HOLZKNECHT (SARAH) VS. KENTUCKY FARM BUREAU MUTUAL INSURANCE COMPANY
Annotate this Case
Download PDF
RENDERED: AUGUST 13, 2010; 10:00 A.M.
TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2009-CA-001022-MR
SARAH HOLZKNECHT, MOTHER AND
NEXT FRIEND OF MEGHAN HOLZKNECHT
v.
APPELLANT
APPEAL FROM HARDIN CIRCUIT COURT
HONORABLE KELLY MARK EASTON, JUDGE
ACTION NO. 08-CI-00196
KENTUCKY FARM BUREAU MUTUAL
INSURANCE COMPANY
APPELLEE
OPINION
AFFIRMING
** ** ** ** **
BEFORE: TAYLOR, CHIEF JUDGE; COMBS AND NICKELL, JUDGES.
COMBS, JUDGE: This case involves a dispute as to coverage under a
homeowner’s insurance policy. Sarah Holzknecht, as mother and next friend of
Meghan Holzknecht, appeals from a summary judgment entered by the Hardin
Circuit Court in favor of Kentucky Farm Bureau Mutual Insurance Company
(Farm Bureau). The trial court held that the policy was unambiguous in excluding
coverage for injury arising out of an insured’s “business pursuit.” The court
concluded that the exclusion applied to bar coverage under the circumstances of
this case, a result challenged by Holzknecht on appeal. In the alternative,
Holzknecht contends that the exclusion clause is subject to the policy’s severability
provision. After our review of counsels’ arguments and the pertinent law, we
affirm.
On January 23, 2008, Sarah Holzknecht filed a complaint against
Sherri May, John David May, and Farm Bureau, the Mays’ homeowner’s
insurance carrier. Holzknecht alleged that the Mays were liable for injuries
sustained by her daughter at a home-based child care business operated by the
Mays. A dog kept at the Mays’ day care attacked and mauled Meghan.
Holzknecht claimed that the Mays failed to exercise ordinary care for the safety of
her child; additionally, she asserted liability under the provisions of Kentucky
Revised Statute(s) (KRS) 258.235(4), which provides that the keeper of a dog shall
be responsible for the damage that it causes. Farm Bureau defended the action
under a reservation of rights.
After the Mays were deposed, Farm Bureau filed a petition for
declaration of rights pursuant to KRS 418.040. Farm Bureau alleged that it was
under no obligation to defend or to indemnify the Mays with respect to the
underlying tort action because: (1) the homeowners had declared to Farm Bureau
that no business enterprise would be undertaken at the home and (2) their policy
-2-
specifically excluded coverage for personal liability arising out of or in connection
with a business pursuit. Farm Bureau next filed a motion for summary judgment.
In its memorandum in support of the motion for summary judgment,
Farm Bureau argued that the clear and unambiguous language of the homeowner’s
policy put the Mays on notice that coverage was excluded with respect to any
injuries arising out of or in connection with the home-based day care service.
Holzknecht responded to the motion, arguing that the facts and circumstances
underlying the tort action against the Mays compelled coverage pursuant to the
terms of the policy.
The trial court concluded that the Mays’ misrepresentation concerning
the operation of a day care business would – in and of itself – disqualify them from
coverage. Additionally, the trial court concluded that the policy specifically and
unambiguously excluded coverage for personal liability arising from the business.
Holzknecht argued that the policy should nevertheless provide coverage since a
dog mauling is the type of event that might have occurred regardless of a business
activity conducted at the Mays’ home. The court disagreed. It also rejected
Holzknecht’s argument in the alternative that the exclusion clause could and
should be severed with respect to John David, entitling him to coverage since he
did not operate the day care business. The court entered summary judgment in
favor of Farm Bureau. This appeal followed.
On appeal, Holzknecht presents two issues for our review. First, she
contends that the trial court erred by concluding that the policy’s “business
-3-
pursuits” exclusion was unambiguous and bars coverage for the tort claim. Next,
Holzknecht contends that the trial court erred by failing to conclude that the
exclusion clause was severable as to the coverage available to John David May.
