Ruff v. Graziano

• Decision Date: 28 April 1998
• Docket Number: No. 97-1686,97-1686
• Citation: 220 Wis.2d 513,583 N.W.2d 185
• Parties: Lori RUFF and Kevin G. Ruff, as Co-Personal Representatives of the Estate of Dustyn J. Ruff, Deceased, Kevin G. Ruff and Lori Ruff, individually and as parents and next friends of Dustyn J. Ruff, a deceased minor, and Kevin G. Ruff and Lori Ruff, as parents and next friends of Dalton L. Ruff, a minor, Plaintiffs-Appellants, d v. Evelyn GRAZIANO, Defendant, Rural Mutual Insurance Company, a Wisconsin corporation, Defendant-Respondent. . Oral Argument
• Court: Wisconsin Court of Appeals

Page 185

583 N.W.2d 185

220 Wis.2d 513

Lori RUFF and Kevin G. Ruff, as Co-Personal Representatives of the Estate of Dustyn J. Ruff, Deceased, Kevin G. Ruff and Lori Ruff, individually and as parents and next friends of Dustyn J. Ruff, a deceased minor, and Kevin G. Ruff and Lori Ruff, as parents and next friends of Dalton L. Ruff, a minor, Plaintiffs-Appellants, ^d v. Evelyn GRAZIANO, Defendant Rural Mutual Insurance Company, a Wisconsin corporation Defendant-Respondent.

No. 97-1686.

Court of Appeals of Wisconsin.

Oral Argument April 28, 1998.

Opinion Released June 10, 1998.

Opinion Filed June 10, 1998.

On behalf of the plaintiffs-appellants, the cause was submitted on the briefs of Robert Marc Chemers, Donald J. O'Meara, Jr. and Scott L. Howie, of Pretzel & Stouffer, Chartered of Chicago, IL, and Stephanie L. Melnick and Jennifer M. Kopps of Melnick & Melnick, S.C. of Milwaukee. There was oral argument by Scott L. Howie.

On behalf of the defendant-respondent, the cause was submitted on the brief and oral argument of Timothy J. Algiers of O'Meara, Eckert, Pouros & Gonring of West Bend.

Before BROWN, NETTESHEIM and ANDERSON, JJ.

NETTESHEIM, Judge.

Lori and Kevin G. Ruff appeal from a summary judgment dismissing their negligence and wrongful death claims against Rural Mutual Insurance Company. Their son, Dustyn, drowned at a beach while under the care of Rural Mutual's insured, Evelyn Graziano. At issue in this case is whether Rural Mutual's business exclusion clause in its homeowners policy issued to Graziano precludes coverage because Graziano was being compensated for day care services at the time of Dustyn's death. We conclude that coverage is precluded by the business exclusion. We further conclude that the trip to the beach is not excepted from the exclusion as an activity "ordinarily considered non-business in nature." Accordingly, we affirm.

FACTS

On August 18, 1995, Graziano took several children, including Dustyn and her son, to Harrington Beach in Belgium, Wisconsin. Dustyn disappeared while swimming and was later discovered drowned. At the time of the accident, Graziano was a licensed day care provider. She had operated a day care business out of her home since 1984. The Ruffs had engaged her services and Dustyn was under her care and supervision at the time of his death.

The Ruffs sued Graziano and Rural Mutual. The Ruffs alleged that Graziano had acted carelessly and negligently in supervising Dustyn and that Rural Mutual had issued a policy of liability insurance to Graziano which would provide coverage for their claims. The Ruffs' complaint asserted claims of negligence and wrongful death and additionally requested declaratory relief against Graziano and Rural Mutual based on the terms of the homeowners policy. ¹ The Ruffs requested the circuit court to enter an order providing that Rural Mutual had a duty to defend and indemnify Graziano. Rural Mutual's response denied coverage and requested that the Ruffs' complaint be dismissed.

On February 2, 1997, Rural Mutual moved for summary judgment claiming that coverage under its policy was precluded by the "business-pursuits" exclusion. That exclusion provides that coverage for personal liability will not apply to "personal injury ...resulting from business activities of an insured." The Ruffs opposed summary judgment based on the exception language to the exclusion which states: "This exclusion does not apply to activities in conjunction with business pursuits which are ordinarily considered non-business in nature." The Ruffs argued that a trip to the beach is an activity which is "ordinarily considered non-business in nature."

The circuit court held a hearing on the issue of coverage on May 13, 1997. The court granted summary judgment in favor of Rural Mutual based on its finding that the outing to the beach was a "business activity." The court stated:

Graziano was charged with the care and maintenance and control of these children. She on a regular basis often had children participate in field trip activities.

...It's an activity that she performed in the operation of her day care service, and the court finds that therefore the activity of taking the children to the Harrington Park [beach] was not nonbusiness in nature.

The Ruffs appeal.

