Summary
The Supreme Court of Missouri held that a homeowners insurance policy's business pursuits exclusion was ambiguous and did not exclude coverage for injuries arising from a weld performed on an employer's property. The court affirmed liability for prejudgment interest on the insurer's policy limits and post-judgment interest on the entire unpaid judgment until the insurer paid or tendered its limits. It reversed the post-judgment interest award only to the extent it included the portion of the judgment already paid by a co-defendant and remanded for recalculation.
Topics
Practice areas
Questions Presented
- Whether the Farmers policy's business-pursuits exclusion applied to exclude coverage for Burns's injury.
- Whether the policy's use of the conjunctive term "and" in defining business was ambiguous and, if so, whether the ambiguity had to be construed against Farmers.
- Whether Farmers owed prejudgment interest on the entire underlying judgment or only on its $1 million policy limit.
- Whether Farmers owed post-judgment interest on the entire judgment after Oak River paid $675,000 of that judgment.
Holdings
- The business-pursuits exclusion did not apply because the relevant policy language required the conduct to involve both a trade, profession, or occupation and the use of the insured's premises for that purpose, and the injury occurred on Kennon property rather than on Smith's premises.
- Missouri continues to apply an objective interpretation of insurance policies, construing ambiguous language according to the meaning an ordinary person of average understanding would attach to it and resolving ambiguity in favor of the insured; courts do not determine the parties' subjective intent through extrinsic evidence before applying that rule.
- Farmers owed prejudgment interest only on its $1 million policy limit, not on the full $2,044,278 underlying judgment.
- Farmers owed post-judgment interest on the entire judgment until Oak River paid $675,000, but thereafter interest accrued only on the unpaid remainder until Farmers paid, tendered, or deposited the portion of the judgment within its $1 million liability limit.
Key quotations
“Farmers' business pursuits exclusion does not apply because the injury did not occur in the course of the insured's "business," which is defined narrowly in the portion of the policy relevant here to be "[a] trade, profession or occupation, excluding farming, and the use of any premises or portion of residence premises for any such purposes."” (507)
“The Court also affirms that Farmers must pay prejudgment interest on the portion of the judgment that does not exceed its $1 million policy limit and pay post-judgment interest accruing on the entire judgment.” (507)
“Interest accrues on unpaid monies. Once monies are paid, there is no debt on which interest can accrue.” (515)
Factual background
Kennon Ready-Mix employed Burns to drive a concrete-mixer truck, and Smith was Burns's supervisor. Smith defectively welded a corroded water-pressure tank on Kennon's cement truck, and the tank later exploded, seriously injuring Burns. The injury occurred on Kennon property rather than on premises owned or operated by Smith. Farmers's policy provided $1 million in personal-liability coverage but excluded bodily injury arising out of an insured's business pursuits, with business defined to include a trade, profession, or occupation and the use of premises for such purposes.
Procedural history
Eric Burns obtained a $2,044,278 negligence judgment against Lynn Smith after a defective weld on a cement-mixer truck's water-pressure tank failed and injured Burns. Smith's insurers refused to defend, and Burns and Smith entered into an agreement under section 537.065, RSMo 2000, limiting Burns's recovery to applicable insurance proceeds. Burns then brought an equitable garnishment action against Oak River Insurance Company and Farmers. Oak River paid $675,000 during the proceedings; the trial court held Farmers liable for its $1 million policy limits, prejudgment interest on those limits, and post-judgment interest on the entire judgment. The Supreme Court affirmed in part, reversed the post-judgment-interest calculation in part, and remanded.
Remand instructions
The trial court must enter a judgment correctly calculating post-judgment interest: interest should accrue on the entire judgment only until Oak River paid $675,000, and thereafter on the unpaid remainder until Farmers pays, tenders, or deposits the portion of the judgment not exceeding its $1 million liability limit.