We shall address these issues in the order in which they were presented by the
parties’ briefs.
Summary judgment serves to terminate litigation where “the
pleadings, depositions, answers to interrogatories, stipulations, and admissions on
file, together with the affidavits, if any, show that there is no genuine issue as to
any material fact and that the moving party is entitled to a judgment as a matter of
law.” Kentucky Rule[s] of Civil Procedure 56.03. Summary judgment should be
granted only if it appears impossible that the nonmoving party will be able to
produce evidence at trial warranting a judgment in his favor. Steelvest, Inc. v.
Scansteel Service Center, Inc., 807 S.W.2d 476 (Ky. 1991). Summary judgment
“is proper where the movant shows that the adverse party could not prevail under
any circumstances.” Id., citing Paintsville Hosp. Co. v. Rose, 683 S.W.2d 255 (Ky.
1985).
On appeal, we must consider whether the trial court correctly
determined that there were no genuine issues of material fact and that the moving
party was entitled to judgment as a matter of law. Scifres v. Kraft, 916 S.W.2d 779
(Ky. App. 1996). Since summary judgment involves only questions of law and not
the resolution of disputed material facts, an appellate court does not defer to the
-4-
trial court’s decision. Goldsmith v. Allied Building Components. Inc., 833 S.W.2d
378 (Ky. 1992). Our review is de novo.
The interpretation of an insurance policy often presents a pure
question of law, rendering it appropriate for summary judgment. See Stone v.
Kentucky Farm Bureau Mut. Ins. Co., 34 S.W.3d 809 (Ky.App.2000). Terms of a
policy will be given their plain and ordinary meaning. City of Louisville v.
McDonald, 819 S.W.2d 319 (Ky. App. 1991). Where the terms of the policy are
clear and unambiguous, they must be enforced as drafted. Osborne v. Unigard
Indem. Co., 719 S.W.2d 737 (Ky. App. 1986).
Holzknecht argues first that the trial court erred by granting summary
judgment in favor of Farm Bureau based on the business pursuits exclusion of the
homeowner’s policy. She argues that the exclusion is inapplicable under the facts
and circumstances of this case.
The policy language at issue provides as follows:
-5-
SECTION II – EXCLUSIONS
1. Coverage E – Personal Liability and Coverage F –
Medical Payments to Others do not apply to “bodily
injury” or “property damage”:
*****
b. Arising out of or in connection with a
“business” engaged in by an “insured.” This
exclusion applies but is not limited to an act or
omission, regardless of its nature or circumstances,
involving a service or duty rendered, promised,
owed, or implied to be provided because of the
nature of the “business”;
*****
n. Arising out of the home day care
business. If an insured regularly provides home
day care services to a person or persons other than
insured and receives monetary or other
compensation for such services, that enterprise is a
business pursuit. . . .
Therefore, with respect to a home day care
enterprise which is considered to be a business
pursuit, this policy:
(1) Does not provide SECTION II -LIABILITY COVERAGES because
business pursuits of an insured are excluded
under exclusion 1.b. of Section II Coverages
– Exclusions;
This home day care business exclusion does not
constitute a reduction of coverage.
Homeowner Policy at 24 – 28. The policy includes the following definitions:
2. “Business” includes trade, profession or
occupation.
-6-
3. “Insured” means you and residents of your
household who are:
a. Your relatives; or
b. Other persons under the age of 21 and in the
care of any person named above. (All emphases
original.)
It is undisputed that a home day care business was being operated from the insured
premises but that the Mays had informed Farm Bureau that there would be no
business pursuits conducted on the premises. Because they had had previous
experience with securing a home day care coverage endorsement, the Mays were
aware that their homeowner’s policy lacked such an endorsement to secure added
coverage for their business.
