Opinion
No. 1:03-cv-00188-JDT-WTL.
August 10, 2004
ENTRY ON ALLSTATE'S MOTION FOR SUMMARY JUDGMENT
This Entry is a matter of public record and is being made available to the public on the court's web site, but it is not intended for commercial publication either electronically or in paper form. Although the ruling or rulings in this Entry will govern the case presently before this court, this court does not consider the discussion in this Entry to be sufficiently novel or instructive to justify commercial publication or the subsequent citation of it in other proceedings.
A young child drowned in a swimming pool at a residence while under the care of Defendant Kristi S. Walton. Plaintiff Allstate Insurance Company ("Allstate") provided a homeowners insurance policy for Ms. Walton. Allstate seeks a declaratory judgment that it has no duty under its homeowners policy to defend or indemnify Ms. Walton and Defendant Richard A. Walton against a lawsuit arising from the drowning. Allstate moved for summary judgment against Ms. Walton as well as James Thompson and Qua Thompson, the parents of the child who drowned.
Allstate moved for summary judgment as against Ms. Walton and the Thompsons. Only the Thompsons responded to the motion.
Allstate was unable to obtain service on Defendant Richard A. Walton, and the time for effecting service has passed. See Fed.R.Civ.P. 4(m).
Allstate, Kristi Walton, and the Thompsons have stipulated and agreed to the following facts for purposes of summary judgment.
Plaintiff, Allstate, is an Illinois insurance company with its principal place of business in Northbrook, Illinois. At all material times, Allstate was duly authorized to transact the business of insurance within the State of Indiana, including Hancock County. Defendants, Kristi S. Walton, Richard A. Walton, James Thompson and Qua Thompson are citizens of the State of Indiana. Ms. Walton resides in Hancock County, Indiana. Allstate delivered the insurance policy at issue to the named insured, Ms. Walton, in Hancock County, Indiana. The incident giving rise to this action involves conduct which took place in Hancock County, Indiana. The matter in controversy, exclusive of interest and costs, exceeds the sum of $75,000. Thus, this court has subject matter jurisdiction pursuant to 28 U.S.C. § 1332(a).
In 1998, Ms. Walton began providing home day care services for financial remuneration out of her home in Fortville, Indiana (the "Home"). From 1998 through July 28, 2000, the money she earned from her home day care business was her sole source of earning a livelihood.
On July 28, 2000, Ms. Walton was providing home day care services at her Home for the following minor children: PT, RT, TJ, TS, DN, CW and AS. Ms. Walton was also watching her own child, NW. She had been providing home day care to PT and her sister, RT, since the beginning of July 2000. Ms. Walton watched PT and RT two or three days per week and charged $96.00 for their care. Ms. Walton provided home day care to the other children five days per week and charged for their care as well.
On July 28, 2000, PT drowned in a swimming pool at the Home while under the home day care of Ms. Walton (the "Accident"). Distraught over the Accident, Ms. Walton did not charge any money for providing day care to PT, RT, TJ, TS, DN, CW and AS during the week of July 24, 2000. Had the Accident not occurred, she would have charged her standard rates for providing day care to the children during that week.
At the time of the Accident, neither Ms. Walton nor Mr. Walton was related by blood, marriage or adoption to TJ, TS, DN, CW or AS. At the time of the Accident, Ms. Walton believed that she was unrelated by blood, marriage or adoption to PT and RT; she also believed that Mr. Walton was unrelated by blood, marriage or adoption to PT and RT. At the time of the Accident, the Thompsons believed that Ms. Walton was not related by blood, marriage or adoption to PT and RT and that Mr. Walton was not related by blood, marriage or adoption to PT and RT. Following the Accident, a genealogy search conducted by the Thompsons confirmed that Ms. Walton, Mr. Walton, PT and RT shared a common ancestor, namely King Henry II, Plantagenet. Ms. Walton, Mr. Walton, PT and RT are cousins separated by 95 degrees of kinship.
Also at the time of the Accident, Allstate had in full force and effect its Deluxe Plus Homeowners Policy No. 062837182, issued to Richard A. and Kristi S. Walton as the Named Insureds, with effective dates of coverage of July 12, 2000 to July 12, 2001 (the "Policy"). The Policy was written on the Home. A true and correct copy of the Policy is attached as Exhibit "A" to the Complaint for Declaratory Judgment that Allstate filed in this action.
