Court No. 2015-CV-H-195
P. Wiley and Tonya J. Rogers, for appellee.
Rodman Cooper, for appellants Jim Phillips Excavating, Inc.,
Jim Phillips and Jake Phillips.
C. Munger and Marshall A. Kupresanin, for appellant Woodville
Mutual Insurance Company.
C. Stebbins, for appellant Erie Insurance Exchange.
DECISION AND JUDGMENT
1} Defendants-appellants, Woodville Mutual Insurance
Company ("Woodville"), Erie Insurance Exchange
("Erie'), Jim Phillips ("Jim"), Jake
Phillips ("Jake"), and Jim Phillips Excavating,
Inc. (collectively, "the Phillips defendants"),
appeal the December 30, 2016 judgment of the Ottawa County
Court of Common Pleas granting summary judgment in favor of
plaintiff-appellee, American Family Insurance Company
("American Family"), and denying summary judgment
in favor of Woodville and Erie. For the reasons that follow,
we affirm the trial court judgment.
2} Walter Apling hired Jake Phillips to demolish his
barn for $3, 000. Jake presented Apling with two methods for
accomplishing the demolition. The method Apling selected-the
less expensive of the two options-required Jake to dig a pit
about 25-30 feet deep, knock down the barn, gather debris
from the barn into the pit, and burn the debris. Jake, who
worked for his father's company, Jim Phillips Excavating,
had performed this type of job approximately ten times.
3} Jake began the project on April 3, 2013. He
hauled his father's excavator to the property that day
and dug the pit. Jake returned around 7:00 the next morning
and knocked down the barn. He put the roofing material in the
pit and ignited it with a propane torch. Using the excavator,
he began gathering debris from the barn to be dumped into the
pit. At approximately 7:30 a.m., Jake noticed that the wind
had picked up, so he decided to stop working. He allowed the
fire to burn out, and about an hour later, when he saw no
sign of fire, he left the Apling property.
4} On his way home, Jake stopped at NAPA Auto Parts
to buy oil for the excavator. While at NAPA, he received a
call from a friend who works for the Carroll Township fire
department. He told Jake that a fire had been reported at the
Apling property. Jake returned to find the barn demolition
engulfed in flames. The fire spread to Apling's granary,
and then to his home and garage. Experts opined that the fire
was caused by Jake's failure to properly extinguish the
fire before leaving the Apling property.
5} Losses to Apling's real and personal
property, and for living expenses incurred for substitute
housing, totaled $313, 553.55. Apling's insurer,
Woodville, compensated him for his losses, and Erie issued
payment to Apling's brother, Charles Apling, who resided
with him and incurred separately-insured losses of his own.
Woodland and Erie pursued claims for indemnification against
Jake Phillips, Jake's father, Jim Phillips, and
Jake's employer, Jim Phillips Excavating, Inc., in Ottawa
County case No. 2013-CV-435H.
6} The Phillips defendants sought coverage under
Jim's farm/ranch policy maintained with American Family.
Jake is an "insured" under that policy. American
Family retained counsel for the Phillips defendants and
provided a defense in the indemnification action subject to a
reservation of rights. It filed the present action for
declaratory judgment on June 29, 2015, against the Phillips
defendants, Woodville, Erie, and Hanover and Progressive
Insurance Companies, which were believed to insure tractors
owned by Jim Phillips Excavating, Inc. American Family sought
a declaration that it owed no duty to defend or indemnify the
Phillips defendants because (1) the Phillips defendants
failed to notify American Family of the claim until November
11, 2014, thereby violating the policy's prompt-notice
provision; and (2) coverage was precluded under the
policy's business-pursuit exclusion.
7} A consent judgment was reached in Ottawa County
case No. 2013-CV-435H, pursuant to which the Phillips
defendants consented to a judgment in favor of Woodville and
Erie in the amounts of $209, 488.66 and $40, 260.34,
respectively. Woodville and Erie counterclaimed against
American Family in the present case, seeking to require
American Family to satisfy the consent judgment.
8} Following a period of discovery, American Family,
Woodville, and Erie filed cross-motions for summary judgment.
The bases for American Family's motion essentially
mirrored the allegations in its complaint for declaratory
judgment: the Phillips defendants breached the timely notice
provision in the policy, and coverage was excluded because
Jake was engaged in a business pursuit at the time of the
9} In a judgment dated December 30, 2016, the trial
court found that American Family was not prejudiced by the
Phillips defendants' failure to provide prompt notice of
the loss, but it granted summary judgment to American Family
based on the business pursuit exclusion contained in the
policy. The court denied Woodville and Erie's motions for
summary judgment. Woodville, Erie, and the Phillips
defendants appealed this judgment and assign the following
errors for our review:
FIRST ASSIGNMENT OF ERROR
The Trial Court erred when it misapplied the American Family
Business Activity Exclusion given the uncontested evidence
which demonstrated the transaction concerned was not a
business activity nor was it profit motivated.
SECOND ASSIGNMENT OF ERROR
The Trial Court erred when it denied Woodville Mutual
Insurance Company Summary Judgment.
THIRD ASSIGNMENT OF ERROR
The Trial Court erred when it ignored and failed to even
address the related request for Summary Judgment filed by
Defendants Jim Phillips, Jake Phillips, and Phillips
Standard of Review
10} Appellate review of a summary judgment is de
novo, Grafton v. Ohio Edison Co., 77 Ohio St.3d 102,
105, 671 N.E.2d 241 (1996), employing the same standard as
trial courts. Lorain Natl. Bank v. Saratoga Apts.,
61 Ohio App.3d 127, 129, 572 N.E.2d 198 (9th Dist.1989). The
motion may be granted only when it is demonstrated:
(1) that there is no genuine issue as to any material fact;
(2) that the moving party is entitled to judgment as a matter
of law; and (3) that reasonable minds can come to but one
conclusion, and that conclusion is adverse to the party
against whom the motion for summary judgment is made, who is
entitled to have the evidence construed most strongly in his
favor. Harless v. Willis Day Warehousing Co., 54
Ohio St.2d 64, 67, 375 N.E.2d 46 (1978), Civ.R. 56(C).