Holzknecht contends that summary judgment was improper because
the policy’s business pursuits exclusion is either inapplicable under the
circumstances or ambiguous as drafted. She argues that the dog that mauled her
child was not directly involved in the day care business and the child’s injuries did
not arise out of any act, omission, or duty of the Mays related to the day care
business. It was, she contends, an occurrence incident to non-business pursuits;
i.e., the keeping of the dog was not part of the business but part of the home itself.
Farm Bureau responds that summary judgment was proper because
the policy expressly excludes coverage for injuries “arising out of or in connection
with” a business – specifically a home-based day care business – engaged in by an
insured. The company argues that but for the day care business, the child would
-7-
not have been on the premises and the tort claim would not have arisen.
Additionally, the company relies on the concealment or fraud provisions of the
policy to deny coverage. We agree with Farm Bureau. The terms of the policy are
unambiguous and specifically exclude the coverage that Holzknecht seeks.
In support of her argument, Holzknecht points out that the Mays’
liability for the dog mauling did not “arise from duties or services owed because of
the day care business” but from their statutory duty as keepers of a dog.
Appellant’s brief at 7. It is true that the Mays’ liability did arise from their
statutory duty as keepers of a dog. However, the policy expressly provides that the
business pursuits exclusion is not limited to injuries resulting from an act or
omission “involving a service or duty rendered, promised, owed, or implied to be
provided because of the nature of the business(.)” Instead, the policy exclusion is
much more broadly drafted to encompass injuries “arising out of or in connection
with a business engaged in by an insured.” We agree with the trial court’s
observation as follows:
It should not be discounted that Holzknecht would not
have been on this property and therefore not bitten by the
dog were it not for the conduct of the day care business
on the property. It is the increased risk associated with
conducting such a business, including the presence of a
number of children that calls for a specific rider or
endorsement to provide appropriate commercial
coverage.
Summary Declaratory Judgment at 5. The Mays’ liability arose because the child
was on the premises (where she undoubtedly had a right to be) when she was
-8-
mauled, and her presence on the premises was plainly attributable to and connected
with the business.
Holzknecht observes that there are no Kentucky cases dealing with a
dog bite in the context of a business-pursuits exclusion clause. She contends that
the business pursuits exclusion should be held to apply only if the dog was
“involved in the business and kept on the premises for the purpose of earning a
profit for or protecting the business.” Appellant’s brief at 8. Holzknecht cites
Wiley1 v. Travelers Ins. Co., 534 P.2d 1293 (Okla. 1974), and Ratner v. Canadian
Universal Ins. Co., 269 N.E.2d 227 (Mass. 1971), in support of her position.
The dispute in Wiley centered on whether the tortfeasor’s dogbreeding operation qualified as a business pursuit or was merely a hobby. The
court’s resolution of the issue did not depend on the fact that the dog that caused
the injury was an integral part of the business but focused on the fact that the
policy at issue contained an exception to the exclusion. No such exception exists
in the policy involved in this appeal.
Although a dog bite gave rise to the claim in Ratner, the type of
insurance coverage at issue in that case was commercial rather than that of a
homeowner. The court found that there was coverage by way of a business
endorsement because the dog was kept by the tortfeasors on their property for
security purposes. Because the dog was on the premises primarily in a business
capacity, the dog bite was covered under the business endorsement. The court
1
The appellee’s brief cites this case as Whiley. The correct spelling as reported in Pacific 2d is
Wiley.
-9-
analogized the injury from the dog bite to a gun wound sustained where a gun was
kept on the premises for protection.
Wiley and Ratner involve circumstances wholly distinguishable from
the case before us and offer no guidance in our review of the court’s judgment in
this case. There is no dispute that the Mays’ home was the site of an established
and profitable day care business and that the exclusion clause contained in their
policy broadly excluded coverage for injuries “arising out of or in connection with
a business engaged in by an insured.” The dog was on premises where a business
was being conducted, and the dog bite clearly fell under the expansive language of
the exclusion clause, withholding coverage for operation of a business.
Holzknecht also relies on this court’s decision in Foster v. Allstate
Ins. Co., 637 S.W.2d 655 (Ky. App. 1982), in support of her argument that
summary judgment in favor of Farm Bureau was improper. In Foster, this Court
examined a business-pursuits exclusion clause in a homeowner’s insurance policy.
