This opinion will be unpublished and

may not be cited except as provided by

Minn. Stat. § 480A.08, subd. 3 (2004).






North Star Mutual Insurance Company,





Jessica M. Linn,



Korey James Young (a minor),



Filed June 21, 2005

Reversed and remanded

Kalitowski, Judge


Stearns County District Court

File No. C2-04-1393


Marcus J. Christianson, Jorun Groe Meierding, Maschka, Riedy & Ries, 201 North Broad Street, Suite 200, P.O. Box 7, Mankato, MN 56002-0007 (for respondent)


Robert E. Pottratz., 502-B East Main Street, P.O. Box 172, Melrose, MN 56352-0172 (for appellant)


            Considered and decided by Randall, Presiding Judge; Kalitowski, Judge; and Huspeni, Judge.*

U N P U B L I S H E D   O P I N I O N


            This appeal, which is brought on behalf of appellant, one-year-old Korey Young, challenges the district court’s decision to grant summary judgment in favor of respondent North Star Mutual Insurance Company.  Appellant, who was injured while in the care of a home daycare provider, contends the district court erred in holding that as a matter of law appellant’s injuries were excluded from coverage under the homeowners’-liability policy issued by respondent.  We reverse and remand.



            On appeal from summary judgment, this court asks whether there are any genuine issues of material fact and whether the district court erred in its application of the law.  State by Cooper v. French, 460 N.W.2d 2, 4 (Minn. 1990).  The parties agree on the facts as set forth by the district court, leaving only questions of law for this court to review.  A reviewing court is not bound by and need not give deference to a district court’s decision on a purely legal issue.  Modrow v. JP Foodservice, Inc., 656 N.W.2d 389, 393 (Minn. 2003).

            Importantly, we note that “[a]n insurer has the burden of proving that a policy exclusion applies.  In interpreting a policy exclusion, any ambiguity in the language of the policy must be construed in favor of the insured.”  Henning Nelson Constr. Co. v. Fireman’s Fund Am. Life Ins. Co., 383 N.W.2d 645, 652 (Minn. 1986) (citation omitted).

            Jessica Linn operated a daycare business out of her home.  She had two children of her own at home and was paid to provide care for four additional children, including appellant.  Respondent issued a homeowners’-liability policy to Linn covering the period from August 26, 2003, to August 26, 2004.  On September 25, 2003, appellant was sleeping in a back bedroom.  While Linn vacuumed her kitchen floor, Linn’s two-year-old son walked into the back bedroom and bit appellant several times.  Appellant’s injuries were significant and required emergency medical treatment.

            A personal-injury action was filed against Linn on appellant’s behalf.  Respondent brought a declaratory-judgment action against Linn and appellant, seeking a judgment that “Linn is entitled to neither indemnity nor defense in connection with claims brought against her by [appellant] and . . . that any injuries sustained by [appellant] are not covered by the policy of insurance issued by [respondent] to” Linn.  Respondent later filed a motion for summary judgment, arguing that the policy’s business-pursuits exclusion precluded coverage.  Appellant opposed respondent’s motion, arguing that the business-pursuits exclusion does not apply and that because the underlying claim is within insurance coverage, summary judgment should be granted in favor of appellant.  In granting respondent’s motion for summary judgment, the district court determined that the policy’s business-pursuits exclusion applied and that the policy’s exception to the exclusion did not.

            The homeowners’ policy at issue includes coverage for “all sums for which an ‘insured’ is liable by law because of ‘bodily injury’ . . . caused by an ‘occurrence’ to which this coverage applies.”  The policy states that respondent “will defend a suit seeking damages if the suit resulted from ‘bodily injury’ . . . not excluded under this coverage.”  The policy contains a business-pursuits exclusion, which states that the policy does not apply to bodily injury “resulting from activities related to the ‘business’ of an ‘insured’, except as provided by Incidental Business Coverage.”  Linn did not purchase the Incidental Business Coverage.  But the policy also includes an exception to the business-pursuits exclusion, which states that the term “business” does not include “activities that are related to ‘business’, but are usually not considered ‘business’ activities.” 

