NYCM Ins. Co. v. Maroney, 6 N.Y.3d 491 (2006)
An “arising out of” clause in an insurance policy requires only a causal connection, not proximate cause, between the injury and the risk associated with the premises or activity.
Summary
This case concerns the interpretation of an “arising out of” clause in a homeowner’s insurance policy. The New York Court of Appeals held that the clause, excluding coverage for injuries “arising out of a premises,” requires only a causal connection between the injury and the premises, not necessarily proximate cause. The court found that the injury sustained by a child who fell from a horse on the insured’s property was causally connected to the horse-boarding activity, thus triggering the exclusion. The dissent argued that the exclusion should be construed narrowly against the insurer and that a causal connection to the conduct of the insured, not merely the premises, should be required. The dissent also addressed the business pursuits exclusion, arguing the insurer had waived its right to invoke it and that, on the merits, this exclusion did not apply.
Facts
The Maroneys operated a horse-boarding business on their property. A child, Kayla Safford, was injured when she fell from a horse on the property. The Saffords sued the Maroneys, alleging negligent supervision. NYCM Insurance Company, the Maroneys’ homeowner’s insurer, sought a declaratory judgment that it had no duty to defend or indemnify the Maroneys because the policy excluded coverage for injuries “arising out of a premises” used for business purposes and for “business pursuits.” The policy excluded coverage for injuries “arising out of business pursuits of an insured or the rental or holding for rental of any part of any premises by an insured.”
Procedural History
The Supreme Court denied NYCM’s motion for summary judgment and granted summary judgment to the Maroneys, finding that the exclusion did not apply. The Appellate Division reversed, holding that the “arising out of” exclusion did apply, and therefore NYCM had no duty to defend or indemnify. The Court of Appeals affirmed the Appellate Division’s order.
Issue(s)
Whether the “arising out of” clause in the homeowner’s insurance policy requires only a causal connection between the injury and the premises, or whether it requires proximate cause?
Holding
Yes, the “arising out of” clause requires only a causal connection, because the phrase is broader than proximate cause and only requires that the injury originate from, grow out of, or have a substantial nexus with the premises or the business activity conducted there.
Court’s Reasoning
The Court of Appeals reasoned that the phrase “arising out of” is broader than “caused by” and requires only a showing that the injury originated from, grew out of, or had a substantial nexus with the premises or the business activity. The court rejected the argument that the exclusion required proximate cause, stating that such a requirement would render the “arising out of” language superfluous. The court found that the child’s injury was causally connected to the horse-boarding business because the injury occurred while the child was riding a horse on the property, which was integral to the business. Therefore, the “arising out of” exclusion applied, and NYCM had no duty to defend or indemnify the Maroneys.
The dissenting judge argued that the phrase “arising out of a premises” should be read to refer to injuries causally connected to a dangerous condition of the premises, and that, at the very least, the clause was ambiguous and should be construed against the carrier. The dissent further argued that NYCM waived its right to invoke the business pursuits exclusion because its notice of disclaimer was insufficiently specific, referring only to a home day care business and not the horse-boarding business. Finally, the dissent contended that the business pursuits exclusion contained an exception for “activities which are usual to non-business pursuits,” and that the plaintiff’s claim of negligent supervision qualified under this exception.