Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-3_15-cv-00780/USCOURTS-alnd-3_15-cv-00780-0/pdf.json

Parties Involved:
Maple Garner
Defendant
J.F.
Defendant
The Travelers Home and Marine Insurance Company
Plaintiff

Document Text:

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF ALABAMA

NORTHWESTERN DIVISION

THE TRAVELERS HOME AND )

MARINE INSURANCE COMPANY, )

)

Plaintiff )

)

vs. ) Case No. 3:15-cv-00780-HGD

)

MAPLE GARNER, et al., )

)

Defendants )

MEMORANDUM OPINION

This matter is before the undersigned United States Magistrate Judge based on

the consent of the parties pursuant to 28 U.S.C. § 636(c). For consideration is the

Motion for Summary Judgment filed by plaintiff, The Travelers Home and Marine

Insurance Company (Travelers). (Doc. 27). 

Plaintiff initiated this proceeding by filing a Petition for Declaratory Judgment.

(Doc. 1). It seeks a declaration regarding its duty to defend or indemnify Defendant

Maple Garner under a homeowner’s insurance policy. Travelers issued a

homeowner’s insurance policy to defendant Maple Garner bearing policy number

985827312 633 1, for the policy period of November 29, 2013, to November 29, 2014

(the “Homeowners Policy”). 

FILED

 2016 Nov-22 PM 01:37

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 1 of 13
On September 12, 2014, defendantsJ.F. and Brandy Frost filed a lawsuit in the

Circuit Court of Lauderdale County, Alabama, styled J.F., a minor, by and through

her Mother and Next Friend, Brandy Frost v. Maple Garner, Individually and d/b/a

1 Step At A Time Daycare, et al., CV-2014-900413. (See Doc. 1 at Ex. B, Lauderdale

County Complaint). Defendants J.F. and Brandy Frost allege that defendant Garner

operated a daycare center doing business as 1 Step At A Time Daycare in Florence,

Alabama. (Ex. B, ¶ 2). They allege that on September 2, 2014, Garner transported

J.F. by vehicle from the premises of the daycare center to Garner’s private residence

located in Florence, Alabama. (Id., ¶ 7). They further allege that, while unsupervised

at Garner’s residence, J.F. was knocked to the ground and bitten several times by a

73-pound dog that was located at Garner’s residence. (Id., ¶¶ 9-10). 

In their complaint, J.F. and Brandy Frost assert claims against Garner

individually and d/b/a 1 Step At A Time Daycare for negligence, wantonness and

negligence per se. They have demanded the policy limit of $100,000 to resolve the

claims asserted against Garner individually and d/b/a 1Step At A Time Daycare in the

Lauderdale County litigation. (Ex. B). Travelersis presently defending Garner in the

Lauderdale County litigation under the provisions of the Homeowners Policy, but is

doing so pursuant to a reservation of rights.

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Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 2 of 13
In Count I of the Petition, Travelers asserts there is no coverage under

Garner’s homeowners policy because the claims and damages asserted against Garner

are excluded from coverage by the “Business” exclusion to the policy. (Doc. 1,

Petition for Declaratory Judgment). 

In response to the summary judgment motion, Maple Garner and 1 Step At A

Time assert that Travelers is not entitled to summary judgment because the business

exclusion is inapplicable since Garner did not receive $2000 or more in total

compensation in the 12 months prior to the occurrence and because J.F.’sinjuries did

not occur in connection with the business of 1 Step At A Time daycare. (Doc. 32,

Garner’s Opposition to Summary Judgment; Doc. 33, Frost’s Opposition to Summary

Judgment).

SUMMARY JUDGMENT STANDARD

Plaintiff has moved for summary judgment pursuant to Rule 56, Fed.R.Civ.P. 

(Doc. 27, Motion for Summary Judgment). According to the Federal Rules of Civil

Procedure, “[t]he court shall grantsummary judgment if the movant shows that there

is no genuine dispute as to any material fact and the movant is entitled to judgment

as a matter of law.” Fed.R.Civ.P. Rule 56(a). Plaintiff, asthe party seeking summary

judgment, bears the initial responsibility of informing the district court of the basis

for its motion, and identifying those portions of the pleadings, depositions, answers

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Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 3 of 13
to interrogatories, and admissions on file, together with the affidavits, if any, which

it believes demonstrates the absence of a genuine issue of material fact. Clark v.