The Policy includes, subject to its terms and conditions, personal liability coverage with stated limits of liability of $100,000 per occurrence, under the following insuring agreement:
Subject to the terms, conditions and limitations of this policy, Allstate will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an occurrence to which this policy applies, and covered by this part of the policy.
We may investigate or settle any claim or suit for covered damages against an insured person. If an insured person is sued for these damages, we will provide a defense with counsel of our choice, even if the allegations are groundless, false or fraudulent. We are not obligated to pay any claim or judgment after we have exhausted our limit of liability.
The Policy's liability coverage contains the following "business pursuits" exclusion:
We do not cover bodily injury or property damage arising out of the past or present business activities of an insured person.
We do cover the occasional or part-time business activities of an insured person who is a student under 21 years of age.
The Policy's liability coverage defines the term "business" in relevant part as follows:
" Business" — means:
a) any full or part-time activity of any kind engaged in for economic gain including the use of any part of any premises for such purposes. The providing of home day care services to other than an insured person or relative of an insured person for economic gain is also a business. However, the mutual exchange of home day care services is not considered a business[.]
The Policy's liability coverage does not define the term "relative".
On April 16, 2002, the Thompsons filed their Complaint for Wrongful Death against the Waltons in the legal proceeding titled, James Thompson and Qua Thompson, Plaintiffs vs. Kristi S. Walton and Richard Walton, Defendants, which is currently pending in the Circuit Court of Hancock County, Indiana as Cause No. 30C01-0204-CT-224 (the "Lawsuit"). A certified copy of the Complaint for Wrongful Death filed in the Lawsuit is attached as Exhibit B to Allstate's Complaint for Declaratory Judgment filed in this action. Allstate currently is defending the Waltons against the Lawsuit pursuant to a full and complete reservation of rights under the Policy.
On February 7, 2003, Allstate filed its Complaint for Declaratory Judgment, commencing this action.
II. MOTION TO DISMISS
Allstate moves for summary judgment against Ms. Walton and the Thompsons; Allstate does not seek summary judgment against Mr. Walton as he has not been served with process. Allstate contends that the Lawsuit is subject to the "business pursuits" exclusion in the Policy and, therefore, it has no duty to defend and indemnify Ms. Walton against the Lawsuit. The Thompsons oppose the motion. They contend that the "business pursuits" exclusion is inapplicable because PT and RT are relatives of Kristi and Richard Walton. Ms. Walton did not respond to the motion.
Summary judgment may be granted only if Allstate is entitled to prevail as a matter of law on the basis of the stipulated facts. Broadcast Music, Inc. v. Claire's Boutiques, Inc., 949 F.2d 1482, 1486 (7th Cir. 1991). Any necessary inferences from the facts must be drawn in favor of the nonmoving parties. Id.
Because this court is sitting in diversity, it is to apply Indiana law as it believes the Supreme Court of Indiana would. See, e.g., Liberty Mut. Fire Ins. Co. v. Statewide Ins. Co., 352 F.3d 1098, 1100 (7th Cir. 2003); State Farm Mut. Auto. Ins. Co. v. Pate, 275 F.3d 666, 669 (7th Cir. 2001). In predicting how the Indiana Supreme Court would rule, the decisions of the Indiana appellate courts are entitled to great weight, "'unless there are persuasive indications that the state's highest court would decide the case differently.'" Liberty Mut. Fire Ins., 352 F.3d at 1100 (quoting Pate, 275 F.3d at 669). However, neither the Indiana Supreme Court nor the lower appellate courts have construed the term "relative" as used in a business pursuits exclusion like that in the Policy. In the absence of guidance from the Indiana courts, this court may look to other jurisdictions in attempting to predict how the Indiana Supreme Court would rule. See King v. Damiron Corp., 113 F.3d 93, 95 (7th Cir. 1997).
The court also finds guidance in principles of contract interpretation. Under Indiana law, "[c]ontracts of insurance are governed by the same rules of construction as other contracts. The proper interpretation of an insurance policy, even if it is ambiguous, generally presents a question of law that is appropriate for summary judgment." Bosecker v. Westfield Ins. Co., 724 N.E.2d 241, 243 (Ind. 2000) (citations omitted). The goal, when interpreting an insurance contract, is to honor the intent of the parties as manifested in the contractual language. State Farm Mut. Auto. Ins. Co. v. Spotten, 610 N.E.2d 299, 300 (Ind.Ct.App. 1993) (citations omitted). "If insurance policy language is clear and unambiguous, it should be given its plain and ordinary meaning." Tate v. Secura Ins., 587 N.E.2d 665, 668 (1992) (internal citations omitted).
