Moncivais v. Farm Bureau Mut. Ins. Co., 87-415

• Decision Date: 19 October 1988
• Docket Number: No. 87-415,87-415
• Citation: 430 N.W.2d 438
• Parties: Luz MONCIVAIS, Jr., and Barbara Moncivais, Appellees, v. FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant.
• Court: Iowa Supreme Court

Page 438

430 N.W.2d 438

Luz MONCIVAIS, Jr., and Barbara Moncivais, Appellees, v. FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant.

No. 87-415.

Supreme Court of Iowa.

Oct. 19, 1988.

John C. Hendricks of Stanley, Lande, Coulter & Nepple, Muscatine, for appellant.

Eric M. Knoernschild of Hintermeister & Knoerschild, and Terrence L. Mealy, Muscatine, for appellees.

Considered by McGIVERIN, C.J., and HARRIS, LARSON, SCHULTZ, and ANDREASEN, JJ.

ANDREASEN, Justice.

Farm Bureau Mutual Insurance Company (Farm Bureau) appeals the order granting summary judgment to Luz Moncivais, Jr., and Barbara Moncivais. This case stems from the accidental death of eleven-month-old Aubrie Moncivais while she was in the care of the insured, Mrs. Arlene Y. Cooper. We must determine if the business pursuit exception in this policy will allow coverage under the facts of this case.

Arlene Cooper provided child day care services in her home. Eleven-month-old Aubrie Moncivais, daughter of Luz and Barbara Moncivais, was in the care of Mrs. Cooper on August 3, 1981. On that morning, Aubrie was placed in a crib with another infant. A toy had been tied to the crib with some twine. While the children were in the crib, Mrs. Cooper went about other household chores. While Mrs. Cooper was away, Aubrie became entangled in the twine and was choked. Two weeks later, Aubrie died as a result of the choking. In a subsequent action for wrongful death, the Moncivaises obtained a judgment against the Coopers based on Mrs. Cooper's neglect and failure to supervise Aubrie which led to an unsafe environment.

Dwight and Arlene Cooper purchased a homeowner's policy from Farm Bureau on February 28, 1978. Following the judgment against the Coopers, the Moncivaises brought this action against Farm Bureau to satisfy that judgment, alleging coverage under the Coopers' homeowner insurance policy. Farm Bureau has denied coverage, based on the following language in the policy:

This policy does not apply:

1. Under Coverage E-Personal Liability

....

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.

Arlene Cooper has operated a child care service for approximately fifteen years. At the time of Aubrie's death, she was caring for approximately seven children on a regular basis. The record reflects that Mrs. Cooper has at times had up to twenty-five children in her care. She would occasionally care for her own grandchildren or great-grandchildren. Her child care activities were not licensed by the state. Mrs. Cooper's testimony reveals that she was aware of the license requirement and, after consulting some of the parents using her services, she decided not to obtain a license. Mrs. Cooper had filed tax returns reflecting her business income from child care. Her 1980 returns reflected a gross income of over $8500.

Both Farm Bureau and the Moncivaises moved for summary judgment. The trial court found the activities of Mrs. Cooper to be ordinarily incident to nonbusiness pursuits and therefore not excluded under the policy terms. Farm Bureau's motion for summary judgment was denied and the Moncivaises were granted summary judgment. On appeal, the Iowa Court of Appeals affirmed the trial court and found the language of the business pursuits exclusion to be ambiguous. The court of appeals went on to construe the ambiguous provisions in favor of the insured. This matter is now before us on Farm Bureau's application for further review.

Our review of the summary judgment is at law. Iowa R.App.P. 4. In reviewing the grant of summary judgment under Iowa Rule of Civil Procedure 237(c), the issue is whether the moving party demonstrated the absence of any genuine issue of material fact and showed entitlement to judgment on the merits as a matter of law. See Suss v. Schammel, 375 N.W.2d 252, 254 (Iowa 1985). Our review consists of two levels of analysis; first, whether the trial court applied the proper legal analysis, and second, whether there are any material facts in dispute.