DISCUSSION

We review a motion for summary judgment using the same methodology as the trial court. See M & I First Nat'l Bank v. Episcopal Homes Management, Inc., 195 Wis.2d 485, 496, 536 N.W.2d 175, 182 (Ct.App.1995). That methodology is well known, and we will not repeat it here except to observe that summary judgment is appropriate when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See id. at 496-97, 536 N.W.2d at 182; see also § 802.08(2), S TATS.

The central issue on appeal is whether the business exclusion in Rural Mutual's homeowners policy applies to the excursion to the beach during which Dustyn drowned. The interpretation of an insurance contract presents a question of law which we review de novo. See Oaks v. American Family Mut. Ins. Co., 195 Wis.2d 42, 47, 535 N.W.2d 120, 122 (Ct.App.1995). Our goal in interpreting the language of the policy is to ascertain and carry out the intention of the parties. See Sprangers v. Greatway Ins. Co., 182 Wis.2d 521, 536, 514 N.W.2d 1, 6 (1994).

A business-pursuits exclusion, such as the one in this case, is a common exception to the broad coverage provided in homeowners and general liability insurance policies. See Bertler v. Employers Ins., 86 Wis.2d 13, 19, 271 N.W.2d 603, 606 (1978). The purpose and necessity for such an exclusion were discussed in Bertler. There the court cited the following explanation for the use of the business-pursuits exclusion:

"The comprehensive personal liability policy...is designed to insure primarily within the personal sphere of the policyholder's life and to exclude coverage for hazards associated with regular income-producing activities.... [T]he hazards of their respective income-producing activities are diverse and involve different legal duties and a greater risk of injury or property damage to third parties than personal pursuits. Business activities can be insured by other types of policies. Their exclusion from personal liability policies avoids areas requiring specialized underwriting, prevents unnecessary coverage overlaps, and helps keep premiums low." [Lawrence A.] Frazier, "The Business-Pursuits Exclusion Revisited," 1977 Insurance Law Journal 88, 89.

Id. at 20, 271 N.W.2d at 606-07. Because this exclusion seeks to limit liability, it must be construed against the insurer. See Bartel v. Carey, 127 Wis.2d 310, 314, 379 N.W.2d 864, 866 (Ct.App.1985). However, "a policy may not be construed to bind the insurer to a risk which it did not contemplate and for which it received no premium." Id. at 314-15, 379 N.W.2d at 866.

The "business-pursuits" exclusion in Graziano's homeowners policy provides as follows:

LIABILITY AND MEDICAL COVERAGES

Coverage E--Personal Liability: We will pay, up to our limit of liability, all sums for which an insured is legally liable because of bodily injury or property damage caused by an occurrence to which this coverage applies. The injury or damage must occur during the policy term. WE DO NOT COVER PUNITIVE OR EXEMPLARY DAMAGES.

....

Exclusions: Coverage E does not apply to:

....

7. personal injury:

....

f. resulting from business activities of an insured; (This exclusion does not apply to activities in conjunction with business pursuits which are ordinarily considered non-business in nature.)

The Ruffs make two arguments on appeal: (1) Graziano's trip to the beach on August 18 does not fall under the business-pursuits exclusion and (2) if it does, the exclusion does not apply because the trip to the beach is "an activit[y] in conjunction with business pursuits which [is] ordinarily considered non-business in nature."

The Ruffs first contend that "[t]he business-pursuits exclusion is not invoked because [Dustyn's] death was not the result of Mrs. Graziano's business pursuit." The Ruffs rely on Graziano's testimony that she would have gone to the beach regardless of whether she was engaged in day care activity. The Ruffs argue that, therefore, the exclusion does not apply.

In support, they rely upon our supreme court's holding in Bertler. There, the plaintiff was injured during the scope of his employment when he was struck by a forklift vehicle operated by a coemployee. See Bertler, 86 Wis.2d at 15, 271 N.W.2d at 604. The plaintiff sought to recover damages against his coemployee and his homeowners liability insurer. See id. The insurer argued that the occurrence fell within the "business-pursuits" exclusion in the policy and thus, coverage was precluded. See id. at 16-17, 271 N.W.2d at 605.

The Bertler court concluded that coverage was precluded under the business-pursuits exclusion because "[the insured's] conduct in operating the forklift at the time of the accident, undertaken in the course of his employment, was regular activity engaged in with a profit motive." Id. at 22, 271 N.W.2d at 608. The Ruffs attempt to distinguish Bertler, arguing that "[w]hile the Bertler insured had no non-business reason to be operating a forklift, Mrs. Graziano's presence at the beach was not dependent upon her business." We are unpersuaded.

The Bertler court adopted a two-pronged definition of "business pursuits." See id. at 21-22, 271 N.W.2d at 607-08. First, there must be continuity such that there is a customary engagement or a stated occupation. See id. at 21, 271 N.W.2d at 607. Second, there must be a profit motive such that the activity is a "means of livelihood, gainful employment, means of earning a living, procuring subsistence or profit, commercial transactions or engagements." Id. (quoted source omitted). Graziano testified that she had been providing day care services since 1984 and that she did so...