Smith v. Allstate Ins. Co.

• Decision Date: 19 April 1991
• Docket Number: No. 901129,901129
• Citation: 241 Va. 477,403 S.E.2d 696
• Parties: Ashlie Lauren SMITH, et al. v. ALLSTATE INSURANCE COMPANY. Record
• Court: Virginia Supreme Court

Page 696

403 S.E.2d 696

241 Va. 477

Ashlie Lauren SMITH, et al. v. ALLSTATE INSURANCE COMPANY.

Record No. 901129.

Supreme Court of Virginia.

April 19, 1991.

Charles B. Molster, III (Keck, Mahin & Cate, on brief), Washington, D.C., for appellants.

R. Craig Jennings (Slenker, Brandt, Jennings & Johnston, on brief), Merrifield, for appellee.

Present: All the Justices.

RUSSELL, Justice.

This declaratory judgment proceeding seeks a determination whether an exclusionary provision in an insurance policy bars coverage for a child's injuries sustained during the insured's business of baby-sitting. We find the exclusionary clause ambiguous and therefore insufficient to bar coverage.

The facts are undisputed. Inder Sharma (the insured) operates a day-care business in her home in Prince William County. She is licensed by the County to operate her business, although state law does not require such licensure. The insured's compensation is based upon the hours devoted to caring for each child, and she is reimbursed for the cost of preparing and serving food to the children in her care. She has a zoning permit to provide day-care services in her home, and these business activities are reflected on her tax returns.

On July 5, 1988, the insured was caring for Ashlie Smith, two years of age. While the insured was preparing lunch for Ashlie, the insured's own family, and some friends, Ashlie entered the kitchen unnoticed and stood near the open door of the oven. Ashlie's dress caught fire and she was severely burned.

On the date of the accident, the insured was covered by a "Deluxe Plus Homeowners Policy" written by Allstate Insurance Company (the insurer). Section II, paragraph 8 of the policy reads as follows:

8. We do not cover bodily injury or property damage arising out of the past or present business pursuits of an insured person.

We do cover:

a) activities normally considered non-business;

b) the occasional or part-time business activities of an insured person who is a student under 21 years of age c) the incidental business activities of any insured person for babysitting, caddying, lawn care, newspaper delivery, and other similar activities.

Contending that the foregoing language excluded coverage of Ashlie's injuries, the insurer brought this declaratory judgment proceeding in the trial court against Ashlie, her mother, the insured, and the insured's husband, seeking a determination that it had no duty to defend or indemnify the insured against Ashlie's claim. At a bench trial on April 17, 1990, the court ruled that coverage was excluded by paragraph 8. A final order incorporating that ruling was entered on May 17, 1990. We granted Ashlie and her mother an appeal.

It is undisputed that the insured's day-care activities were "business pursuits" within the meaning of paragraph 8, quoted above. Therefore, the first sentence of the paragraph would exclude coverage for the accident in question unless the exclusionary effect of that sentence is vitiated by one of the three subparagraphs which follow. Subparagraph (a), which extends coverage to "activities normally considered non-business" has been a fruitful source of litigation elsewhere, but for the purposes of this case, we will assume, without deciding, that it does not afford coverage. Subparagraph (b) is inapplicable because the insured was not a "student under 21 years of age." Accordingly, we focus upon subparagraph (c).

On the facts of this case, the language of subparagraph (c) would afford coverage if it lacked the word "incidental," because the policy would read, in pertinent part: "We do cover the business activities of any insured person for babysitting." The sole question for determination, therefore, is whether that result is altered when the language reads, as it does: "We do cover the incidental business activities of any insured person for babysitting." (Emphasis added.)

The insured argues that the preparation of lunch is incidental to her business activity of baby-sitting, and that the policy language clearly affords coverage for that reason. The insurer argues that the language clearly excludes coverage because day care was the insured's principal occupation, and baby-sitting was therefore not an "incidental business activity."

In addition to their dispute as to the modifying effect of the adjective, the parties also dispute its meaning. The insured relies on a dictionary definition of "incidental," i.e., "subordinate, nonessential, or attendant in position or significance." Webster's Third New International Dictionary 1142 (3d ed. 1976). The insurer, in oral argument, contended that "incidental business activities" could not include the insured's day-care business because baby-sitting constituted her full-time occupation. That argument equates "incidental" with ...