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11/30/95 ALLSTATE INSURANCE COMPANY v. HELENE

November 30, 1995

ALLSTATE INSURANCE COMPANY, PLAINTIFF-APPELLEE,
v.
HELENE SMILEY; DAVID SMILEY; HELENE SMILEY, AS MOTHER AND NEXT FRIEND OF KRISTEL SMILEY; AND VENTON JAMES CARLSTON, SPECIAL ADM'R OF THE ESTATE OF VENTON CONNOR CARLSTON, DECEASED, DEFENDANTS-APPELLANTS.



Appeal from the Circuit Court of Du Page County. No. 94-MR-0047. Honorable Bonnie M. Wheaton, Judge, Presiding.

Rehearing Denied January 30, 1996. Released for Publication January 30, 1996.

The Honorable Justice Bowman delivered the opinion of the court: Geiger and Colwell, JJ., concur.

The opinion of the court was delivered by: Bowman

The Honorable Justice BOWMAN delivered the opinion of the court:

Plaintiff, Allstate Insurance Company (Allstate), brought this complaint for declaratory judgment against its insureds, Helene Smiley, David Smiley, and Helene Smiley, as mother and next friend of Kristel Smiley (the Smileys), and the plaintiff in the underlying personal injury action, Venton James Carlston (Carlston), special administrator of the estate of Venton Connor Carlston. Allstate sought a declaration that its homeowners' and personal umbrella policies (collectively, the policies) it issued to the Smileys did not afford coverage for the claims asserted against them by Carlston. The trial court granted Allstate's motion for summary judgment, and the Smileys and Carlston (collectively, the defendants) filed this timely appeal. We affirm in part, reverse in part, and remand.

BACKGROUND

In the early 1980's, the Smileys purchased a homeowners' insurance policy from Allstate. In 1987, Helene Smiley began providing day-care services for children at her home. In 1988, she purchased a personal umbrella policy from Allstate because, according to her deposition testimony, she wanted coverage for her expanding child-care business. According to Helene Smiley, she called Bonnie Perton, her Allstate agent, and told her that she thought it was a "good decision" to get an umbrella policy "considering my own children and the other children that I cared for." Perton told her the policy would be "taken care of." At her deposition, Perton stated that she could not remember the substance of this conversation. However, when asked what her response would be to an applicant's comment that she wanted a personal umbrella policy because of her own children and the children she cared for, Perton replied that she would question the applicant regarding whether a business activity was being conducted.

On July 29, 1993, Venton Connor Carlston (Connor), a 20-month-old infant whom Helene Smiley was caring for, fell into the Smileys' backyard swimming pool and drowned. The swimming pool was separated from the back deck of the Smileys' house by a fence and gate. At the time of Connor's death, both the homeowners' and personal umbrella policies were in effect. Carlston, as special administrator of Connor's estate, sued the Smileys. The complaint alleged that Connor had been in the care, custody, and control of Helene Smiley at the time of his death and that Helene Smiley's negligent acts and/or David Smiley's negligent failure to maintain properly the premises caused his death.

Defending the lawsuit under a reservation of rights, Allstate brought this complaint for declaratory relief against the Smileys and Carlston. In its complaint, Allstate alleged that Helene Smiley provided day-care services for compensation in her home at the time of Connor's death. Allstate asked for a declaration that (1) it was not obligated to defend or indemnify the Smileys in the underlying personal injury action; and (2) the homeowners' and personal umbrella policies did not provide coverage to the Smileys for the claims made against them by Carlston.

In support of its position, Allstate invoked the following provisions from the homeowners' policy:

"Losses We Cover

Subject to the terms, limitations and conditions of this policy, Allstate will pay damages which an insured person becomes legally obligated to pay because of bodily injury or property damage arising from an accident covered by this part of the policy.

***

Losses We Do Not Cover

***

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

We do cover the occasional or part-time business activities of an insured person who is a student under 21 years of age." (Emphasis in original.)

The homeowners' policy also provides the following definition:

"5. " Business " means:

a) any full or part-time activity of any kind engaged in for economic gain and the use of any part of any premises for such purposes. The providing of home day care services to other than an insured person or relative of an insured person for monetary or other compensation is also business. However, the mutual exchange of home day care services is not considered compensation." (Emphasis in original.)

Allstate also invoked the following provisions from the personal umbrella policy:

"When We Pay

Allstate will pay when an Insured becomes legally obligated to pay for personal Injury or property damage caused by an occurrence.

***

Losses We ...


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