The policy provided that the liability protection afforded by Section II of the policy
did not apply:
(d) to bodily injury or property damage arising out of
business pursuits of any Insured except activities therein
which are ordinarily incident to non-business pursuits….
Id. at 656. (Emphasis added). For purposes of its opinion, the Court assumed that
the homeowner’s baby-sitting enterprise was a business pursuit and focused
exclusively on the exception to the exclusion. The Court examined the decisions
of other jurisdictions and concluded that the exception provision contained in the
-10-
exclusion “leaves some doubt as to its meaning, and it is clearly susceptible to two
reasonable interpretations. . . .” Id. at 657. Because of the ambiguity in the
exception, the Court applied the rule contra proferentem, properly interpreting the
contract more strictly against its drafter, and construed the exclusion as not
precluding coverage. Id. Again, there is no similar exception to the exclusion
clause in the Mays’ policy. Nor is there any ambiguity in the exclusion clause
itself. Consequently, the literal language of the exclusion must apply to preclude
coverage in this case.
As an alternative to her argument that the business pursuits exclusion
does not apply in this case, Holzknecht contends that the clause is subject to the
policy’s severability provision. She argues that the policy should be construed so
as to apply coverage to each insured separately and to preserve coverage for John
David May since he was not engaged in the day care business.2 In support of her
argument, Holzknecht relies on our decision in K.M.R. v. Foremost Ins. Group,
171 S.W.3d 751 (Ky. App. 2005). However, that case does not support her
argument.
In Foremost, this Court examined the provision of a homeowner’s
policy excluding coverage to its insureds for bodily injury caused by intentional
2
The policy provides as follows:
SECTION I – CONDITIONS
2. Severability of Insurance. This insurance applies
separately to each “insured.” This condition will not increase
our limit of liability for any one “occurrence.”
-11-
acts. The underlying tort action concerned Tommy Conrad’s sexual molestation of
K.M.R. The trial court concluded that the intentional nature of Tommy’s acts
absolved Foremost of any duty to defend or to indemnify Tommy or his wife,
Elizabeth. K.M.R. appealed, contending that the allegations in her complaint
against Elizabeth focused on Elizabeth’s “unintentional, negligent omissions to
protect the child.” K.M.R. argued that the severability clause rendered the policy
ambiguous as to coverage for Elizabeth.
After carefully examining the language of the exclusion clause
contained in the Foremost policy, we rejected K.M.R.’s argument. We held that
Foremost’s policy which excluded coverage for bodily injuries “[r]esulting from
any act or omission that is intended by any of you to cause any harm or that any of
you could reasonably expect to cause harm” was carefully and precisely drawn to
exclude coverage for both of the Conrads. We observed that a clearly worded
exclusion is not treated as ambiguous or rendered unclear by the mere existence of
a severability provision. Foremost, supra, citing National Ins. Underwriters v.
Lexington Flying Club, Inc., 603 S.W.2d 490 (Ky. App. 1980). We held that the
policy’s severability clause did not preserve coverage for Elizabeth since the policy
plainly “denies protection to an innocent actor who is tainted by association with
an intentional wrongdoer.” Id. at 754.
Holzknecht contends that Farm Bureau “has offered no exclusion that
would apply to defeat coverage other than Sherri May’s operation of a day care
business.” Appellant’s brief at 14. Farm Bureau’s policy excludes coverage where
-12-
“an insured” is engaged in a business pursuit as opposed to “any insured.”
Accordingly, based on that distinction between the article “an” versus the adjective
“any,” Holzknecht argues that John David May’s coverage should be preserved.
