ContractsProf Blog

Editor: Myanna Dellinger
University of South Dakota School of Law

Wednesday, November 2, 2005

Court Construes "Business Activities" Narrowly

California_flag_15 An employee who allegedly defamed his employers by writing letters to investors had no right to be defended under his homeowner’s policy, according to a recent unpublished decision by the California Court of Appeals, interpreting the “business activities” clause of the policy.

Policyholder Michael Southard got into trouble with his bosses when he wrote letters to investors disparaging their management.  His employer not only fired him, but sued him for, among other things, defamation.  Since this was a tort, he claimed the right to be defended by Allstate, his homeowner’s insurance carrier.  Allstate declined, citing the policy provision that stated:

We do not cover bodily injury or property damage arising out of the past or present business activities of an insured person.

The trial court held that it was a jury issue whether the clause was satisfied.  Allstate appealed.
Southard claimed that he wasn’t engaged in business activities when he wrote the letters, since he was not acting on behalf of his employer or in the course of his job.  The clause at issue defined “business” as "Business" is defined as “any full or part-time activity of any kind engaged in for economic gain.”

The appellate court, finding that the language was not ambiguous, concluded that Southard’s employment was a “business activity,” and that his letters, while not on behalf of his employers, nevertheless “arose out of” his employment.  Accordingly, Allstate had no duty to defend.

Allstate Insurance Co. v. Superior Court of Los Angeles, 2005 Cal. App. Unpub. LEXIS 9498 (2d Dist. Oct. 19, 2005).

[Frank Snyder]

Recent Cases | Permalink

TrackBack URL for this entry:

Listed below are links to weblogs that reference Court Construes "Business Activities" Narrowly: