#25507-a-JKK
2010 S.D. 93

                          IN THE SUPREME COURT
                                  OF THE
                         STATE OF SOUTH DAKOTA

                                * * * *

WESTERN NATIONAL MUTUAL
INSURANCE COMPANY,                        Plaintiff and Appellee,

v.

VALERIE DECKER, as Guardian
Ad Litem of L.E.D., a minor,              Defendant and Appellant,

and

SARAH DECKER, formerly SARAH
WALDNER; and BENJAMIN WALDNER,            Defendants.

                                * * * *

                  APPEAL FROM THE CIRCUIT COURT OF
                     THE SECOND JUDICIAL CIRCUIT
                  MINNEHAHA COUNTY, SOUTH DAKOTA

                                * * * *

                       HONORABLE STUART L. TIEDE
                                Judge

                                * * * *

DOUGLAS M. DEIBERT of
Cadwell, Sanford, Deibert &
 Garry LLP                                Attorneys for plaintiff
Sioux Falls, South Dakota                 and appellee.

STEPHANIE E. POCHOP of
Johnson Pochop Law Office                 Attorneys for defendants
Gregory, South Dakota                     and appellants.

                                * * * *
                                          CONSIDERED ON BRIEFS
                                          ON OCTOBER 4, 2010

                                          OPINION FILED 12/08/10
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KONENKAMP, Justice

[¶1.]        A parent whose child was injured while in the care of a babysitter

brought suit to recover damages. In a declaratory judgment action, the insurance

company successfully argued that its policy did not cover injuries sustained in a

daycare-type business. We conclude that the circuit court correctly ruled that the

policy was unambiguous and the business exclusion applied.

                                   Background

[¶2.]        On January 11, 2001, Joe Decker left his eight-month-old child, L.E.D.,

with Sarah Decker. Sarah placed L.E.D. in his car seat thinking he would go to

sleep. Moments later she heard him make an odd noise. She took him out of the

car seat; he had stopped breathing; he was choking on a small object. Sarah called

for help, but ultimately the child suffered permanent brain damage.

[¶3.]        At the time, Sarah was living with Benjamin Waldner, her brother.

Benjamin owned the home. It was insured by Western National Mutual Insurance

Company. Benjamin allowed Sarah to live there rent free. She cleaned and cared

for the home while Benjamin, a trucker, was gone. Sarah’s fiancé, Mark Decker,

lived there also, along with others who rented rooms from Benjamin. Mark Decker

is Joe Decker’s cousin. Benjamin, Sarah, Mark, and Joe all came from the same

Hutterite colony.

[¶4.]        Sarah cared for several children in Benjamin’s home. She did not have

a name for her babysitting service or a written agreement with the parents about

when and how she would be paid. In the year 2000, she provided care for nine

children from six families. Sarah kept no records and filed no income tax returns.

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She recalled that she charged some parents $1.50 per hour. The hours Sarah cared

for the children varied, but she provided care five days a week, generally from nine

to five.

[¶5.]        In March 2000, Joe Decker and his wife Valerie began using Sarah to

care for their older child, B.D. L.E.D. was born on May 23, 2000. Sarah started

caring for him, according to Valerie, in August 2000. Sarah testified that when Joe

dropped off and picked up the children, she did not charge him, in honor of the

relationship between her fiancé, Mark, and his cousin, Joe. When Valerie picked

the boys up, however, Valerie would pay her and Sarah accepted the payments.

Valerie did not document these payments, but claimed $1,684 in child care credits

on their 2000 federal income tax return for amounts paid to Sarah. It is undisputed

that on the day of L.E.D.’s injury, Joe dropped off L.E.D. and Sarah did not charge

him for her services.

[¶6.]        A lawsuit on behalf of L.E.D. was brought against Sarah Decker and

Benjamin Waldner for negligence. Western National sought a declaratory judgment

that it had no duty to defend the action against Sarah or Benjamin or indemnify

them because the policy unambiguously excluded coverage for L.E.D.’s injury. Both

sides moved for summary judgment.

[¶7.]        Western National argued that when the accident occurred, Sarah was

operating a business, and the injury was sustained as a result of her business

activities, which were not covered under the express terms of the policy. Valerie, on

the other hand, asserted that Western National’s policy is ambiguous on the facts of




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the case, and the ambiguity should be construed against Western National and in

favor of coverage.

[¶8.]        The policy defines “Business” as “a trade, a profession, or an

occupation including farming, all whether full or part time. . . . ‘Business’ includes

services regularly provided by an ‘insured’ for the care of others and for which an

‘insured’ is compensated. A mutual exchange of like services is not considered

compensation.” The policy further states that “‘[b]usiness’ does not include: . . . b.

activities that are related to ‘business,’ but are usually not viewed as ‘business’ in

nature.” Under the section entitled “EXCLUSIONS THAT APPLY TO LIABILITY

COVERAGES,” the policy provides, “‘We’ do not pay for ‘bodily injury’ or ‘property

damage’ resulting from one or more of the following excluded ‘occurrences,’ . . . g.