Coats & Clark, Inc., 929 F.2d 604, 608 (11th Cir. 1991) (quoting Celotex Corp. v.

Catrett, 477 U.S. 317, 323 (1986)). A genuine issue of material fact is shown when

the non-moving party produces evidence so that a reasonable fact-finder could return

a verdict in its favor. Greenberg v. BellSouth Telecomms., Inc., 498 F.3d 1258, 1263

(11th Cir. 2007). If the non-moving party fails to make a sufficient showing on an

essential element of its case with respect to which it has the burden of proof, the

moving party is entitled to summary judgment. Celotex, 477 U.S. at 323. In

reviewing whether the non-moving party has met its burden, the court muststop short

of weighing the evidence and making credibility determinations of the truth of the

matter; the evidence of the non-movant isto be believed, and all justifiable inferences

are to be drawn in itsfavor. Tipton v. Bergrohr GMBH-Siegen, 965 F.2d 994, 998-99

(11th Cir. 1992) (internal citations and quotations omitted). However, speculation

or conjecture cannot create a genuine issue of material fact. Cordoba v. Dillard’s,

Inc., 419 F.3d 1169, 1181 (11th Cir. 2005). A “mere scintilla of evidence” in support

of the non-moving party also cannot overcome a motion for summary judgment. 

Young v. City of Palm Bay, 358 F.3d 859, 860 (11th Cir. 2004). 

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Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 4 of 13
DISCUSSION

The pertinent parts of Garner’s Homeowners Policy are as follows:

SECTION II - LIABILITY COVERAGES

COVERAGE E - PERSONAL LIABILITY

If a claim is made or a suit is brought against an “insured” for damages

because of “bodily injury” . . . caused by an “occurrence” to which this

coverage applies, we will:

1. Pay up to our limit of liability for the damagesfor which an

“insured” is legally liable. . . .

2. Provide a defense at our expense by counsel of our choice,

even if the suit is groundless, false or fraudulent. We may

investigate and settle any claim or suit that we decide is

appropriate. Our duty to settle or defend ends when our

limit of liability for the”occurrence” is exhausted by the

payment of a judgment or settlement.

. . .

SECTION II - EXCLUSIONS

A. Coverage E - Personal Liability and Coverage F - Medical

Payments to Others.

Coverages E and F do not apply to “bodily injury” or “property

damage”:

. . . 

2. Arising out of or in connection with a “business”

conducted from an “insured location” or engaged in by an

“insured”, whether or not the “business” is owned or

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Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 5 of 13
operated by the “insured” or employs an “insured.” This

exclusion A.2. applies to, but is not limited to, an act or

omission, regardless of its nature or circumstance,

involving a service or duty rendered, promised, owed, or

implied to be provided because of the nature of the

“business.” 

This exclusion A.2. does not apply to:

. . .

c. One or more activities, for which no “insured”

receives more than $2000 in total

compensation for the consecutive 12 months

before an “occurrence” . . . 

(Doc. 29-13, Plaintiff’s Ex. J, at TRAV_0305, TRAV_0307). 

The Travelers policy defines “Business” as follows:

a. A trade, profession or occupation engaged in on a fulltime, part-time or occasional basis; or

b. Any other activity engaged in for money or other

compensation, except the following:

(1) Volunteer activitiesfor which no

money is received other than

payment for expenses incurred

to perform the activity;

(2) Providing home day care

services for which no

compensation is received, other

than the mutual exchange of

such services; or

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Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 6 of 13
(3) Providing home day care

services to a relative of an

“insured.”

(Id. at TRAV_0289).

Thus, according to the policy, there is no coverage where the damages arise out

of or in connection with a “business” conducted from an “insured location” or

engaged in by an “insured,” whether or not the “business” is owned or operated by

the “insured” or employs an “insured,” unless the “insured” received no more than

$2000 in total compensation from the “business” for the consecutive 12 months

before an “occurrence.” 

It is undisputed that Garner has been licensed by the Alabama Department of

Human Resources (DHR) to operate a child care facility and has operated 1 Step At

A Time daycare for in excess of 15 years. (Doc. 29-5, Plaintiff’s Ex. E, Garner

Depo., at 12). She operated this daycare as a sole proprietorship. (Id. at 19). During

that time, Garner has maintained her license with DHR and had a number of children

under her care, including J.F. and her brother, D.F. During J.F.’s enrollment at

Garner’s daycare facility, Frost paid for J.F.’s care either directly or with the

assistance of the State of Alabama through a stipend. (Doc. 29-16, Plaintiff’s Ex. L). 

