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Vol. 4, Iss. 11
November 11, 2015

One Zany “Business Pursuits” Exclusion Case

 

It is not unusual for cases involving the “business pursuits” exclusion, under a homeowner’s policy, to have interesting facts. Houses are for living. But lots of people also operate businesses out of them. And in this situation things sometimes happen that may not have if the business were being run out of an office of retail store. Insurers do not want to be providing general liability coverage under their (low priced) homeowner’s and personal umbrella policies. So such policies very likely preclude coverage for bodily injury or property damage arising out of an insured’s operation of a business.

While Nationwide Mutual Insurance Company v. Pasiak, No. 36922 (Ct. App. Conn. Nov. 10, 2015) does not involve an unusual use of a home for a business, it still qualifies as a zany “business pursuits” exclusion case.

I’ll borrow liberally from the court’s telling of the facts since I can’t improve on it.

“Sara Socci was an employee of the defendant’s company, Pasiak Construction Services, LLC, and worked out of an office located on the second floor of the defendant’s [Jeffrey Passiak] home. On May 9, 2006, while she was working alone at the office, a masked intruder entered the office carrying a gun and demanded that she open the safe. Unaware that a safe even existed in the home, she could not provide the intruder with the safe’s combination. The intruder led her into a bedroom, where he tied her hands, gagged her and blindfolded her. At one point, he pointed a gun at her head and threatened to kill her family if she did not give him the combination.

[Pasiak] returned home during the incident and was attacked by the intruder. During the ensuing struggle, [Pasiak] pulled off the intruder’s mask, revealing him to be Richard Kotulsky, a friend of [his]. [Pasiak] began talking to Kotulsky and inquired about Sara Socci. Kotulsky led [Pasiak] to the bedroom, where the defendant found Sara Socci on the floor, crying and hysterical. [Pasiak] picked her up and removed her restraints, all the while conversing with Kotulsky. She asked to leave, but [Pasiak] told her to stay and sit down. After further discussions with Kotulsky, the defendant allowed him to leave the house. Sara Socci then told [Pasiak] about the threats that Kotulsky had made to her and her family, but the defendant would not call the police. He told Sara Socci to stay with him and refused to let her call the police or to discuss the incident further. She remained with [Pasiak] for several hours, in fear that, if she left, she or her family might be harmed. Only after [Pasiak] drove Sara Socci to Greenwich to discuss the incident with a mutual friend did he allow her to leave. Eventually, the police were contacted, ultimately leading to Kotulsky’s arrest and subsequent conviction.

Sara Socci developed post-traumatic stress disorder, requiring extensive therapy, and was unable to return to work. In March, 2008, she and her husband, Kraig Socci, filed a civil action against the defendant alleging causes of action for false imprisonment, negligence, intentional, reckless, and negligent infliction of emotional distress, and loss of consortium. On February 23, 2010, a jury returned a general verdict in favor of the Soccis. It awarded Sara Socci compensatory damages of $628,200 and punitive damages of $175,000, and awarded Kraig Socci $32,500 for loss of consortium.”

A coverage case ensued and at issue was the applicability of the business pursuits exclusion in Pasiak’s personal umbrella policy. The trial court concluded that the business pursuits exclusion did not apply. It did so on the basis that Pasiak was attempting to protect his lifelong friend rather than furthering his business pursuits.

The Connecticut appeals court saw it differently. It focused on the term “arising out of” contained in the business pursuits exclusion (“arising out of the business pursuits or business property of the insured”). Determining that such term calls for an expansive standard of causation, the appeals court rejected the trial court’s reliance on Pasiak’s state of mind in the motivation for his actions – keeping his friend out of jail -- and held as follows:

“Applying this broad standard to the facts of the present case, we agree with the plaintiffs that Sara Socci’s injuries arose out of the defendant’s business pursuits. The trial court found, and no party disputes, that at the time that Kotulsky assaulted her, Sara Socci was at the office location [of the defendant’s construction business] performing duties for [the business] .... The defendant arrived thereafter and, after initially struggling with Kotulsky, assisted him in concealing his actions by detaining Sara Socci until she agreed to refrain from contacting the police. Thus, the sine qua non of the defendant’s tortious conduct was Sara Socci’s presence at his business office fulfilling her responsibilities as his employee. See 9A L. Russ & T. Segalla, supra, at 128:17, pp. 128–39 through 128–40 (“liabilities in connection with workplace altercations have been held to necessarily involve the insured’s business pursuits and therefore fall within the business pursuits exclusion”). Stated alternatively, had Sara Socci not been at the office performing her duties as an employee of the defendant’s business, there is no reason to believe that she would have been assaulted by Kotulsky and, consequently, detained by the defendant. Indeed, there was no other reason for Sara Socci’s presence on the premises, and her acquiescence in obeying the defendant’s commands to wait and not leave were, in part, a function of their employer-employee relationship. Accordingly, we conclude that the defendant’s conduct, and Sara Socci’s resulting injuries, were connected with, had their origins in, grew out of, flowed from, or were incident to the defendant’s business pursuits.”

 

 
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