Case Law Update: Business Pursuits Exclusion

WDC Journal Edition: December 2001
By: Civil Trial Counsel of Wisconsin

Vandenberg v. Continental Insurance Company
244 Wis.2d 802, 628 N.W.2d 876 (2001)
Decided July 3, 2001

Stephanie Riehl was providing paid daycare in her home for three children and simultaneously caring for her own three children. Riehl had a renter's policy with Continental Insurance Company that contained a "business pursuits" exclusion. The Continental policy had an exception to the "business pursuits" exclusion for activities that are "usual to non-business pursuits."

Justin Vandenberg, an eight-month-old infant, was being cared for by Riehl as part of her daycare business. Riehl took Justin upstairs for a nap. While Riehl was downstairs caring for the remaining children, her five-year-old son, Jason, went upstairs to Riehl's bedroom to watch television. Jason placed several pillows over Justin in an attempt to avoid waking him. As a result, Justin suffocated.

The appeal came before the supreme court on certification from the court of appeals. Two issues were addressed:

1. Does a daycare provider's allegedly negligent supervision and control over her own children while providing daycare services for other children fall, as a matter of law, within the "usual to non-business pursuits" exception to the "business pursuits" exclusion in a renter's insurance policy?

2. Are there material issues of fact from which a trier of fact could conclude that the Riehls were entitled to reformation of their renter's insurance policy to include daycare coverage?

With regard to the first issue, the supreme court found that the exception to the "business pursuits" exclusion in this case was ambiguous. Therefore, the supreme court concluded that, "reasonable persons in the position of the plaintiff in the present case could reasonably believe that they had coverage under this exception for the supervision and control of their own child."

The plaintiffs also claimed coverage based on reformation of the insurance policy for the plaintiff's claim that Riehl was negligent in her care for Justin. Riehl had a previous policy with the same agent that provided coverage for the daycare center. They also alleged the agent knew the Riehls still had a daycare business which operated out of their home. The trial court found there was no express request for daycare coverage during the meeting with the agent and therefore the trial court denied the request for reformation and granted the insurance company summary judgment on that issue. The supreme court remanded the case on the reformation issue to determine whether there was a mutual mistake of fact. The supreme court noted that an express request for daycare coverage was not required in the context of insurance contracts when "the insured can demonstrate that there was an understanding regarding the desired coverage based on prior dealings, even in the absence of an express request for coverage."