Hollingsworth v. Commercial Union Ins. Co. (1989)

JULIA HOLLINGSWORTH, Plaintiff and Appellant, v. COMMERCIAL UNION INSURANCE COMPANY et al., Defendants and Respondents

(Opinion by Arabian, J., with Klein, P. J., and Danielson, J., concurring.)

COUNSEL

Douglas Byron Haynes for Plaintiff and Appellant.

Smylie & Selman, Neil H. Selman and Jeffrey C. Segal for Defendants and Respondents.

OPINION

ARABIAN, J.

Introduction

"[T]he logic of words should yield to the logic of realities." (Di Santo v. Pennsylvania (1927) 273 U.S. 34, 43 [71 L. Ed. 524, 529, 47 S. Ct. 267] (Brandeis, J., dis.), overruled on other grounds in California v. Thompson (1941) 313 U.S. 109, 116 [85 L. Ed. 1219, 1223, 61 S. Ct. 930].) In this case, we must determine whether ear piercing constituted a "professional service," which defendant Commercial Union Insurance Company (Commercial) specifically excluded from coverage in an insurance policy held by plaintiff Julia Hollingsworth (Hollingsworth). On summary judgment, the trial court found the term unambiguous and ruled that Commercial had no duty to defend or to indemnify Hollingsworth. We affirm.

Factual and Procedural Statement

At all relevant times, Hollingsworth was the sole proprietor of Merle Norman Cosmetics-Eastland, a cosmetics store, operating under a merchants insurance policy originally issued by Commercial sometime prior to March 1984. In pertinent part, the policy provided coverage for bodily injury "caused by an occurrence insured by this policy ...." However, it also specified several types of losses excluded from its coverage: "Losses Not Covered Under Business Liability Coverage [¶] 8. Professional Services [¶] [Commercial Union] does not insure you for bodily injury or property damage due to the providing of, or failure to provide, any professional service. However, this exclusion does not apply to pharmacological services if you are doing business as a retail drugstore." The policy did not otherwise define the term "professional services."

On June 7, 1984, Jamie Marie Davis, a minor, had her ears pierced at the store by one of Hollingsworth's employees, which resulted in serious injury and disfigurement. Hollingsworth promptly notified Commercial of the [208 Cal. App. 3d 804] incident. On November 16, 1984, Davis's guardian ad litem filed suit for personal injuries and eventually named Hollingsworth and Merle Norman Cosmetics-Eastland as party defendants.

On March 6, 1986, Hollingsworth formally requested that Commercial defend her in the Davis action. Commercial denied coverage, informing her that the injury came within the policy's "professional services" exclusion. As a result, Hollingsworth brought suit against Commercial for tortious breach of contract, including breach of duty of good faith and fair dealing, breach of fiduciary duty, and breach of statutory duty.

Commercial moved for summary judgment based upon the terms of the insurance policy and the manner in which the injury to Davis occurred. In opposition, Hollingsworth submitted her own declaration describing her business and the ear-piercing operation she offered her customers. In pertinent part, she stated: "5. As of June, 1984, I employed two girls to sell our products and do ear-piercing. They were paid $3.65 per hour as a base wage, and a small percentage of their sales, which if added to their base wage amounted to about $4.00 to $4.50 per hour. When I hired them, I did not require that they have a high school education or that they have any special knowledge of my business or of ear-piercing.

"6. In March, 1984, the representative of the manufacturer of the ear-piercing tool visited my Studio and spent no more than twenty (20) minutes demonstrating to me and my employees how to use the tool. Neither I nor my girls took any classes or special training in ear-piercing and, to my knowledge, the manufacturer's representative had no special training, nor was he licensed. The tool was simple to operate, was non-electric, and required no particular skill.

"* * *

"8. We pierced ears for free if the customer purchased one set of earrings from us. We did not give any discount on the earrings if the customer did not need an ear-piercing. ..."

The trial court found that the exclusion for injuries resulting from the rendering of "professional services" related to "negligence that occurs within the particular occupation practice as contrasted with premises negligence or something like that which is clearly covered for other things." The court accordingly ruled that "professional services covers the ordinary activities of the work activities of the Hollingsworth's" and granted summary judgment in favor of Commercial. [208 Cal. App. 3d 805]

Issue Presented

The sole issue is whether the trial court properly determined that the policy exclusion for "professional services" included ear piercing as performed by the insured's employee.

