The Art of Business and Insurance Policy Coverage

'Business' as Usual? 

Shriner v. Amica Mutual Ins. Co., 2017 VT 23

By Thomas M. Kester

“Choose a job you love, and you will never have to work a day in your life.” This sentiment also  applies to part-time jobs—and maybe, by extension, to your insurance policy exclusions.

Plaintiff, a retired physician, is a glassblower who moved his equipment onto his residence, specifically, his garage. Plaintiff blew glass with a friend and the two operated a glassblowing enterprise. Plaintiff identified himself as a “artisan” on his tax forms and filed a Schedule C form for business profits with the Internal Revenue Service, describing his business type as “blown glass manufacturing.”

On January 12, 2012, “The furnace exhaust system in a piece of glassmaking equipment malfunctioned and caused a fire that destroyed the garage and all the property and equipment inside it.” Plaintiff was covered by a homeowner’s policy issued by Defendant. “The policy carried a $25,000 deductible and contained an exclusion from coverage for structures from which a business was conducted.” I smell trouble brewing. Plaintiff claimed $88,354.91 in personal property lost. Defendant accepted Plaintiff’s claim and calculated replacement cots at $42,422.97. After applying the policy’s deductible, Defendant made an advance cash payment of $1,460.53.

Maybe there was a full moon, maybe the magic eight ball said “try again,” or maybe the SCOV Law Editor doesn’t love the International Association of Defense Counsel enough (j/k: he totes adores them) [SCOV Law Editor's Note: Kester played an elaborate joke implying that I'd joined the IADC. That's a story for another day.], but Defendant switched its position and asserted that Plaintiff’s “glassblowing activities constituted a ‘business’ for the purposes of the policy’s exclusion, refused to make any further payments to replace the garage.” As a result, Defendant paid Plaintiff $11,613 for destroyed nonbusiness property in the garage but payment for other property—“business” personal property—was capped at $2,500. The latter calculation spurred the Plaintiff to sue and the trial court granted Defendant’s motion for summary judgment. Plaintiff appeals.

The SCOV first offers up some guiding legal principles with insurance policies:

(1) an insurance policy is a contract; (2) policies may have endorsements and the two will be read together by a court; (3) courts generally resolve policy language ambiguity in the insured’s favor (Plaintiff); and (4) the insurer has the burden to show that the policy excludes the insured’s claim. What is covered by this policy, per SCOV, is “property, on the residence premises, used primarily for business purposes” and recovery is capped at $2,500. What is not covered are: “structures from which business is conducted” and “structures used to store business property.” The SCOV notes that the endorsement replaced the standard definition of “business” with “Business includes trade, profession, or occupation.”

The SCOV tackles three of Plaintiff’s arguments. 

The first is that by deleting the policy’s “business” definition and adding differing “business” definitional language via the endorsement, that created ambiguity. Not so fast, says the SCOV, “It is a basic rule of insurance policy construction that if an endorsement creates or expands an exclusion and the endorsement language is ambiguous, the insurer has carried its burden and the exclusion applies,” and the endorsement language is not ambiguous. Onto the second argument.

Plaintiff asserts that his glassblowing amounted to “a part-time trade, profession, or occupation” and fell outside the endorsement’s definition of “business.” The policy’s standard definition included “part-time” language.

This is a nifty argument, but the SCOV states that “in interpreting the insurance policy at issue here, we cannot . . . compare the language of the endorsement to the language of the standard-form provision unless we conclude the endorsement language is facially ambiguous.” It is like reading text that has been written over whited-out words. The SCOV examines only the endorsement language to answer the question of “whether the word ‘business’ encompasses only full-time business or it also includes part-time business” (side note: footnote #2 raises an interesting point). SCOV states that Plaintiff’s argument (that anything less than full-time is not excluded from coverage) “is not a reasonable interpretation” and looks at various facts showing how this more was more business than artistic hobby.

Plaintiff’s final argument is that “‘[m]aking glass is [his] art’” and “he ‘need[ed] to create some saleable product . . . to offset some of the cost of practicing the art form that [he] love[s].” I can buy this argument. G.K. Chesterton said “art is mankind’s signature,” and who doesn’t want to leave their mark on this dark blue marble we call Earth? Some hobbies are more financially feasible than others. I myself practice law solely to finance my one true love—writing shtick for this blog. 

SCOV says that Plaintiff “conceded that he engaged in glassblowing as a trade, profession, or occupation, and glassblowing generated profits for him . . . . His enterprise need not be exclusive or quotidian to constitute a business.”

According to SCOV, defendant carried their burden and summary judgment in their favor was appropriate.