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Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 7 of 13
Thus, it is clear that Garner operated 1 Step At A Time (1 Step) as a “business”

as that term is defined under the policy. If the activity that resulted in the injury to

J.F. either arose out of or was in connection with this business, coverage is excluded. 

The undisputed facts reflect that J.F. had been enrolled as a day care student

at 1 Step from February 11, 2013, until withdrawn on September 13, 2014, after the

occurrence that resulted in J.F.’s injury on September 2, 2014. (Plaintiff’s Ex. L).

Garner admitted that, but for J.F.’s enrollment at 1 Step,J.F. would not have been on

a field trip with her on September 2, 2014. (Plaintiff’s Ex. A, Garner Depo., at 137-

38).

Frost brought her daughter, J.F., to 1 Step and signed her in for child care

services on the morning of September 2, 2014. Frost also electronically recorded

J.F.’s attendance at 1 Step on that day through the use of an electronic attendance

system maintained by the State. (Plaintiff’s Ex. B). 

When Frost arrived with J.F., Garner represented to Frost that she would be

conducting a field trip to the library and asked Frost for permission to allow J.F. to

go. (Plaintiff’s Ex. D, Brandy Frost Depo., at 24). Frost verbally granted permission. 

(Id.). Garner left 1 Step in the daycare van at approximately 9:30 a.m. (Plaintiff’s

Ex. A, Garner Depo., at 69). After leaving 1 Step, Garner went to her home intending

to pick up some math papers for children at 1 Step before proceeding to the library. 

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Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 8 of 13
(Plaintiff’s Ex. E, Garner Depo., at 41; Plaintiff’s Ex. A, Garner Depo., at 83-84). It

was while Garner and J.F. were at Garner’s residence that J.F. was attacked and

injured by the dog, which belonged to Garner’s daughter.

In casesinvolving insurance coverage regarding the use of a motor vehicle, the

phrase “‘arising out of’ are words of much broader significance than ‘caused by,’

They are ordinarily understood to mean ‘originating from,’ ‘having its origin in,’

‘growing out of’ or ‘flowing from,’ or, in short, ‘incident to, or having connection

with,’ the use of the car.” Red Ball Motor Freight v. Employers Mut. Liab. Ins. Co.,

189 F.2d 374, 378 (5th Cir. 1951).1

According to the Eleventh Circuit, 

Courts have consistently held that but-for causation is enough to

constitute “arising out of.” In the course of interpreting Alabama law,

the court in Davis Constructors & Eng’rs, Inc. v. Hartford Acc. &

Indem. Co., 308 F.Supp. 792 (M.D.Ala. 1968) construed similar

language to include an accident where the indemnitee’s negligence was

the sole cause. Id. at 795. Courts generally interpret “arising out of” in

this broad sense. See Mid-Continent Cas. Co. v. Swift Energy Co., 206

F.3d 487, 498 (5th Cir. 2000) (collecting cases).

Twin City Fire Ins. Co., Inc. v. Ohio Cas. Ins. Co., Inc., 480 F.3d 1254, 1264 (11th

Cir. 2007).

1

In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh

Circuit adopted as binding precedent all of the decisions of the former Fifth Circuit handed down

prior to the close of business on September 30, 1981. 

Page 9 of 13

Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 9 of 13
It is clear that “but-for” J.F.’s enrollment and attendance at 1 Step At A Time

daycare on the date of the incident, she would not have been with Garner at the

location where the attack occurred. It is clear that the incident “arose out of,” that is,

it “flowed from,” “was incident to,” or “had connection with” the business of 1 Step

daycare.2

Garner was in the business of providing daycare for compensation. J.F. was

one of the children to whom she provided this service. On the day of the incident,

J.F. wassigned into the daycare and left with Garner for the alleged purpose of going

on a field trip to the library. While on the way to the library, Garner stopped at her

residence to pick up math papers for children at the daycare, which is also an action

related to the business. 

