The business - or to use former terminology, business pursuits - exclusion, is one of the most important and long-standing exclusions to the liability coverages of homeowners policies. Until the recent past, the verbiage of the business definition was very simple and straightforward. If the activity in question had any business or profit motive, then no coverage existed. Things have changed.
The lines between business activities and personal activities have become more complicated. As a result, the definition of business is more complex, as is the business exclusion. The definition of business now reads a trade, profession, or occupation engaged in on full-time, part-time, or occasional basis and any other activity engaged in for money or other compensation except the following:…
There are four categories of exceptions. First, there are activities not falling within the following three categories, for which no insured receives more than US Dollars 2,000 in total compensation for the 12-month period prior to the beginning of the policy.
Second, volunteer activities for which no money is received other than reimbursement of expenses incurred to perform the activity are not deemed to be a business.
Third, providing home day care services for which the insured receives no compensation other than mutual exchange of such services from others is not deemed a business.
Fourth, the definition of business does not include providing home day care services to a relative of an insured.
The business exclusion itself provides that the liability and medical payments coverages do not apply to bodily injury or property damage arising out of or in connection with a business conducted from an insured location or engaged in by an insured. It does not matter whether or not the business is owned or operated by an insured or employs an insured. The business exclusion further states that it includes but is not limited to acts or omissions involving services or duties rendered and promises owed or implied to be provided because of the nature of the business.
The use of the phrases arising out of, or in connection with, in the business exclusion renders it a very broad exclusion. These phrases require only a minimal, incidental relationship between bodily injury and an insured's business activities to render the exclusion applicable. There are some exceptions to the business exclusion. The most common would involve renting part of the residence premises or using portions of it as an office, school, studio, or private garage.
Finally, the business exclusion does not apply to an insured who is under the age of 21 and involved in a part-time or occasional, self-employed business without any employees. For example, your daughter's baby-sitting for pay or your son's mowing lawns, raking leaves, or shoveling snow for pay would not fall into the business exclusion.
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Note: This article was sent to us by: Sandra Darphs at 10062010
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