Nat'l Farmers Union Prop. & Cas. Co. v. Garfinkel

Decision Date15 March 2012
Docket NumberNo. 11CA0230.,11CA0230.
Citation2012 COA 46,277 P.3d 905
PartiesNATIONAL FARMERS UNION PROPERTY AND CASUALTY COMPANY, Plaintiff–Appellant, v. Larry GARFINKEL; Kane Real Estate & Development, LLLP, a Colorado limited liability limited partnership; Daniel B. Willie; Dessa S. Willie; Moore P. Huffman, Jr.; General Property Mortgage, Inc., a Colorado corporation; Great Northern Insurance Company, a Minnesota corporation; and Ranch at Roaring Fork Homeowners Association, Inc., a Colorado nonprofit corporation, Defendants–Appellees.
CourtColorado Court of Appeals

OPINION TEXT STARTS HERE

White and Steele, P.C., James M. Dieterich, Chelsey M. Burns, Denver, CO, for PlaintiffAppellant.

Karp Neu Hanlon, P.C., Sander N. Karp, Glenwood Springs, CO, for DefendantAppellee Larry Garfinkel.

Cozen O'Connor, Brad W. Breslau, Denver, CO, for DefendantsAppellees Kane Real Estate & Development, LLLP; Daniel B. Willie; Dessa S. Willie; Moore P. Huffman, Jr.; General Property Mortgage, Inc.; and Great Northern Insurance Company.

Purvis Gray, LLP, John A. Purvis, Boulder, CO, for DefendantAppellee Ranch at Roaring Fork Homeowners Association, Inc.

Opinion by Judge VOGT.*

¶ 1 Plaintiff, National Farmers Union Property and Casualty Company (NFU), appeals the trial court's summary judgment in favor of defendants, Larry Garfinkel; Kane Real Estate & Development, LLLP; Daniel B. Willie; Dessa S. Willie; Moore P. Huffman, Jr.; General Property Mortgage, Inc.; Great Northern Insurance Company; and Ranch at Roaring Fork Homeowners Association, Inc. We affirm in part, reverse in part, and remand for further proceedings.

I. Background

¶ 2 In 2008, a wildfire in Garfield County injured defendant Garfinkel and damaged the property of the other defendants. In two lawsuits (the underlying lawsuits), defendants sued Larry Gerbaz and 100 Road Cattle Company LLC (the LLC), alleging generally that Larry Gerbaz was acting individually and as an agent of the LLC when he burned slash piles on the LLC's property, that he was negligent in leaving the fires unattended, and that his negligence caused their losses.

¶ 3 At the time of the fire, NFU had in effect a farm liability insurance policy, with a $1 million liability limit per occurrence, covering the property at 1265 County Road 100, Carbondale, Colorado (the farm property), where the slash burning took place. The LLC was the named insured.

¶ 4 NFU also had in effect a homeowners insurance policy insuring the residence of Larry Gerbaz, which was adjacent to the farm property, with a $500,000 limit per occurrence.Larry Gerbaz was the named insured, and Molly Gerbaz, his wife, also qualified as an insured under the policy.

¶ 5 The underlying lawsuits were settled through NFU's payment of the $1 million liability limit under the farm policy and the parties' agreement to file this action to obtain a judicial determination of whether there also was coverage for defendants' losses under the homeowners policy.

¶ 6 In this action, the parties filed cross-motions for summary judgment on the coverage question. The trial court entered summary judgment for defendants, rejecting NFU's argument that it was not obligated to provide coverage based on two exclusions in the homeowners policy, the “business pursuits” exclusion (precluding coverage for bodily injury or property damage arising out of or in connection with a business engaged in by an insured) and the “owned premises” exclusion (precluding coverage for bodily injury or property damage arising out of a premises owned by an insured that is not an insured location).

II. Standard of Review

¶ 7 Summary judgment is appropriate where the pleadings and supporting documents demonstrate that no genuine issue of material fact exists and that the moving party is entitled to a judgment as a matter of law. C.R.C.P. 56(c); Pierson v. Black Canyon Aggregates, Inc., 48 P.3d 1215, 1218 (Colo.2002). The nonmoving party is entitled to the benefit of all favorable inferences that may be drawn from the undisputed facts, and all doubts are resolved against the moving party. A.C. Excavating v. Yacht Club II Homeowners Ass'n, 114 P.3d 862, 865 (Colo.2005). We review the trial court's summary judgment de novo. Pierson, 48 P.3d at 1218.

