Shapiro v. Glens Falls Ins. Co.

• Decision Date: 31 March 1975
• Parties: Alexander SHAPIRO, Appellant, v. GLENS FALLS INSURANCE COMPANY, Respondent.
• Court: New York Supreme Court — Appellate Division

Page 892

365 N.Y.S.2d 892

47 A.D.2d 856

Alexander SHAPIRO, Appellant, v. GLENS FALLS INSURANCE COMPANY, Respondent.

Supreme Court, Appellate Division, Second Department.

March 31, 1975.

Whitehorn & Delman, New York City (Joseph Delman, New York City, of counsel), for appellant.

John M. Cunneen, New York City, for respondent.

Before COHALAN, Acting P.J., and CHRIST, BRENNAN, MUNDER and SHAPIRO, JJ.

MEMORANDUM BY THE COURT.

In an action Inter alia to declare that, under a policy of personal liability insurance issued by defendant to plaintiff, defendant is obligated to defend plaintiff in a certain slander action, plaintiff appeals from a judgment of the Supreme Court, Kings County, dated April 29, 1974, which, after a nonjury trial, declared (1) that the policy did not entitle plaintiff to coverage or defense by defendant in the slander action and (2) that defendant properly refused to provide coverage to plaintiff with respect to that action.

Judgment affirmed, with costs.

In 1972, plaintiff allegedly uttered slanderous statements directed against the general partners of a real estate syndicate in which he was a limited partner. Those statements form the basis of a suit in slander commenced against plaintiff by the general partners. Plaintiff claims there is coverage for those claims under the personal excess liability policy here in question. However, coverage for liability as a result of the alleged statements is excluded by virtue of the express terms of the 'business pursuits' exclusion contained in the policy, which provide:

'This policy does not apply * * * to personal injury * * * arising out of * * * any business pursuits * * * of the insured'.

Plaintiff, as a limited partner of long standing in this real estate syndicate, was primarily concerned with realization of profits from his investment. Under these circumstances, the test of 'business pursuits' set forth in Home Ins. Co. v. Aurigemma (45 Misc.2d 875, 257 N.Y.S.2d 980), i.e., a customary engagement or continued activity for the purpose of profit, is satisfied (cf. Levinson v. Aetna Cas. and Sur. Co., 64 Misc.2d 979, 981, 316 N.Y.S.2d 921, 923; Fadden v. Cambridge Mut. Fire Ins. Co., 51 Misc.2d 858, 862, 274 N.Y.S.2d 235, 240--241, affd. 27 A.D.2d 487, 280 N.Y.S.2d 209).

Plaintiff's primary means of livelihood consisted of activities other than his investment in this real estate syndicate. However, for purposes of the 'business pursuits' exclusion, the 'business' engaged in by him need not necessarily be limited to his Sole occupation or employment (cf. Matter of Steinbeck v. Gerosa, 4 N.Y.2d 302, 308, 175 N.Y.S.2d 1, 5--6, 151 N.E.2d 170, 173).

By the very nature of partnership, plaintiff, as a limited partner, was more clearly engaged in a 'business pursuit' than is, for example, a corporate stockholder.

COHALAN, Acting P.J., and CHRIST, BRENNAN and MUNDER, JJ., concur.

SHAPIRO, Justice, dissents and votes to reverse the judgment and to declare that defendant is obligated under the terms of the policy of insurance of defend plaintiff, indemnify him and reimburse him for expenses already incurred in connection with the slander action, with the following memorandum:

In this declaratory judgment action Special Term has determined that the plaintiff insured is not entitled to coverage under an 'umbrella' policy of personal liability insurance issued by the defendant insurer, Glens Falls Insurance Company. I respectfully dissent from this court's affirmance of the judgment and vote to award judgment in plaintiff's favor.

QUESTIONS INVOLVED

1. Is the 'business pursuits' exclusion in defendant's policy, as therein defined, applicable to the facts of the case? Special Term answered 'Yes'. I disagree.

2. Is the 'intentional injury' exclusion of the policy applicable to the claim made against plaintiff in the slander action? Special Term answered 'Yes'. I disagree.

3. Does the policy considered as a whole exclude coverage of that cause of action? Special Term answered 'Yes'. I disagree.

THE FACTS

Defendant's personal excess liability policy insured plaintiff for a three year term commencing April 19, 1970. Plaintiff is the president of a plumbing supply company to which enterprise he devotes most of his full working time. During the past 15 years he has made numerous financial investments which have produced dividends of over $40,000 annually. Among these investments, plaintiff in 1961 paid $10,000 for a limited partnership interest in the Irving Place Realty Company, a real estate syndicate. By the terms of the partnership agreement, plaintiff, as a limited partner, had no control over the conduct of the partnership business and had no authority to act for or bind the partnership. His participation was limited to receiving his share of the profits, if there were any.