Ambiguous provisions generally are construed in favor of the insured. Meridian Mut. Ins. Co. v. Auto-Owners Ins. Co., 698 N.E.2d 770, 773 (Ind. 1998). However, "[w]hen . . . the injured party is not the named insured, the policy is construed from a neutral stance." Indiana Lumbermens Mut. Ins. Co. v. Statesman Ins. Co., 291 N.E.2d 897, 899 (Ind. 1973) ("The party claiming to be an insured in this case never paid a penny's premium to the insurer. We are therefore not in a situation where we must construe the contract language any certain way and can seek out the general intent of the contract from a neutral stance."); see also Burkett v. Am. Family Ins. Group, 737 N.E.2d 447, 452 (Ind.Ct.App. 2000). "An ambiguity exists where a provision is susceptible to more than one interpretation and reasonable persons would differ as to its meaning." Bosecker, 724 N.E.2d at 244 (citations omitted). A policy's terms "'are interpreted from the perspective of an ordinary policyholder of average intelligence[.]'" Burkett, 737 N.E.2d at 452 (quoting Gallant Ins. Co. v. Amaizo Fed. Credit Union, 726 N.E.2d 860, 864 (Ind.Ct.App. 2000)).
The issue presented is whether Allstate has no duty to defend and indemnify Ms. Walton against the Lawsuit because of the Policy's "business pursuits" exclusion. It is undisputed that from 1998 through July 2000, Ms. Walton provided home day care services to several children, she charged for these services, and the income obtained from these services was her sole source of earning a livelihood. It is also undisputed that but for the Accident, she would have charged for the day care services she was providing to the children on July 28, 2000, the date of the Accident. Ms. Walton's home day care services were an activity engaged in for economic gain and thus satisfy the first part of the Policy's definition of the term "business."
The more difficult question is whether the home day care services provided to PT constitute a "business" under the home day care provision. The Policy's definition of "business" states that "providing home day care services to other than an insured person or relative of an insured person for economic gain is also a business." Thus, by negative implication the provision of home day care services to an insured person or relative of an insured person is not considered a "business." The determination of whether or not PT was a "relative" of an insured person within the meaning of the home day care provision controls the outcome of this case.
The Policy does not define the term "relative," but this alone does not render the term ambiguous. See Smith v. Allstate Ins. Co., 681 N.E.2d 220, 223 (Ind.Ct.App. 1997). The term is ambiguous because its meaning under the Policy is unclear and its meaning is susceptible to more than one reasonable interpretation, see Bosecker, 724 N.E.2d at 244; see also Frost ex rel. Anderson v. Whitbeck, 654 N.W.2d 225, 232 (Wis. 2002) (concluding that the term "relative" in a homeowner's insurance policy exclusion was ambiguous); though, not the interpretation urged by the Thompsons. The court agrees with Allstate that PT should not be considered a "relative" under the home day care provision of the Policy.
When a policy term is undefined, the term is given its usual and common meaning, "unless, from the contract and the subject matter thereof, it is clear that some other meaning was intended." King v. Ebrens, 804 N.E.2d 821, 827 (Ind.Ct.App. 2004) (quotation omitted); see also Smith, 681 N.E.2d at 223 (utilizing Webster's Ninth New Collegiate Dictionary to determine the meaning of undefined terms in policy of insurance). Here, there is no indication that any meaning other than the usual and common meaning of "relative" was intended. Thus, the court gives the term its usual and ordinary meaning. The usual and common meaning of "relative" as found in Random House Webster's College Dictionary is "a person who is connected with another by blood or marriage." Random House Webster's College Dictionary 1097 (2nd ed. 1997). Black's Law Dictionary defines "relative" as "a person connected with another by blood or affinity; a kinsman." Black's Law Dictionary 1291 (7th ed. 1999). "Affinity" is "the relation that one spouse has to the blood relatives of the other spouse; relationship by marriage." Id. 59.
It is undisputed that Kristi Walton, Richard Walton, PT and RT share a common ancestor, King Henry II, Plantagenet. Thus, they are relatives within a very broad understanding of the term. The question becomes whether the usual and common meaning of "relative" extends to a person connected with another by blood who is separated by 95 degrees of kinship.