The heart of this dispute concerns the interpretation and application of the business activities exclusion in the Coopers' homeowner insurance policy. The burden to prove applicability of an exclusion is placed on the insurer. See City of Cedar Rapids v. Northwestern Nat'l Ins. Co., 304 N.W.2d 228, 230 (Iowa 1981). When interpreting the language of an insurance contract, we are guided by the principles set forth in Cairns v. Grinnell Mutual Reinsurance Co., 398 N.W.2d 821, 823-24 (Iowa 1987). The object of contract interpretation is to ascertain from the language "the intent of the contracting parties at the time the contract was made." Id. (quoting Home Federal Sav. & Loan Ass'n v. Campney, 357 N.W.2d 613, 617 (Iowa 1984)); see also Iowa R.App.P. 14(f)(14). When neither party offers extrinsic evidence concerning the interpretation of the relevant contract language, the interpretation of that language by the court is a question of law. Cairns, 398 N.W.2d at 823-24. Ambiguity exists "if, 'after the application of pertinent rules of interpretation to the face of the instrument, a genuine uncertainty results as to which one of two or more meanings is the proper one.' " Id. at 824. (quoting Fraternal Order of Eagles v. Illinois Casualty Co., 364 N.W.2d 218, 221 (Iowa 1985)). Because insurance policies constitute adhesion contracts, we construe ambiguous policy provisions in a light favorable to the insured. Cairns, 398 N.W.2d at 824. The insurer must define clearly and explicitly any limitations or exclusions to coverage expressed by broad promises. Id. When there is no ambiguity, we will not write a new contract of insurance between the parties. Furthermore, we will not strain the words and phrases of the policy "to impose liability that was not intended and was not purchased." Id. (quoting Gateway State Bank v. North River Ins. Co., 387 N.W.2d 344, 346 (Iowa 1986)).

Interpretation of the policy language involves two separate determinations. First, we must determine what type of activity is defined as a business pursuit. If Mrs. Cooper's activities did constitute a business activity, we must interpret the language "except activities therein which are ordinarily incident to non-business pursuits."

We have previously defined the type of activities which are considered business pursuits when interpreting insurance policies:

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 of profit, commercial transaction or engagements.

Aid (Mut.) Ins. v. Steffen, 423 N.W.2d 189, 191-92 (Iowa 1988) (quoting Fadden v. Cambridge Mut. Fire Ins. Co., 51 Misc.2d 858, 862, 274 N.Y.S.2d 235, 241 (N.Y.Sup.Ct.1966)). Mrs. Cooper does not dispute that her child care activities constituted a business pursuit. The Iowa Code recognizes that certain child day care activities must be regulated as a business. See Iowa Code §§ 237A.1(7), 237A.1(8) & 237A.2 (1987). Iowa Code section 237A.1(7) defines child day care as "the care, supervision, or guidance of a child by a person other than the parent, guardian, relative or custodian for periods of two hours or more and less than twenty-four hours per day per child on a regular basis in a place other than the child's home...." Mrs. Cooper's activities meet the definition of child day care as set forth in the Iowa Code. The duration and extent of Mrs. Cooper's activities require that they be considered a business pursuit as defined by the insurance policy.

The policy language provides an exception to the business pursuits exclusion. We must now interpret the language of the business pursuits exclusion, "except activities therein which are ordinarily incident to non-business pursuits." A review of cases from other jurisdictions reveals several methods of analysis used to interpret this policy language. See generally Annotation, Construction and Application of "Business Pursuits" Exclusion Provision in General Liability Policy, 48 A.L.R.3d 1096, 1107-09 (1973).

Some jurisdictions have focused on the specific activities of the insured which caused the unsafe environment for the child. In Gulf Insurance Co. v. Tilley, 280 F.Supp. 60, 64-65 (N.D.Ind.1967), aff'd per curiam, 393 F.2d 119, 120 (7th Cir.1968), a child was burned by an overturned coffee pot while in the care of a babysitter. The court focused on the insured's activity of brewing coffee and determined that brewing coffee was an activity not normally associated with childcare. The exception applied and coverage was granted. Id.

The result in Tilley stems from a narrow focus on the specific activities of the person providing child care. This focus would allow coverage when the unsafe environment or negligence resulted from activities not associated with child care, such as brewing coffee, but would not allow coverage if the unsafe environment was the result of activity associated with childcare, such as preparing food for the children. The possibility for inconsistent results when this form of analysis is utilized was discussed in State Farm Fire & Casualty Co. v. Moore, 103 Ill.App.3d 250, 255, 430 N.E.2d 641, 645, 58 Ill.Dec. 609, 613 (1981):

As the lunch was for Moore and her child as well as the children for whom she sat, her activity falls within the exception. By contrast if she had been preparing lunch only for Marcus, [the child in her care] her activity would be,...