Business pursuits exclusion
A homeowner’s policy did not cover a claim for the wrongful death of a high school girl who was mauled by a tiger. In Safeco v. Hilderbrand, the insureds ran an animal sanctuary for exotic animals no longer wanted by zoos and circuses. While it was a non profit organization, the insureds also created a for profit company, Animal Entertainment Productions (AEP), to generate income to maintain the sanctuary. The insureds kept their jobs as social workers, but got a small business loan for AEP, and AEP earned some money, but was always operated at a loss. The insureds did not have a business policy, but had a homeowners policy with Safeco. When demand was made on the claim, Safeco filed a declaratory judgment action, claiming it had no duty to defend or indemnify its insureds for the claim because of a business pursuits exclusion in the policy. The policy excluded “bodily injury or property damage: . . . arising out of business pursuits of any insured . . . , ” but the exclusion did not apply to: “Activities which are ordinarily incident to nonbusiness pursuits.” After a bench trial on the merits, the trial court found the policy did not cover the claim and the Tenth Circuit affirmed, finding the business pursuits exclusion applied and the exception to the exclusion did not apply.
Under Kansas law, “To constitute a business pursuit, there must be two elements: first, continuity, and secondly, the profit motive.” Both elements were found. The activities of the insureds in operating AEP showed the engagement in a business over time. To show a profit motive, the business must be capable of being run for profit; the evidence showed the insureds operated AEP with a profit motive, even though no profit materialized. It is the profit motive and not any actual profit which the court considers. The court states:
In sum, we conclude the [insureds] operated AEP with both continuity and a profit motive when the incident occurred. At the time of the accident, Doug’s “trade, profession or occupation” was animal trainer for AEP. Therefore, AEP qualifies as a business pursuit and any incidents arising from its operation, including the tiger attack, are not covered by the [insureds’] homeowners policy.
The Tenth Circuit then found the non business pursuits exception did not apply. The accident arose out of the insured’s exotic animal shelter and entertainment business. The victim was a volunteer at the animal shelter and the insured used his business property and his expertise as an animal trainer for the photo shoot. The fact that there was no payment for the photo shoot was not determinative.