As stated, no Indiana cases have interpreted the meaning of "relative" in a similar context. The court's own research of cases from other jurisdictions led to only one case, Frost ex rel. Anderson v. Whitbeck, which offers guidance in interpreting the meaning of "relative" in a homeowner's insurance policy. Tina Frost and Doreen Whitbeck shared the same great-great-grandfather and thus were third cousins separated by eight degrees of kinship. As a result, Tina's young daughter, Brittany, and Doreen were third cousins once removed and separated by nine degrees of kinship. Frost, 654 N.W.2d at 228. Tina and Brittany stayed at Doreen's home during which time Brittany was bitten twice by Doreen's dog and sustained injuries. Three years later, Tina and Brittany filed suit against Doreen and American Family, her homeowner's insurance company. American Family sought summary judgment, contending that its policy contained an exclusion of coverage for bodily injury of a resident-relative. Thus, the issue was whether Tina was a relative of Doreen within the meaning of the resident-relative exclusion. Id. at 229.
The Wisconsin Supreme Court rejected the proposition that the word "relative" refers to all persons related by blood irrespective of the distance or remoteness of the relationship. Frost, 654 N.W.2d at 232. The court said that "courts generally conclude that 'relative' means a person connected by blood, marriage, or adoption" and then decide "whether the person at issue is or is not a relative, depending on the language of the policy, the nature of the relation, and the purpose of the policy provision." Id. The court agreed that "relative" "means, at a minimum, a person related to another by blood," id. at 233, but found that definition insufficient to give meaning to the word as used in the policy. The court said: "Justice Ann Walsh Bradley asked at oral argument: How far does the policy require us to trace our ancestors to determine who our relatives are? If we accept Adam and Eve, she continued, aren't we all relatives under American Family's definition?" Id. The court also noted research which lends support to the claim that all humans share a common African ancestor. Id. n. 37. Then it concluded:
A reasonable policyholder would not understand the word "relative" in this policy exclusion to include any person related by blood no matter how remote the relationship. If "relative" embodies all persons having a blood relationship to the insured, the effect is to enlarge the exclusion in this policy to extend to persons only barely and remotely touching the policyholder.
We need not define in the present case what degree of consanguinity is required by the word "relative" as used in the . . . exclusion. We need determine only whether the word "relative" in the context of this policy exclusion extends as far as persons having a great-great-grandfather as a common ancestor.Frost, 654 N.W.2d at 234-35. The court added that a reasonable insured would not have understood the word "relative" within the exclusion to include a person who shared a great-great-grandfather with the policyholder and, therefore, held that Tina was not a relative of Doreen for purposes of the resident-relative policy exclusion. Id. at 235. While it is true that Frost involved a different policy provision, the court's decision there depended on its interpretation of the same word upon which this court's decision turns. The Thompsons' effort to distinguish Frost are unavailing.
The court is persuaded by the decision and reasoning of Frost. In reaching its decision, the Wisconsin Supreme Court applied rules of construction of insurance contracts that also are applicable under Indiana law. See Frost, 654 N.W.2d at 229-31. The Thompsons contend that the appropriate meaning of "relative" is the common, everyday meaning. However, the court parts with the Thompsons' view that the common, everyday meaning would include a person connected with another by blood who is separated by 95 degrees of kinship. There must be some limit to the common, everyday meaning of "relative". See id. at 233-34. Even the most charitably and reasonably broad construction of the word "relative" would not result in coverage under the Policy. Furthermore, the conclusion that the person involved is not a relative within the meaning of the insurance policy is clearer in this case than in Frost because the relationship involved here (95 degrees of kinship) is significantly more remote than in Frost (8 degrees of kinship).
The purpose of the business pursuits exclusion and home day care provision aids the court's interpretation of the term "relative". The business pursuits exclusion protects Allstate from liability to persons who are connected to an insured person and premises only because of the insured's activities pursued for economic gain. The home day care provision excepts insured persons and relatives from the business pursuits exclusion. These people are either insured persons, or the family relationship is known to the insured person and such relatives are likely to have a relationship with the insured independent of the insured's business activities. Neither Ms. Walton nor the Thompsons were aware of the remote relationship between the Waltons and PT before the Accident, and there is no suggestion that they had any close personal interaction outside of their business relationship.