Discussion

On summary judgment, the trial court must determine whether the evidence reveals any unresolved issue of material fact between the parties. (Code Civ. Proc., § 437c.) [1] However, in a case turning on the interpretation and application of a policy term, the issue on summary judgment becomes a mixed question of fact and law, particularly in light of the extensive and well established principles that inform our efforts on review: [2a] "Words used in an insurance policy are to be interpreted according to the plain meaning which a layman would ordinarily attach to them. Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists. [Citations.]

[3] "On the other hand, 'any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer and ... if semantically permissible, the contract will be given such construction as will fairly achieve its object of providing indemnity for the loss to which the insurance relates.' [Citations.] The purpose of this canon of construction is to protect the insured's reasonable expectation of coverage in a situation in which the insurer-draftsman controls the language of the policy. [Citations.] Its effect differs, depending on whether the language to be construed is found in a clause providing coverage or in one limiting coverage. [4] 'Whereas coverage clauses are interpreted broadly so as to afford the greatest possible protection to the insured [citations], exclusionary clauses are interpreted narrowly against the insurer. [Citations.]' [Citations.] '[A]n insurer cannot escape its basic duty to insure by means of an exclusionary clause that is unclear. ... "[A]ny exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect" [citation]; thus, "the burden rests upon the insurer to phrase exceptions and exclusions in clear and unmistakable language." [Citation.]' [Citation.]" (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal. 3d 800, 807-808 [180 Cal. Rptr. 628, 640 P.2d 764].)

Hollingsworth's policy provided basic property and liability coverage to her as the proprietor of a cosmetics sales business. Commercial based its denial of coverage on the specific exclusion of losses resulting from the rendering of "professional services": "[Commercial] does not insure you for bodily injury or property damage due to the providing of, or failure to [208 Cal. App. 3d 806] provide, any professional service." The policy does not elsewhere define "professional service"; nor has any court judicially construed a similar policy term with reference to ear piercing.

[5a] In the absence of an express policy explanation or authoritative interpretation, Hollingsworth argues she was entitled to assume that the ear piercing performed by her employees was an insured risk, relying substantially on Marx v. Hartford Accident and Indemnity Company (1968) 183 Neb. 12 [157 N.W.2d 870]. There, the court stated, "A 'professional' act or service is one arising out of a vocation, calling, occupation, or employment involving specialized knowledge, labor, or skill, and the labor or skill involved is predominantly mental or intellectual, rather than physical or manual. [Citations.]" (157 N.W.2d at p. 872.) Hollingsworth also cites to standard dictionaries, which generally define "profession" as "a calling requiring specialized knowledge and often long and intensive academic preparation." (Webster's Ninth New Collegiate Dict., p. 939.) Since ear piercing is not regulated by the state, does not require licensing, and consists simply of mechanically operating the ear-piercing tool, she contends that it does not qualify as a "professional" service under the foregoing definitions. Alternatively, she contends that the term is at least ambiguous and must be construed in favor of coverage.

Commercial counters by drawing a distinction between engaging in a "profession" and rendering "professional" services, the latter applying in a wider variety of situations and depending to a greater extent upon the circumstances to which it applies. [6] After extensive review, we conclude that an insured's claim of coverage for "professional services" must be evaluated in light of all the relevant circumstances in which that claim arises, including, but not limited to, the term's commonly understood meaning, the type and cost of the policy, and the nature of the enterprise.

Several factors lead us to this conclusion. [2b] First, since we give primary consideration to the insured's reasonable expectation of coverage, the common understanding of the language in question becomes our initial point of reference. (See, e.g., Reserve Insurance Co. v. Pisciotta, supra, 30 Cal.3d at p. 810.) The dictionary definition of "professional" encompasses a broad range of activities beyond those traditionally considered "professions," such as medicine, law, or engineering. (See also Exner v. American Medical Assn. (1974) 12 Wn. App. 215 [529 P.2d 863, 866, 75 A.L.R.3d 603].) That definition includes "2 a: participating for gain or livelihood in an activity or field of endeavor often engaged in by amateurs