursuit, there must be two elements: first, continuity, and secondly, the profit motive; as to the first, there must be a customary engagement or a stated occupation; and, as to the latter, there must be shown to be such activity as a means of livelihood, gainful employment, means of earning a living, procuring subsistence or profit, commercial transactions or engagements.' "
Krings v. Safeco Insurance Co., 6 Kan.App.2d 391, 393, 628 P.2d 1071, 1074 (1981) (quoting Fadden v. Cambridge Mutual Fire Insurance Co., 51 Misc.2d 858, 862, 274 N.Y.S.2d 235, 241 (1966)). Appellants' interpretation suggests that only the principal activity of an insured--his business, trade, profession, or occupation--is excluded under the policy. The use of the plural "pursuits" suggests a more expansive construction. See Krings, supra, at 395 n. 1, 628 P.2d at 1075 n. 1. Contrary to appellants' assertion, we do not find that the term is ambiguous.
Even if we accept appellants' contention and assume that under certain circumstances an investment might not constitute a "business pursuit," we find the comparison unsound. In depicting Goettl's involvement with the warehouse as an investment, appellants are considering Goettl's activity in a vacuum. From 1950 to 1960, Goettl was an officer and one of two stockholders in International Metal, the company which constructed and maintained the building. He was one of two partners in Adgus Properties which owned the building and leased it to International Metal for use as a receiving and storage warehouse. Goettl did not just receive rent as part owner of the building. Rather, the warehouse was an integral part of the operations of International Metal, a business in which Goettl actively participated as plant superintendent and vice-president. Clearly, Goettl's involvement in International Metal, which used the building, and in Adgus Properties, which sold the building to McGraw-Edison, was the kind of commercial activity which is described in the policy as "business pursuits."
Furthermore, Hartman's injury arose out of these business pursuits....
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