¶ 8 We likewise review de novo the trial court's interpretation of an insurance policy. Hoang v. Assurance Co., 149 P.3d 798, 801 (Colo.2007); Sachs v. Am. Family Mut. Ins. Co., 251 P.3d 543, 545 (Colo.App.2010). Like other contracts, insurance policies are reviewed with the ultimate aim of effectuating the contracting parties' intentions, and are to be given effect according to the plain and ordinary meaning of their terms. Bailey v. Lincoln Gen. Ins. Co., 255 P.3d 1039, 1050–51 (Colo.2011). If policy provisions are ambiguous—that is, susceptible of more than one reasonable interpretation—they are to be construed against the insurer as the drafter of the policy. Id. at 1051;Sachs, 251 P.3d at 546. However, unambiguous limitations or exclusions in an insurance policy must be enforced. Hoang, 149 P.3d at 801;Sachs, 251 P.3d at 546 (affirming summary judgment for insurer based on owned premises exclusion in homeowners policy).

III. Analysis
A. The Business Pursuits Exclusion

¶ 9 NFU contends that, because the farm property was being leased to third parties for haying and pasturing at the time of the April 2008 wildfire, coverage for defendants' losses was specifically excluded by the business pursuits exclusion in the homeowners policy, and the trial court erred in ruling to the contrary. We conclude that further proceedings are required to resolve this issue.

1. Scope and Applicability of the Exclusion

¶ 10 The intent of homeowners liability policies is to protect the insured against the risk of liability for injuries suffered by others. 9A Lee R. Russ & Thomas F. Segalla, Couch on Insurance § 128.2 (3d ed. 2011). While such policies may provide liability coverage for injuries caused by an insured on premises other than the insured location, they typically exempt from coverage bodily injury or property damage arising out of or in connection with a business engaged in by an insured. Because people characteristically separate their business activities from their personal activities, business pursuits coverage is not essential for their homeowners coverage and is excluded to keep premium rates at a reasonable level. Id. at § 128.12; see Indus. Indem. Co. v. Goettl, 138 Ariz. 315, 674 P.2d 869, 874–75 (1983) (explaining rationale for excluding income-producing activities, which present special risks beyond the ordinary risks and hazards inherent in maintaining a home, from personal liability coverage in homeowner policies); Allstate Ins. Co. v. Hallman, 159 S.W.3d 640, 645 (Tex.2005) ([A]s numerous courts have recognized, the purpose of the business pursuits exclusion is to lower homeowners insurance premiums by removing coverage for activities that are not typically associated with the operation and maintenance of one's home.”); see also Bailey, 255 P.3d at 1047 (observing, in a different context, that ability of insurers to limit coverage is “central to the notion of what constitutes insurance” (quoting Aluminum Co. v. Aetna Cas. & Sur. Co., 140 Wash.2d 517, 998 P.2d 856, 878 (2000))).

¶ 11 The NFU policy at issue here includes a business pursuits exclusion. It states:

SECTION II—EXCLUSIONS

1. Coverage E—Personal Liability and Coverage F—Medical Payments to Others do not apply to “bodily injury” or “property damage”:

...

b. Arising out of or in connection with a “business” engaged in by an “insured.” This exclusion applies but is not limited to an act or omission, regardless of its nature or circumstance, involving a service or duty rendered, promised, owed or implied to be provided because of the nature of the “business.”

The definitions portion of the policy states that “business includes trade, profession or occupation.” 1

¶ 12 This exclusion is identical or similar to exclusions in other homeowners policies. See Couch, § 128:12 (noting that “nearly all the variations employ virtually the same substantive language, including broad exclusionary language for liabilities arising out of ‘business engaged in by’ or ‘business pursuits' of an insured”); see also Metro. Prop. & Cas. Ins. Co. v. Jablonske, 722 N.W.2d 319, 326 (Minn.Ct.App.2006) (declining to recognize a distinction between an exclusion labeled “business” and an exclusion labeled “business pursuits”). Although the exclusion at issue here does not use the phrase “business pursuits,” we will refer to it as a “business pursuits” exclusion, consistent with the case law and the terminology used by the parties in this case.

¶ 13 Exclusions for business pursuits have been the subject of numerous appellate decisions. In Colorado, courts have found business pursuits exclusions to exclude coverage where an insured, seeking liability coverage under his homeowners policy, shot the victim in a business dispute, Bolejack v. Travelers Ins. Co., 64 P.3d 939, 941 (Colo.App.2003), and where the insureds injured children while operating day-care businesses in their homes. See Republic Ins. Co. v. Piper, 517 F.Supp. 1103, 1106–07 (D.Colo.1981); Rodriguez v. Safeco Ins. Co., 821 P.2d 849, 852 (Colo.App.1991).

¶ 14 In none of the three Colorado cases was the particular exclusion at issue found to be ambiguous. In Rodriguez, 821 P.2d at 853, and Republic Ins. Co., 517 F.Supp. at 1107–08, the courts expressly rejected arguments that the business pursuits exclusions in the policies before them were ambiguous. In Bolejack, 64 P.3d at 940–41, where—as in the case before us—the exclusion precluded coverage for bodily injury or property damage “arising out of or in connection with a ‘business' engaged in by an ‘insured,’ and defined business as including any “trade, profession, or occupation,” the division cited case law requiring enforcement of unambiguous policy exclusions and concluded that the “plain language of the exclusion”...

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