11} When seeking summary judgment, a party must
specifically delineate the basis upon which the motion is
brought, Mitseff v. Wheeler, 38 Ohio St.3d 112, 526
N.E.2d 798 (1988), syllabus, and identify those portions of
the record that demonstrate the absence of a genuine issue of
material fact. Dresher v. Burt, 75 Ohio St.3d 280,
293, 662 N.E.2d 264 (1996). When a properly supported motion
for summary judgment is made, an adverse party may not rest
on mere allegations or denials in the pleadings, but must
respond with specific facts showing that there is a genuine
issue of material fact. Civ.R. 56(E); Riley v.
Montgomery, 11 Ohio St.3d 75, 79, 463 N.E.2d 1246
(1984). A "material" fact is one which would affect
the outcome of the suit under the applicable substantive law.
Russell v. Interim Personnel, Inc., 135 Ohio App.3d
301, 304, 733 N.E.2d 1186 (6th Dist. 1999); Needham v.
Provident Bank, 110 Ohio App.3d 817, 826, 675 N.E.2d 514
(8th Dist.1996), citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 201
Law and Argument
12} Woodville, Erie, and the Phillips defendants all
appealed the trial court judgment. Woodville filed an initial
brief and a reply brief setting forth arguments in support of
its challenge to the trial court judgment; Erie and the
Phillips defendants filed "joinders" adopting
13} Appellants contend in their first assignment of
error that the trial court misapplied the business-pursuit
exclusion. They contend in their second assignment of error
that the trial court erred in denying Woodville and
Erie's motions for summary judgment. And in their third
assignment of error, they contend that the trial court erred
in failing to address the Phillips defendants' motion for
The "Business Pursuit" Exclusion
14} In granting summary judgment in favor of
American Family, the trial court concluded that the
business-pursuit exclusion of the American Family farm/ranch
policy precluded coverage. That exclusion provides:
Business. We will not pay for damages due to bodily injury or
property damage arising out of business pursuits of any
a. Activities normally considered non-business; or
b. The occasional or part-time business activities of any
self-employed insured under 19 years of age.
policy defines "business" as "[a]ny profit
motivated full or part time employment, trade, profession or
occupation, and including the use of any part of the premises
for such purposes."
15} The trial court concluded that Jake's
business activity gave rise to the fire, thus coverage was
excluded under the American Family policy. Appellants argue
that the trial court's decision was wrong because (1)
Jake did not perform the barn demolition on behalf of
Phillips Excavating business; (2) the barn demolition was not
"profit motivated" and was not a business activity
of Phillips Excavating; and (3) Jake's conduct in leaving
the property without properly extinguishing the fire was a
16} Insurance contracts are construed using the same
rules as other written contracts. Universal Underwriters
Ins. Co. v. Shuff, 67 Ohio St.2d 172, 173, 423 N.E.2d
417 (1981). Where the policy's language is clear and
unambiguous, its interpretation is a matter of law and the
court may not "resort to construction of that
language." Hybud Equip. Corp. v. Sphere Drake Ins.
Co., Ltd., 64 Ohio St.3d 657, 665, 597 N.E.2d 1096
(1992), citing Karabin v. State Auto. Mut. Ins. Co.,
10 Ohio St.3d 163, 167, 462 N.E.2d 403 (1984). The words and
phrases used in the policy must be given their natural and
commonly accepted meaning. Id. Ambiguous
provisions-particularly provisions purporting to exclude or
limit coverage- must be construed strictly against the
insurer and liberally in favor of the insured. Westfield
Ins. Co. v. Hunter, 128 Ohio St.3d 540, 2011-Ohio-1818,
948 N.E.2d 931, ¶ 11. "However, the rule of strict
construction does not permit a court to change the obvious
intent of a provision just to impose coverage."
Hybud Equip. at 665.
17} American Family claims that for an activity to
constitute a "business pursuit, " as the phrase is
used in the exclusion, two elements must be established: (1)
continuity and (2) profit motive. "Continuity"
requires "'a customary engagement or a stated
occupation.'" Lenart v. Doversberger, 8th
Dist. Cuyahoga Nos. 65372, 65373, 1994 Ohio App. LEXIS 2063,
*19 (May 12, 1994), quoting Asbury v. Indiana Union Mut.
Ins. Co., 441 N.E.2d 232, 237 (Ind.App.1982).
"Profit motive" requires that the activity be
performed as "'a means of livelihood, gainful
employment, means of earning a living, procuring subsistence
or profit, commercial transactions or engagements.'"
18} American Family contends that the barn
demolition project satisfies both elements. As to
"continuity, " it maintains that Jake earns a
living by performing the type of work at issue here. While it
notes that Phillips Excavating performs this type of work,
that Phillips Excavating had completed projects for Apling in
the past, and that Jake used his father's excavator for
the project, it insists that for purposes of the business
pursuit exclusion, it makes no difference whether Jake was
acting on behalf of his father's company or whether he
was simply acting in his individual capacity.
19} As to the "profit motive element, "
American Family relies on Jake's deposition testimony. It
urges that Jake admitted that he took the job with the intent
to take money, and Jake's profit motivation is
demonstrated by the fact that he and Apling negotiated as to
the method and the price for performing the work. American
Family insists that in determining whether ...