ECONOMY PREMIER ASSURANCE COMPANY V. MITCHELL | HOMEOWNERS INSURANCE -- BUSINESS EXCLUSION

In Economy Premier Assurance Company V. Mitchell, decided in the Western District Of North Carolina on May 29, 2013, the court addressed an exclusion for the insured's "business."

The insured had a homeowners policy. While she was watching (babysitting) a child, the child became injured. A claim was made against her, and the issue was whether the liability portion of the HO policy provided coverage.

The insured watched the child during the week, and was paid $150 per week. She testified that she watched the child not just for compensation, but also out of altruism and due to friendship with the parents. The policy excludes liability "bodily injury . . . arising out (1) of the rendering of or failure to render professional services (the "professional services exception"); and (2) arising out of or in connection with a "business" engaged in by an "insured" (the "business exception")." A business "includes any full or part time activity of any kind engaged in for economic gain, including the use of any part of any premises for such purposes." The policy also had an exclusion for operating a "home day care business."

The court ruled that the exclusion applied, stating, "Whatever may have been her personal motivations for agreeing to care for young Jackson, the undisputed facts of the case indicate the formation of a contract, complete with an offer and acceptance to offer child care services in return for a fixed, weekly rate of $150. Under North Carolina Contract Law courts are to examine the terms of a contract for indications of the parties' intent."

The court also addressed an umbrella policy, which had an exclusion for liability in connection "with the business, profession or occupation of anyone insured by this endorsement." "It is also undisputed that the $150 per week that Ms. Mitchell was paid was her only compensation during the relevant time period."

John Kirby has handled numerous insurance disputes in North Carolina, includig disputes involving "business" exclusions and limitations.