Bowman v. Allstate Insurance Co.
United States Court of Appeals, Second Circuit
238 F.3d 468
February 5, 2001
Summary of Opinion
Plaintiffs Bowman, husband and wife, sued their homeowner’s insurance
company because the company denied its homeowner’s policy covered an injury to
a person who was building a horse barn on the plaintiff’s property. The barn
was to be used in the plaintiff’s horse business when completed. This made the
injury not covered because of the business activities exclusion of the policy.
The trial court accepted that argument and granted summary judgment for the
insurance company.
The Court of Appeals agreed with the trial court that building a barn for use
in a horse business comes within the business activity exclusion of the
homeowner’s policy. The insurance company wins.
Text of Opinion
Plaintiffs-Appellants Edward A. Bowman and Terri L. Bowman (collectively
"Bowmans") appeal from an order of the United States District Court
for the Northern District of New York (Thomas J. McAvoy, then-Chief Judge ),
granting summary judgment for defendant-appellee Allstate Insurance Company
("Allstate") and dismissing their case against Allstate in its
entirety. The District Court held that Allstate did not owe a duty to defend or
indemnify the Bowmans under a homeowner's insurance policy because the injury
giving rise to the Bowmans' claim under the policy arose out of the Bowmans'
business activities.
For the reasons given below, we conclude that the construction of a structure
to be used in an insured's business falls under the "business
activities" exclusion in a homeowner's insurance policy. Accordingly, the
District Court did not err in granting summary judgment in favor of Allstate.
Affirmed.
BACKGROUND
The Bowmans own property in Barton, New York, on which are situated their
home and a separate apartment building. Terri Bowman used part of the property
in conducting her business, Gentle Creek Horse Farm. The business, which
generated income for Terri Bowman, provided horse riding lessons, horse boarding
services, and horse breeding services. The Bowmans' property was covered by a
homeowners' insurance policy issued by Allstate. The policy specifically
excluded coverage for "bodily injury or property damage arising out of the
past or present business activities of an insured person."
In 1995, the Bowmans initiated construction of a horse barn and riding arena
on their property for use in Terri Bowman's Gentle Creek Horse Farm business. In
October 1995, Aaron Brotzman ("Brotzman") was injured while working on
construction of the barn. He subsequently brought a personal injury action
against the Bowmans. The Bowmans gave notice of the claim to Allstate, but
Allstate denied coverage based, among other reasons, on the "business
activities" exclusion contained in the Bowmans' policy. The Bowmans thus
brought this action seeking a judgment declaring that Allstate owes a duty to
defend and indemnify under the policy. Allstate moved for summary judgment. The
District Court granted Allstate's motion on February 24, 2000, holding that
Gentle Creek Horse Farm constitutes a "business" under the policy and
that Brotzman's injury arose out of that business's activities. [FN1] This
timely appeal followed.
FN1. The District Court separately dismissed the Bowmans' complaint
against Bo-Ty, Inc. after the Bowmans failed to respond to Bo-Ty's motion
for summary judgment. Likewise, the court dismissed the Bowmans' complaint
against Brotzman after the Bowmans failed to file a written statement
setting forth good cause why their action against Brotzman should not be
dismissed for failure to effect service of the summons and complaint upon
him. Neither dismissal is before us.
DISCUSSION
"We review a district court's grant of summary judgment de novo,
construing the evidence in the light most favorable to the non-moving party and
drawing all reasonable inferences in its favor." Maguire v. Citicorp Retail
Servs., Inc., 147 F.3d 232, 235 (2d Cir.1998) (citations omitted). "We will
affirm a district court's decision to grant summary judgment if the record
indicates that 'there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.' " Id. (quoting
Fed.R.Civ.P. 56(c)). "Under New York law, an insurance contract is
interpreted to give effect to the intent of the parties as expressed in the
clear language of the contract. [T]he initial interpretation of a contract is a
matter of law for the court to decide." Morgan Stanley Group Inc. v. New
England Ins. Co., 225 F.3d 270, 275 (2d Cir.2000) (internal quotations marks and
citations omitted).
The Bowmans concede that Gentle Creek Horse Farm qualifies as a
"business" under the insurance policy, as it exhibits both
"continuity" and "profit motive." Home Ins. Co. v. Aurigemma,
45 Misc.2d 875, 879, 257 N.Y.S.2d 980, 985 (Sup.Ct.1965). They contend, however,
that Brotzman's injury did not "aris[e] out of" the farm's business
activities, because Brotzman's injury did not result from the services provided
by the business, namely, horse riding lessons, horse boarding, and horse
breeding. Rather, the Bowmans argue, the injury resulted from the construction,
on property covered by their homeowners' policy, of a structure that just
happened to be intended for future use in Terri Bowman's business.
We are not persuaded by the Bowmans' argument. The Bowmans acknowledge that
the barn was ultimately to be used as part of Terri Bowman's business. The fact
that Brotzman's injury did not result directly from the services provided by the
horse farm does not mean that it did not result from the business's activities.
"[A]n insured is engaging in a business pursuit when his activities are
'incidental to his employment.' " Salimbene v. Merchants Mut. Ins. Co., 217
A.D.2d 991, 993, 629 N.Y.S.2d 913, 915 (4th Dep't 1995); see also Velleman v.
Continental Ins. Co., 162 Misc.2d 95, 98, 616 N.Y.S.2d 146, 148 (Sup.Ct.1994)
("The question is not ... why [the injured party] fell, but why he was at
the premises ."). It is clear that but for the business activities of Terri
Bowman, Aaron Brotzman would not have been engaging in the construction work
that led to his injury. See Outwater v. Ballister, 253 A.D.2d 902, 905, 678
N.Y.S.2d 396, 399 (3d Dep't 1998) ("[I]f the injury was caused by an act
that would not have occurred but for the business pursuits of the insured, said
act is beyond the scope of the policy."); Thoele v. Aetna Cas. & Sur.,
39 F.3d 724, 728 (7th Cir.1994) (same); see also 9 LEE R. RUSS, THOMAS F.
SEGALLA, COUCH ON INSURANCE 3D s 128:14 (1997) ("In analyzing whether any
specific activity was business-related, a key question is could the injury have
been sustained even if the business was not involved?"). Allstate
specifically excluded such business activities from the protection it was
providing the Bowmans. Cf. Kennedy v. Lumbermans Mut. Cas. Co., 152 Misc.2d 491,
492, 577 N.Y.S.2d 353, 354 (Sup.Ct.1991) ("[T]he policy is a homeowner's
policy and intends to cover only the home and domestic related activities. This
is not a 'business' policy, and the carrier wishes to make sure that it is not
forced to cover business activities. The policyholder has, of course, not paid
for business coverage."). Accordingly, the business activities exclusion
applies and Allstate owes no duty to defend or indemnify the Bowmans.
CONCLUSION
For the foregoing reasons, we affirm the grant of Allstate's motion for
summary judgment.
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