In 1967 the general partners proposed a sale of the sole parcel of real property owned by the partnership and a subsequent winding up of the partnership affairs. Plaintiff disapproved the terms of the proposed sale and dissolution, and some four years later, with the matter still unresolved, he wrote, signed and mailed a form letter to the other limited partners, inviting them to join him in an arbitration proceeding against the general partners.

Shortly thereafter, in June, 1972, the general partners commenced a slander action against plaintiff, seeking damages in the amount of $500,000, in which they alleged that in oral communications with one of the limited partners, plaintiff willfully and maliciously accused the general partners of 'flim flamming, cheating and stealing', of being 'thieves', of 'phoneying and doctoring' the books and records of the partnership and of 'getting away with murder' in connection with their conduct of the partnership business. Plaintiff forwarded the summons and complaint in that action to defendant, with a request that it represent and defend him in the suit, as required by the policy of insurance. By letter dated August 3, 1972, written on behalf of defendant, coverage was disclaimed for the reason that the policy excluded coverage for 'personal injury * * * arising out of * * * any business pursuits.' ¹

Following the disclaimer, plaintiff instituted the present action. The insurer's answer, in addition to asserting the 'business pursuits' exclusion, set forth a further affirmative defense that coverage was barred by an amendatory endorsement to the policy which by its terms excluded coverage for personal injury caused 'intentionally' by the insured.

The applicable policy provisions follow:

'Section 2 * * *

'2.2 * * * (Defendant) will indemnify the Insured * * * for all sums which the Insured shall become legally obligated to pay as damages, because of Personal injury * * * caused by such an occurrence * * *.

'Section 5 * * * When used in this policy or in any endorsement forming a part hereof:

'5.3 'business' includes a trade, profession or occupation;

'5.9 'personal injury' means:

'(c) libel, slander, defamation of character or reputation, invasion of rights of privacy, humiliation or mental anguish; or

'Section 6 * * * This policy does not apply:

'6.6 to Personal injury or Property damage arising out of:

'(a) any Business pursuits * * * of the Insured'.

(ENDORSEMENT)

'1. With respect to Sections 5.9 and 5.10 defining 'personal injury' and 'property damage', such insurance as is afforded by the policy does not apply:

'(b) to any Personal injury or Property damage caused intentionally by or at the direction of the Insured.' (Emphases in original.)

Special Term awarded declaratory relief in favor of defendant, finding that both the 'business pursuits' exclusion (section 6.6 of the policy) and the endorsement language (section 1, subd. (b)) barred policy coverage.

THE LAW

I. The 'Business Pursuits' Exclusion

In my opinion, Special Term went astray on both grounds relied on by it in upholding defendant's affirmative defenses. 'Business' is defined in the policy to include 'a trade, profession or occupation'. It seems clear to me that plaintiff engaged in no 'trade, profession or occupation' in the accepted sense of those terms in making an investment as a limited partner in the Irving Place Realty syndicate. His occupation was that of proprietor of a plumbing supply business. In the absence of a policy definition of the term 'business pursuits', that term should not be construed so broadly as to bring within its ambit financial investments involving no expenditure of time or labor on an insured's part and which imposed on plaintiff no duties or obligations directly connected with the day-to-day conduct of the investment enterprise. To construe 'business pursuits' as Special Term did and as this court is now sanctioning would mean, for example, that a doctor or an engineer or a judge who invested in a limited partnership under an agreement such as the one in this case, which provides 'the limited partners shall take no part in the conduct or control of the partnership business * * * and shall have no right or authority to act for or bind the partnership', was nonetheless engaged in that enterprise as a business pursuit.

The term 'business pursuits' has been defined as encompassing two major elements--continuity, in the sense of Customary engagement or stated Occupation, and profit motive, in the sense of activity providing a means of livelihood or gainful employment (Home Ins. Co. v. Aurigemma, 45 Misc.2d 875, 257 N.Y.S.2d 980; Fadden v. Cambridge Mut. Fire Ins. Co., 51 Misc.2d 858, 274 N.Y.S.2d 235, affd. 27 A.D.2d 487, 280 N.Y.S.2d 209). In another context, it has been declared that the term 'business' need not refer to one's sole occupation and employment (Matter of Steinbeck v. Gerosa, 4 N.Y.2d 302, 308, 175 N.Y.S.2d 1, 5--6, 151 N.E.2d 170, 173) and at least one State includes within the scope of the 'business pursuits' exclusion contained in liability policies every activity in which profit is a motive (Salerno v....