            Appellant contends that the activity that gave rise to liability here was Linn’s failure to supervise her own child and that the district court should have applied the exception to the exclusion because such an activity is not usually considered a business activity.  To support this argument, appellant relies on Bankers Standard Insurance Co. v. Olwell, 309 N.W.2d 799 (Minn. 1981).  In Bankers, a couple provided daycare in their home for two children.  309 N.W.2d at 800.  While in the couple’s care, the two children wandered into the street and were injured when struck by a car.  Id.  Like the case at hand, the couple in Bankers had a homeowners’-insurance policy with a business-pursuits exclusion and an exception to the exclusion for activities “which are ordinarily incident to non-business pursuits.”  Id. at 800-01.  In Bankers, the supreme court held that the exception to the business-pursuits exclusion applied and the children were entitled to coverage under the homeowners’ policy. 801-02.  In doing so, the supreme court reasoned that “it is difficult to conceive of an activity more ordinarily incident to a noncommercial pursuit than home care of children.” 802 (quoting Crane v. State Farm Fire & Cas. Co., 5 Cal.3d 112, 117, 485 P.2d 1129, 1131, 95 Cal. Rptr. 513, 515 (1971)).

            Here, the district court recognized that “[t]he present fact situation is very similar to the facts in Bankers.”  But the district court held that Bankers had been overruled, at least in part, by Zimmerman v. Safeco Insurance Co. of America, 605 N.W.2d 727 (Minn. 2000).  In Zimmerman, the president and sole shareholder of an airport-taxi business sought a declaratory judgment that his insurer had an obligation to defend and indemnify him in a sexual-harassment lawsuit under his homeowners’ policy.  605 N.W.2d at 728.  The supreme court held that coverage was properly denied and declined to apply the business-pursuits exception. 731. 

            Contrary to the district court’s determination, we conclude that Zimmerman did not overrule Bankers.  Although the Zimmerman court commented negatively on the overly broad holding in Bankers, the court acknowledged that the Bankers court “held that the exception to the exclusion applied because the activity was normally related to a nonbusiness pursuit.”  Zimmerman, 605 N.W.2d at 731.  And instead of overruling Bankers, the Zimmerman court merely declined to apply the exception to a sexual-harassment case “where, by definition, the liability-creating conduct is based upon the employment relationship in the business setting.”  Id.  The Zimmerman holdingis distinguishable here.  Unlike Zimmerman, where the court found that sexual harassment “can only happen in the workplace,” id., the issue of Linn’s liability for her child’s act did not depend on the business setting.  Rather, Linn’s liability and respondent’s coverage obligation would have been at issue whether Linn’s child bit a daycare child or a non-daycare child in or out of the daycare setting.  Thus, the facts here provide even a stronger case for applying the exception to the exclusion than the broader holding under the facts of Bankers.

            Moreover, in addition to our obligation to apply the supreme court’s holding in Bankers, our decision here is based on our obligation to construe any ambiguity in a policy exclusion in favor of the insured.  See Henning, 383 N.W.2d at 652.  Notwithstanding the Bankers opinion, respondent chose to draft a homeowners’ policy with an exception to the business-pursuits exclusion for “activities that are related to ‘business,’ but are usually not considered ‘business’ activities.”  And although the business-pursuits exclusion would otherwise apply to occurrences arising out of Linn’s daycare business, the exception creates an ambiguity when applied to the occurrence at issue here.  In construing the exception to the exclusion in favor of the insured, we conclude that respondent has a duty to defend Linn in the underlying suit.  See Jostens, Inc. v. Mission Ins. Co., 387 N.W.2d 161, 165-66 (Minn. 1986) (stating that an insurer has a duty to defend claims that are “arguably” covered by a policy).

            We conclude that because respondent has a duty to defend Linn under the homeowners’ policy, the district court erred in granting summary judgment in favor of respondent.  We reverse and remand for further proceedings consistent with this opinion. 

            Reversed and remanded.

*  Retired judge of the Minnesota Court of Appeals, serving by appointment pursuant to Minn. Const. art. VI, § 10.