An individual who operated his construction company out of an office in his home was not entitled to coverage under his umbrella liability insurance policy for an underlying judgment rendered in a lawsuit against him by an employee who had been attacked by a masked gunman while at work and later was detained by the insured so that she would not report the incident to the police, a Connecticut appellate panel held. The policy’s business pursuits exclusion applied to bar coverage for the employee’s underlying suit because there was no reason to believe that she would have been assaulted or detained had she not been at the office performing her duties as an employee of the insured’s business, the panel advised, reversing the trial court’s determination that the exclusion was inapplicable (Nationwide Mutual Insurance Co. v. Pasiak, officially released November 10, 2015, Prescott, E.).

Background. While working for Jeffrey Pasiak’s construction company in an office located on the second floor of his home, Sara Socci was accosted at gunpoint by a masked intruder who entered the office and demanded that she open the safe. When she told the intruder that she could not provide the combination, he led her into a bedroom, tied her hands, and blindfolded/gagged her. At one point, he pointed his gun at her head and threatened to kill her family if she did not give him the combination.

Pasiak returned home during the incident and was attacked by the intruder. The two men struggled and Pasiak pulled off the intruder’s mask, revealing him to be a friend. Pasiak inquired about the whereabouts of Socci, at which point the friend led Pasiak to the bedroom where she was tied up. Pasiak untied Socci and attempted to calm her, but he refused to call the police and he let his friend leave the premises. Socci also wanted to leave, but Pasiak also told her to stay there with him and not to call the police. She remained with him for several hours, afraid that she or her family would be harmed if she left. Only later did Pasiak let her go home. Eventually, the police were contacted, leading to the intruder’s arrest and subsequent conviction.

Socci developed post-traumatic stress disorder as a result of the incident, necessitating that she receive extensive therapy and resulting in her inability to return to work. She and her husband filed suit against Pasiak, alleging causes of action for false imprisonment, negligence, emotional distress, and loss of consortium. The jury returned a general verdict in the Soccis’ favor, awarding Sara compensatory damages exceeding $600,000 and punitive damages of $175,000. Sara’s husband was awarded $32,500 for loss of consortium.

At the time of the home-office invasion, Pasiak held three insurance policies issued by Nationwide Mutual Insurance Co. and/or Nationwide Mutual Fire Insurance Co. (hereinafter collectively, “Nationwide”): an automobile policy, a homeowners policy, and a personal umbrella policy. Nationwide provided Pasiak with a defense of the Soccis’ lawsuit under a reservation of rights, and it filed declaratory judgment action against Pasiak seeking a determination that it had no coverage duty with respect to the underlying lawsuit. Both parties filed summary judgment motions and the trial court ruled in Pasiak’s favor, concluding that Nationwide had a duty to defend its insured because the allegations in the underlying complaint fell within the conduct covered under both the homeowners policy and the umbrella policy.

The trial court initially issued no ruling on the insurer’s duty to indemnify, however, so Nationwide again filed a summary-judgment motion on that issue. The trial court granted the insurance company’s motion with respect to the homeowners policy but denied it as to the umbrella policy, concluding that the latter contained broader coverage than the former with respect to emotional distress and that none of the exclusions cited by the insurer precluded indemnification as a matter of law. A bench trial ensued on the issue of indemnification under the umbrella policy, the trial court concluded that the policy’s business pursuits exclusion did not apply to bar coverage of the claims in the underlying lawsuit, and the insurer appealed the trial court’s decision.

Policy language. The umbrella liability insurance policy’s business pursuits exclusion stated as follows: “[e]xcess liability and additional coverages do not apply to … [a]n occurrence arising out of the business pursuits or business property of an insured.” The policy defined “occurrence” as “an accident including continuous or repeated exposure to the same general conditions. It must result in bodily injury, property damage, or personal injury caused by an insured.” The term “business” was defined as “a trade, profession, occupation, or employment including self-employment, performed on a full-time, part-time or temporary basis.”

The parties’ contentions. The insurance company argued on appeal that the language of the business pursuits exclusion established a broad causal standard and that the trial court had focused improperly upon the insured’s motivations rather than upon a determination of whether his conduct had arisen out of his business pursuits. According to the insurer, the incident giving rise to the claim—the insured’s refusal to let his employee leave his presence after the incident and her resulting injuries—arose out of the operation of his construction business. The employee would not have been attacked by the insured’s friend and, consequently, would not have been threatened and restrained had she not been at the office of the insured’s construction company and performing her duties as an employee, the insurer asserted. The insured countered that the trial court appropriately concluded that the exclusion was inapplicable because there was no causal connection between his business and his conduct.

Business pursuits exclusion. Although the umbrella policy did not explain what constituted “business pursuits,” relevant case precedent from the state’s highest court instructs that the phrase contemplates a continuous or regular activity engaged in by the insured for the purpose of earning a profit or a livelihood. In that regard, the record established that the insured’s construction company was sufficiently continuous and profit-driven to satisfy the test established under prior case law.

As for the issue of whether the employee’s injuries arose out of the insured’s operation of his construction business, there was no dispute that the employee was at the office location of the insured’s construction business performing duties for that business at the time she was assaulted by the masked intruder. The insured arrived thereafter and, after initially struggling with the attacker, assisted him in concealing his actions by detaining the employee until she agreed to refrain from calling the police. Thus, the sine qua non of the insured’s tortious conduct was the employee’s presence at his home office while fulfilling her responsibilities as his employee.

Stated alternatively, had she not been at the office performing her duties as an employee of the insured’s business, there was no reason to believe that she would have been assaulted by the intruder or detained by the insured. Indeed, there was no other reason for her presence on the premises, and her acquiescence in obeying the insured’s commands not to leave after the attack were, in part, a function of their employer-employee relationship. Accordingly, the insured’s conduct and his employee’s resulting injuries were connected with, had their origins in, grew out of, flowed from, or were incident to the insured’s business pursuits.

The phrase “arising out of” establishes an expansive standard of causation. Thus, whether the occurrence claimed under the umbrella policy arose out of the insured’s business pursuits was not dependent on his state of mind as the trial court had determined. Rather, it was sufficient for the insurer to demonstrate that the tortious acts and resulting injuries in the underlying action were connected with, had their origins in, grew out of, flowed from, or were incident to the insured’s business pursuits to establish the necessary causal nexus. As such, because the “occurrence” underlying the insured’s claim for indemnification arose out of his business pursuits, the trial court’s judgment was reversed and the case was remanded with direction to render judgment for the insurance company.

The case is No. AC 36922.  

Attorneys: Charles W. Fortune (Seiger Gfeller Laurie LLP) for Nationwide Mutual Insurance Co. and Nationwide Mutual Fire Insurance Co. David J. Robertson (Heidell, Pittoni, Murphy & Bach, LLP) for Jeffrey S. Pasiak.

Companies: Nationwide Mutual Insurance Co.; Nationwide Mutual Fire Insurance Co.