APPEAL FROM THE CIRCUIT COURT OF THE SECOND JUDICIAL CIRCUIT MINNEHAHA COUNTY, SOUTH DAKOTA HONORABLE STUART L. TIEDE Judge
The opinion of the court was delivered by: Konenkamp, Justice
CONSIDERED ON BRIEFS ON OCTOBER 4, 2010
[¶1.] A parent whose child was injured while in the care of a babysitter brought suit to recover damages. In a declaratory judgment action, the insurance company successfully argued that its policy did not cover injuries sustained in a daycare-type business. We conclude that the circuit court correctly ruled that the policy was unambiguous and the business exclusion applied.
[¶2.] On January 11, 2001, Joe Decker left his eight-month-old child, L.E.D., with Sarah Decker. Sarah placed L.E.D. in his car seat thinking he would go to sleep. Moments later she heard him make an odd noise. She took him out of the car seat; he had stopped breathing; he was choking on a small object. Sarah called for help, but ultimately the child suffered permanent brain damage.
[¶3.] At the time, Sarah was living with Benjamin Waldner, her brother. Benjamin owned the home. It was insured by Western National Mutual Insurance Company. Benjamin allowed Sarah to live there rent free. She cleaned and cared for the home while Benjamin, a trucker, was gone. Sarah's fiancee, Mark Decker, lived there also, along with others who rented rooms from Benjamin. Mark Decker is Joe Decker's cousin. Benjamin, Sarah, Mark, and Joe all came from the same Hutterite colony.
[¶4.] Sarah cared for several children in Benjamin's home. She did not have a name for her babysitting service or a written agreement with the parents about when and how she would be paid. In the year 2000, she provided care for nine children from six families. Sarah kept no records and filed no income tax returns.
She recalled that she charged some parents $1.50 per hour. The hours Sarah cared for the children varied, but she provided care five days a week, generally from nine to five.
[¶5.] In March 2000, Joe Decker and his wife Valerie began using Sarah to care for their older child, B.D. L.E.D. was born on May 23, 2000. Sarah started caring for him, according to Valerie, in August 2000. Sarah testified that when Joe dropped off and picked up the children, she did not charge him, in honor of the relationship between her fiancee, Mark, and his cousin, Joe. When Valerie picked the boys up, however, Valerie would pay her and Sarah accepted the payments. Valerie did not document these payments, but claimed $1,684 in child care credits on their 2000 federal income tax return for amounts paid to Sarah. It is undisputed that on the day of L.E.D.'s injury, Joe dropped off L.E.D. and Sarah did not charge him for her services.
[¶6.] A lawsuit on behalf of L.E.D. was brought against Sarah Decker and Benjamin Waldner for negligence. Western National sought a declaratory judgment that it had no duty to defend the action against Sarah or Benjamin or indemnify them because the policy unambiguously excluded coverage for L.E.D.'s injury. Both sides moved for summary judgment.
[¶7.] Western National argued that when the accident occurred, Sarah was operating a business, and the injury was sustained as a result of her business activities, which were not covered under the express terms of the policy. Valerie, on the other hand, asserted that Western National's policy is ambiguous on the facts of the case, and the ambiguity should be construed against Western National and in favor of coverage.
[¶8.] The policy defines "Business" as "a trade, a profession, or an occupation including farming, all whether full or part time. . . . 'Business' includes services regularly provided by an 'insured' for the care of others and for which an 'insured' is compensated. A mutual exchange of like services is not considered compensation." The policy further states that "'[b]usiness' does not include: . . . b. activities that are related to 'business,' but are usually not viewed as 'business' in nature." Under the section entitled "EXCLUSIONS THAT APPLY TO LIABILITY COVERAGES," the policy provides, "'We' do not pay for 'bodily injury' or 'property damage' resulting from one or more of the following excluded 'occurrences,' . . . g. 'bodily injury' or 'property damage' resulting from activities related to the 'business' of an 'insured,' except as provided by Incidental Business Coverage." No incidental business coverage existed in this case.
[¶9.] Finding the policy language unambiguous, the circuit court ruled that Sarah regularly provided care for others for which she was compensated. In the court's view, it was immaterial that Sarah did not charge Joe and Valerie Decker each time she cared for their children: she cared for children on a daily basis and was "compensated" as part of her business pursuit. The court ruled inapplicable the exception to the exclusion, which provided that "business" does not include "activities that are related to 'business,' but are usually not viewed as 'business' in nature." In the court's view, L.E.D. was injured as a result of the care provided through Sarah's operation of her business. Because Sarah was ...