Fla. Appellate Court Upholds Business Exclusion Written in Policy

April 21, 2005

The Florida Court of Appeals, Second District, on April 20 issued its opinion in First Protective Insurance Co. v. Featherston, upholding the validity of a business exclusion in a homeowners insurance policy.

"This decision recognizes a contract is a contract and that a clearly written exclusion such as the one at issue here clearly precludes coverage" said Robert J. Hurns, legislative database manager and counsel for the Property Casualty Insurers Association of America (PCI), which filed an amicus brief in the case. "The policy clearly stated that coverage was not provided for bodily injury arising out of a business engaged in by the insured. The evidence showed that the insured was providing day care services in exchange for a fee, hence a business was being conducted on the premises."

First Protective insured Mrs. Featherston and her husband under a homeowners policy. The policy contained an exclusion for bodily injury arising out of a "business" engaged in by an insured. The policy also contained an endorsement providing that if an insured regularly provides home day care services to a person and receives compensation for such services, that enterprise is a business.

Hannah Elizabeth Thornhill, the daughter of Donald and Catherine Thornhill, suffered a serious injury while at the Featherstons' home, and eventually died. The Thornhills' filed suit against Mrs. Featherston alleging negligence and wrongful death. First Protective initiated a declaratory action seeking a declaration as to whether its policy provided coverage for this claim.

The trial court held the endorsement constituted a reduction of coverage, and that the phrase 'this endorsement does not constitute a reduction of coverage' conflicted with the remainder of the endorsement; thus rendering the endorsement null and void.

On appeal, the PCI and the Florida Insurance Council filed a joint amicus brief, arguing that the unambiguous wording clearly excluded coverage, and that the court should not rewrite contracts. In reversing the decision of the trial court, the appellate court stated that "coverage is excluded as a matter of law by the business exclusion as modified by the home day care endorsement of the policy."