While it is true that the Frost court's interpretation of "relative" resulted in the conclusion that the damages claims of the cousin and her daughter were not excluded from coverage under the policy, if the Thompsons are arguing that the term "relative" in an insurance policy should be construed in whatever manner necessary to result in a finding of coverage, they are incorrect. No court interpreting policy language should push the meaning of the language to absurd limits; yet, this is what is required in order to reach the conclusion that the "business pursuits" exclusion is inapplicable in this case.
Thus, the court concludes that the common, usual meaning of the term "relative" cannot be stretched as far as would be necessary to bring PT within the meaning of that term as used in the home day care provision of the business pursuits exclusion. Would an ordinary policy holder of average intelligence expect that the Policy's use of the word "relative" included a person with a common ancestor who is separated by 95 degrees of kinship? The answer surely is "no."
The stipulation is that neither Kristi nor Richard was related by blood, marriage or adoption to TJ, TS, DN, CW or AS. The court does not challenge the stipulated facts, but one can't help but wonder if a genealogy search was conducted for these children, whether some remote relationship to the Waltons would surface.
The Thompsons claim that the Presidents Bush are recognized as related to Presidents Franklin Pierce, Teddy Roosevelt, Abraham Lincoln and Gerald Ford. Seehttp://www.our.homewithgod.com/mkcathy/presidents.html (last visited Aug. 4, 2004) (stating, for example, that George H. Bush is the seventh cousin four times removed of Lincoln). This, however, does not answer the question of whether the remote relationship in the instant case comes within the usual and ordinary meaning of the term "relative."
Lastly, it is noted that the first cousins in Moore v. City of East Cleveland, Ohio, 431 U.S. 494 (1977), were more closely related than PT and RT are to Kristi and Richard Walton.
Therefore, the court concludes that a reasonable policyholder would not understand the term "relative" as used in the home day care provision to include a person related by blood who is separated by 95 degrees of kinship. If "relative" is given the meaning urged by the Thompsons, then the business pursuits exclusion may be effectively eviscerated where the business involves home day care services, as it does here. The court need not determine where to draw the line in terms of remoteness of the relationship. "At some point the blood connection becomes too tenuous for parties to even be aware they are related." Frost, 654 N.W.2d at 236-37 (Wilcox, J., dissenting). Indeed, that was the situation here. Neither Ms. Walton nor the Thompsons were aware of the distant relationship between the Waltons and PT until after the genealogy search was conducted following the Accident. In short, a neutral reading of the term "relative" does not include a cousin separated by 95 degrees of kinship.
The stipulated facts do not address whether the search was conducted in order to support the claim for coverage under Allstate's policy, but this seems likely to have been the case.
III. DEFENDANT RICHARD A. WALTON
Federal Rule of Civil Procedure 4(m) allows the court, on its own motion and after notice to the plaintiff, to dismiss an action without prejudice as to a defendant who has not been served with the summons and complaint within 120 days of the filing of the complaint, if the plaintiff cannot show good cause for the lack of service. Fed.R.Civ.P. 4(m). The rule, however, gives the court the discretion to extend the time for service, even if good cause is not shown. Id.
Allstate's Complaint was filed on February 7, 2003. The 120 days prescribed in Rule 4(m) has passed. Therefore, the court on its own motion will order the Plaintiff within twenty days of this date to provide proof of service on Defendant Richard Waltonor show good cause for the lack of timely service on him. If Allstate is able to provide proof of service, then a judgment similar to that to be entered against Kristi Walton and the Thompsons will be entered against Defendant Richard Walton. If, however, Allstate is unable to show proof of service and does not show good cause, the action against Richard Walton will be dismissed without prejudice for lack of timely service.
However, assuming that the stipulated facts are incontrovertible, it would be an inevitable result that Allstate has no duty under its homeowners policy to defend or indemnify Richard Walton against the Thompsons' lawsuit.
IV. CONCLUSION
For the foregoing reasons, Allstate's Motion for Summary Judgment will be GRANTED as to Defendants Kristi Walton, James Thompson and Qua Thompson, and the court on its own motion ORDERS the Plaintiff within twenty (20) days of this date to provide proof of service on Defendant Richard Walton or show good cause for the failure to timely effect service on that Defendant. Because Allstate's claims against Defendants Kristi Walton, James Thompson and Qua Thompson appear inseparable from the claim against Richard Walton, it would be inappropriate to direct entry of judgment while the latter claim remains.