In its response, Farm Bureau rejects Holzknecht’s characterization of
John David May as an “innocent actor,” paraphrasing the language of our holding
in Foremost, supra. Farm Bureau points to statements included in the Mays’
depositions that indicate that John David was actively involved as a keeper of the
dog and that he was also involved (albeit arguably minimally) in the day care
business. Additionally, Farm Bureau observes that John David May was aware
that the business was being conducted in his home and that he consented to its
continued operation. Presumably, he benefitted financially from the enterprise as
well. Farm Bureau cites Argent v. Brady, 901 A.2d 419 (N.J. App. 2006), in
support of its contention that John David May is also excluded from the policy’s
coverage under these circumstances.
In Argent, supra, the Court considered whether the business pursuits
exclusion of a homeowner’s insurance policy applied to the resident son of the
named insureds. Linda Brady, a named insured, operated a day care business from
her home. Linda’s son, Michael, kept a dog on the premises. When an infant in
Linda’s care was bitten in the face by Michael’s dog, the victim’s mother filed a
tort action against Linda Brady, her husband, and Michael Brady. There was no
evidence that the injury arose out of a business engaged in by Michael.
Nonetheless, the Bradys’ insurer denied coverage based on the policy’s business
-13-
pursuits exclusion. In granting summary judgment in favor of the victim, the trial
court concluded that Michael was an insured, reasoning that the severability clause
of the homeowner’s insurance policy operated to remove him from the
applicability of the exclusion clause -- noting as well an ambiguity as to the
applicability of the exclusion.
On appeal, the court reversed. The appellate court rejected the
Bradys’ contention that the insurer’s use of “any insured” rather than “an insured”
created an ambiguity that triggered the severability clause. “That the use of the
word ‘any’ could be perceived by some as making the exclusion clearer does not
make the language that was chosen ambiguous.” Argent v. Brady, 901 A.2d at
425. The court concluded that the severability clause did not affect the clearly
worded exclusion clause. It reasoned as follows:
[T]he severability clause is not denominated a “coverage
provision,” and it would be unreasonable to find that it
operated independently in that capacity to increase the
insurance afforded under the insuring provisions of the
policy, or to partially nullify existing coverage
exclusions.
Id. at 427.
Finally, the Court noted that the availability of a business-risk
insurance endorsement was an option specifically intended to provide coverage
under the very kind of circumstances of the case before us. The Court reasoned as
follows:
[T]hose business pursuits conducted in the home such as
day care are foreseeably subject to risks created by
-14-
family members other than the business proprietor, such
as the risk of injury from a pet owned by another family
member, as here. In this circumstance, it would be
unreasonable to utilize a purported policy ambiguity as a
means of establishing coverage, since no coverage could
reasonably have been anticipated to exist in the first
instance. To employ the doctrine of ambiguity to create
coverage here would thus be contrary to the reasonable
expectations doctrine, and would stand that doctrine on
its head. Alleged ambiguities cannot be construed in
favor of an insured if the only result is to create
unexpected coverage. (Emphasis added.)
Id. In summary, rather than attempting to infer ambiguity from a severability
provision, an insured’s proper resolution of such a risk would be to opt for a
business-risk endorsement.
We agree with the reasoning of the New Jersey appellate court in all
respects, and we find it particularly applicable in this case. John David May
plainly falls within the scope of the policy’s business-pursuits exclusion because it
appears that he was involved in the enterprise. We agree that the policy exclusion
is unambiguous and broad enough to encompass him. Since severability clauses
are not drafted to negate policy exclusions, the existence of that clause in Farm
Bureau’s policy does not render the exclusion ambiguous. We conclude that the
availability of a business-risk endorsement was the only clear and unambiguous
protection to the Mays. Tortured constructions of clauses in an attempt to create an
aura of ambiguity are unavailing to create coverage.
We affirm the judgment of the Hardin Circuit Court.
ALL CONCUR.
-15-
BRIEF FOR APPELLANT:
BRIEF FOR APPELLEE:
Matthew C. Hess
Elizabethtown, Kentucky
Beth A. Lochmiller
Jonathan A. Rabinowitz
Elizabethtown, Kentucky
-16-
Some case metadata and case summaries were written with the help of AI, which can produce inaccuracies. You should read the full case before relying on it for legal research purposes.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.