Opinion ID: 2430351
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Heading Rank: 2

Heading: the business pursuits and rental exclusion

Text: Nationwide also contends that the exclusion contained in Section II(1)(b) defeats coverage. This provision excludes personal liability and medical payments for an occurrence arising out of business pursuits of an insured, or the rental or the holding for rental of any part of any premises by an insured. In the policy, business is defined to include trade, profession, or occupation and the exclusion does not apply to activities which are normally considered nonbusiness. At length, the parties debate the holding of this Court in Neal v. Celina Mutual Ins. Co., Ky., 522 S.W.2d 179 (1975), and the decision of the Court of Appeals in Foster v. Allstate Co., Ky.App., 637 S.W.2d 655 (1981). In Neal , the accident occurred on the premises of an automobile service station, clearly business premises. The issue was whether the business pursuits exclusion applied to a nonbusiness incident, the accidental discharge of a firearm, which occurred on business premises. In Foster , the activity engaged in was babysitting, an activity acknowledged to be a business pursuit. As in Neal , the issue was whether the business pursuits exclusion applied when the injury producing activity was not ordinarily incident to operating a business. In each of these cases, the activity engaged in was acknowledged to be a business pursuit and the issue was whether an exception to the exclusion which appeared in the policy applied so as to render coverage available. As the issue here is whether the activity engaged in was a business pursuit within the meaning of the policy, these decisions have little application to the instant case. This Court has not previously construed the phrase business pursuit, the phrase which is controlling and which appears in many insurance policies. Numerous decisions from other jurisdictions, however, have construed this language and, in most cases, required a determination that the activity be for profit and that it be a continuous, customary activity. As to what is an excluded `business pursuit,' the Courts have generally taken the restrictive view that this phrase denotes a continuous or regular activity for the purpose of earning a livelihood, such as a trade, profession, or occupation, or a commercial enterprise. Annot., 48 A.L.R.3d 1096 (1973). In Krings v. Safeco Ins. Co., 2 Kan.App.2d 391, 628 P.2d 1071 (1981), the Court of Appeals of Kansas described business pursuits as follows: To constitute a business pursuit, there must be two elements: first, continuity, and secondly, the profit motive; as to the first, there must be a customary engagement or a stated occupation; and as to the latter, there must be shown to be such activity as a means of livelihood, a gainful employment, means of earning a living, procuring subsistence or profit, commercial transactions or engagements. Id. 628 P.2d at 1074. Likewise, in Randolph v. Ackerson, 108 Mich.App. 746, 310 N.W.2d 865 (1981), a full-time employee in the automotive industry purchased and razed an old barn for the value of the wood. To determine whether this activity amounted to a business pursuit under language similar to the language employed by Nationwide, the Court looked to the insured's customary occupation, whether he had engaged in such ventures in the past, and whether his involvement in the activity was continuous. The Court said: That is indicative of the singular nature of the activity in question. The fact that Defendant's venture required a great amount of effort and a great amount of time is not determinative. Since Defendant's activity was not a `stated occupation' or a `customary engagement,' it was not continuous. Id. 310 N.W.2d at 866. Finally, by defining business to include trade, profession, or occupation, the policy itself prevents an expansive interpretation of the term. From the evidence, it is clear that Lusby was an investor in Wanner's business venture. He had not participated in acquisition of the tires on the property nor had he engaged in negotiating a sale with the Chinese. While Lusby undoubtedly intended to make a profit, his participation was limited to investing money and protecting his investment. Such is woefully insufficient to qualify as a business pursuit as the term was defined in the authorities and the policy. As to its final contention, Nationwide points to the rental property exclusion in the policy and makes an argument that it excludes coverage. This exclusion applies to the rental or holding for rental of any part of any [uninsured] premises. We need not belabor this issue as it is firmly refuted by the facts. Lusby hired Smith to remove the tires from around the building to make the property more presentable for an inspection by a bank officer. Depending upon the outcome of the inspection and the bank's decision as to an additional loan, Lusby intended to renovate the building and then offer it for rental. As the foregoing facts demonstrate, at the time of the injury, the property was not rented nor was it being held for rental. A number of intermediate and uncertain steps were required before rental could even be considered.