Home Page The Publication The Editor Contact Information Insurance Key issues Book Subscribe

Vol. 6, Iss. 6
July 12, 2017

Must Read: The Most Ridiculous Argument I’ve Ever Seen Made For Coverage
(Believe Me – It’s Staggering)

I’ve said this before. Part of the business of being a lawyer is having to handle less than ideal cases. All lawyers get bad cases. Counsel must play the hand they are dealt – even a pair of twos -- and their job is to make the most of it. But maybe there’s a limit. I have read umpteen thousands of coverage decisions over my career and have seen a lot of policyholder arguments for coverage that are, well, Hail Mary’s. But the argument put forth for coverage in Allstate Ins. Co. v. Walton, 2004 U.S. Dist. LEXIS 19582 (S.D. Ind. August 10, 2004) is the most ridiculous I’ve ever seen. Sometimes I make up outlandish coverage cases in Coverage Opinions. This one is real. I’m not clever enough to have made this one up.

Allstate v. Walton involved coverage for Kristi Walton, a woman who provided home day care services for children, for financial remuneration, out of her home. A tragedy struck when PT, one of the young children under Ms. Walton’s care, drowned in a swimming pool at her home.

Suit for wrongful death was filed by PT’s parents against Ms. Walton and her husband Richard. Allstate undertook the defense of Mr. and Mrs. Walton, pursuant to a reservation of rights, under a homeowner’s policy. Allstate filed an action seeking a determination that it did not owe coverage to the Waltons on the basis of the following Business Pursuits Exclusion:

“We do not cover bodily injury or property damage arising out of the past or present business activities of an insured person. We do cover the occasional or part-time business activities of an insured person who is a student under 21 years of age.”

“Business” was defined as a) 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 providing of home day care services to other than an insured person or relative of an insured person for economic gain is also a business. However, the mutual exchange of home day care services is not considered a business[.]”

The court had no trouble concluding that Ms. Walton’s “home day care services were an activity engaged in for economic gain and thus satisfy the first part of the Policy’s definition of the term ‘business.’”

However, the court noted the home day care services exception in the exclusion and explained that “[b]y negative implication the provision of home day care services to an insured person or relative of an insured person is not considered a “business.”

So the question became whether PT was a relative of the Waltons. If so, coverage for home day care services would be available. The Policy did not define the term “relative.” Looking to dictionaries for guidance, the court concluded relative means a person connected by blood or marriage.

And the parents of PT argued that PT was, in fact, a “relative” of the Waltons. Get ready. Following the accident, a genealogy search determined that PT and the Waltons shared a common ancestor, namely King Henry II, Plantagenet. He was King of England from 1154–1189. Thus, the Waltons and PT are cousins, albeit separated by 95 degrees of kinship! [By comparison, children and their parents are one degree of kinship.]

Shockingly, the court was not convinced that, based on this super-neat fact, PT was a “relative” of the Waltons, at least for purposes of the Business Pursuits Exclusion:

“The Thompsons contend that the appropriate meaning of ‘relative’ is the common, everyday meaning. However, the court parts with the Thompsons’ view that the common, everyday meaning would include a person connected with another by blood who is separated by 95 degrees of kinship. There must be some limit to the common, everyday meaning of ‘relative.’ Even the most charitably and reasonably broad construction of the word ‘relative’ would not result in coverage under the Policy.”

The court added: “No court interpreting policy language should push the meaning of the language to absurd limits; yet, this is what is required in order to reach the conclusion that the ‘business pursuits’ exclusion is inapplicable in this case. Thus, the court concludes that the common, usual meaning of the term ‘relative’ cannot be stretched as far as would be necessary to bring PT within the meaning of that term as used in the home day care provision of the business pursuits exclusion. Would an ordinary policy holder of average intelligence expect that the Policy’s use of the word ‘relative’ included a person with a common ancestor who is separated by 95 degrees of kinship? The answer surely is ‘no.’”

As I said – I didn’t make this up. Because I couldn’t.

Yes, counsel must play the hand they are dealt. But sometimes you just have to push your cards into the center of the table.


Website by Balderrama Design Copyright Randy Maniloff All Rights Reserved