Defendant Frost argues that, when Garner arrived at her home, she was no

longer engaged in work activities, stating further that “at the exact moment of the

occurrence, when she completely abandoned J.F. on her front steps to gain entry to

her home, Garner was not engaged in any child care related activity.” (Doc. 33, Brief

2 Plaintiff asserts that the term “in connection with” expands the excluded coverage even

further than that excluded by damages “arising out of” the operation of the business. (Doc. 35,

Plaintiff’s Reply at 14). While plaintiff cites several cases from other states to support this

argument, in this case it is a distinction without a difference. J.F.’s injuries clearly arose out of her

entrustment into Garner’s daycare business. It appears that the injuries also occurred “in connection

with” the operation of that business. However, in this case, they are one and the same thing.

Page 10 of 13

Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 10 of 13
of B. Frost, at 11). However, this is the very nature of the cause of action. That is,

it is alleged that Garner failed to supervise J.F. and, as a result, she was injured. The

failure to supervise implies a duty to supervise and that duty, at least in part, arose

from her assumption of that duty as a provider of daycare servicesfor J.F. In fact, the

exclusion states, in part, that it applies to an act or omission “involving a service or

duty rendered, promised, owed, or implied to be provided because of the nature of the

‘business.’” Thus, even assuming Garner took J.F. to her residence without

permission and in violation of regulations relating to the operation of a daycare

business, it does not change the fact that she had a duty, based on the nature of her

business, to properly supervise J.F. Thus, the injury to J.F. arose from or was in

connection with the operation of 1Step, and the resulting damages are excluded from

coverage under the policy.

Defendants also argue that an exception contained in the business exclusion

applies because Garner never realized any profit or received a salary from her

business in the 12 months preceding the loss. 

Exception A.2.c. to the business exclusion preserves coverage for “[o]ne or

more activities, for which no ‘insured’ receives more than $2000 in total

compensation for the consecutive 12 months before an ‘occurrence.’” (Plaintiff’s Ex.

J at TRAV_0305-TRAV_0307). 

Page 11 of 13

Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 11 of 13
Defendant operated 1Step as a sole proprietorship business. “Alabama law

makes no distinction between an individual and a sole proprietorship operated by an

individual. They are considered the same for legal purposes.” Carolina Cas. Ins.Co.

v. Williams, 945 So.2d 1030, 1035 (Ala. 2006) (citing Clardy v. Sanders, 551 So.2d

1057, 1059-60 (Ala. 1989) (recognizing that an individual who operates a sole

proprietorship is not a separate legal entity from the sole proprietorship)). 

Furthermore, Garner’s tax returns reflect that the entirety of 1 Step’s income and

losses are exclusively attributable to her. Income is taxed to the person who earns it. 

Commissioner v. Culbertson, 337 U.S. 733, 739-40, 69 S.Ct. 1210, 1212-13, 93 L.Ed.

1659 (1949). 

Defendants argue that, because Travelers denied coverage to 1 Step on the

ground that it was not an insured under Garner’s homeowners policy, Travelers

cannot now argue that the two are the same. However, this is simply not the case. 

Whether Garner and 1 Step are one and the same for tax purposes has nothing to do

with a determination of whether Garner’s sole proprietorship is covered by her

homeowners policy. It is not. However, even if 1 Step were an insured under the

Travelers policy, there would still be no coverage of this incident due to the business

exception. In either case, the income received by 1 Step is attributable to Garner. 1

Step’s gross receiptsin the twelve months preceding the incident were well in excess

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Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 12 of 13
of the $2000 threshold. The “total compensation” received by Garner and 1 Step may

have been offset by operating losses for tax purposes, but the fact that she did not

make a profit does not negate the fact that she received “total compensation” for her

daycare services in an amount in excess of $2000. Therefore, the exception to the

exclusion is inapplicable. 

CONCLUSION

Based on the evidence presented and the arguments of the parties, the Court

finds that no genuine issue of material fact exists and that Travelers is entitled to

judgment as a matter of law. Therefore, plaintiff’s motion for summary judgment is

due to be granted. Furthermore, the Court findsthat Travelers owes no duty to defend

Garner under the policy, and no coverage exists for the claims and damages of

Brandy Frost and J.F. A separate order will be entered accordingly.

DONE this 22nd day of November, 2016.

 

HARWELL G. DAVIS, III

UNITED STATES MAGISTRATE JUDGE

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Case 3:15-cv-00780-HGD Document 36 Filed 11/22/16 Page 13 of 13