The Connecticut Appellate Court recently interpreted a “business pursuits” exclusion in a homeowner’s umbrella liability policy broadly and held that a claim for coverage for tortious conduct related to or connected with one’s business pursuits falls within the exclusion and that a direct proximate causal connection to the business is not required. The Appellate Court reversed a trial judgment that required the personal umbrella liability insurer to indemnify the insured for a $835,000 tort judgment entered against him arising from his unlawful detention of an employee that caused the employee emotional distress. Nationwide Mut. Ins. Co. v. Pasiak, 161 Conn.App. 86 (Nov. 10, 2015). You may read the decision here.
In Pasiak, the insured maintained an office for his construction business at his home where one of his employees worked. The insured was sued by the employee for damages that the employee claimed she sustained as a result of false imprisonment, negligence and infliction of emotional distress arising from an attempted robbery at the home office. While the employee was working in the office, a masked intruder entered the office with a gun and demanded that the employee open a safe in the office. The employee was unable to provide the intruder with the combination to the safe and the intruder tied her up and blind folded her in another room in the residence. The insured returned to the home during the incident and was attacked by the intruder. During a struggle with the intruder, the insured discovered that the intruder was actually the insured’s friend. The intruder informed the insured where the employee was located and after the insured released the employee from her restraints, the insured refused the employee’s request to leave the property and ordered her to stay while he continued discussions with the intruder. The insured then allowed the intruder to leave the house. Sometime later, the insured drove the employee to a friend’s house and the employee was ultimately allowed to leave.
After the employee filed her lawsuit for damages against the insured, the insured tendered the claim to Nationwide under a homeowner liability policy and a personal umbrella liability policy issued to him. It was determined that there was no coverage under the homeowner policy and the Connecticut Appellate Court was asked to determine whether the tort judgment entered against the insured in the employee’s lawsuit was excluded under the umbrella policy's business pursuits exclusion. The policy excluded coverage for “an occurrence arising out of the business pursuits or business property of an insured.” The policy defined the term “business” to include “a trade, profession, occupation, or employment including self-employment, performed on a full-time, part-time or temporary basis.” On appeal, Nationwide argued that the trial court erred in determining the exclusion did not apply by focusing on whether the insured’s tortious conduct was motivated by his business activities rather than whether the tortious conduct was connected to the business activities of the insured. The Appellate Court agreed with the insurance company and ruled that the business pursuits exclusion established an expansive standard of causation between the incident giving rise to a claim for coverage and the insured’s business pursuits. The court ruled that whether a particular incident involves business pursuits depends on whether there is a continuous or regular activity engaged in by the insured for the purpose of earning a profit or livelihood. After concluding that the insured’s construction business satisfied the definition of business pursuits, the court addressed the issue of whether the employee’s injuries for which the insured was found liable arose out of the operation of the business. The court ruled that the phrase “arising out of” establishes an expansive standard of causation and only requires some causal relation or connection to the business activities rather than a direct proximate causal connection. If the insured’s conduct and the resulting injuries “were connected with, had their origins in, grew out of, flowed from, or were incident to the defendant’s business pursuits”, then the business pursuits exclusion applied. Applying this broad standard, the court found that the incident for which Pasiak was found liable fell within the business pursuits exclusion because but for his employee’s presence at the home business office, the employee would not have been assaulted and then detained by the insured.
The Connecticut Appellate Court broadly interpreted the terms in the insurance policy exclusion at issue in Nationwide v. Pasiak, notwithstanding that courts usually strictly construe exclusions to coverage in insurance policies. One possible explanation for the court’s reasoning is that homeowner insurance policies generally exclude coverage for damages arising out of a business engaged in by insureds because people generally separate their business activities from their personal activities. The court therefore determined that business pursuits coverage was not an essential part of the homeowner’s coverage purchased from Nationwide. If the insured wanted liability coverage for tortious conduct arising out of the business operated from his home, presumably he could have purchased business liability coverage. It is not clear from the court’s decision, however, whether the insured had any business liability coverage.