‘bodily injury’ or ‘property damage’ resulting from activities related to the ‘business’

of an ‘insured,’ except as provided by Incidental Business Coverage.” No incidental

business coverage existed in this case.

[¶9.]        Finding the policy language unambiguous, the circuit court ruled that

Sarah regularly provided care for others for which she was compensated. In the

court’s view, it was immaterial that Sarah did not charge Joe and Valerie Decker

each time she cared for their children: she cared for children on a daily basis and

was “compensated” as part of her business pursuit. The court ruled inapplicable the

exception to the exclusion, which provided that “business” does not include

“activities that are related to ‘business,’ but are usually not viewed as ‘business’ in

nature.” In the court’s view, L.E.D. was injured as a result of the care provided

through Sarah’s operation of her business. Because Sarah was operating a business


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as defined under the policy, and the policy does not cover bodily injury caused by

the operation of a business, the court granted summary judgment for Western

National.

                                 Analysis and Decision

[¶10.]         On appeal, Valerie argues that Western National’s insurance policy is

ambiguous because the policy defines business to include certain activities while it

excludes “activities related to ‘business’ but are not usually viewed as ‘business’ in

nature[.]” Insurance contract interpretation is a question of law reviewed de novo.

Auto-Owners Ins. Co. v. Hansen Hous., Inc., 2000 S.D. 13, ¶ 10, 604 N.W.2d 504,

509 (citations omitted). According to Valerie, without any parameters or guidelines

on what activities Western National considers related to business but not usually

viewed as business in nature, the policy provisions are “open to multiple

                                                   
interpretations” and are, therefore, ambiguous.

[¶11.]         “Ambiguity in an insurance policy is determined with reference to the

policy as a whole and the plain meaning and effect of its words.” Nat’l Sun Indust.,

Inc. v. S.D. Farm Bureau Ins. Co., 1999 S.D. 63, ¶ 18, 596 N.W.2d 45, 48 (citation

omitted). In construing the provisions of an insurance contract, we do not seek

strained interpretations. Id. Moreover, “[t]he terms of an unambiguous insurance


        Both parties cite to and quote language from other courts analyzing when
         daycare-type services constitute a business under various insurance policies
         from other companies. In some of those cases, the insurance policies did not
         define business to include compensation. Rather, the courts were asked to
         interpret the phrase “business pursuit,” and in so interpreting discussed
         compensation and profit motive. Here, however, business is defined in the
         policy. Therefore, we will restrict our analysis of the facts to the definitions
         given under the policy.

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policy cannot be enlarged or diminished by judicial construction.” Am. Family Mut.

Ins. v. Elliot, 523 N.W.2d 100, 102 (S.D. 1994) (citation omitted).

[¶12.]       There are three policy provisions we must examine here. First, the

policy defines business to include “services regularly provided by an ‘insured’ for the

care of others and for which an ‘insured’ is compensated.” There is no dispute Sarah

is an insured. Therefore, if Sarah regularly provided care to others and was

compensated for such care, her activities satisfy the policy definition of a business.

The fact that the policy does not define “regularly” or “compensated” does not make

the policy ambiguous. “Ambiguity in an insurance policy is determined with

reference to the policy as a whole and the plain meaning and effect of its words.”

Nat’l Sun Indust., Inc., 1999 S.D. 63, ¶ 18, 596 N.W.2d at 48 (citation omitted).

[¶13.]       Valerie asserts that there is a material issue of fact in dispute on

whether Sarah’s care was regularly provided because Sarah had no set schedule —

she cared for children on a “those who came, came” basis. That Sarah did not have

a concrete schedule does not create a material issue of fact on whether her care of

others was “regularly” provided. From the undisputed evidence that Sarah

provided care, even on an unscheduled basis, Sarah’s care of others was regular in

nature. She cared for children in Benjamin’s home five days a week for over a year,

and during that time L.E.D. was injured. Her care of others did not involve isolated

acts, but was in fulfillment of a continuous, regular arrangement with the various

parents. Sarah was L.E.D.’s regular caregiver, a point Valerie does not dispute.

[¶14.]       Valerie next argues that because Sarah did not receive compensation

on the day of the accident, and on the days when Joe dropped off and picked up the


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children, Sarah was not “compensated” as required in the policy’s definition of a

business. In construing the term “compensated,” Valerie concentrates, not on the

fact that Sarah was paid for some of the care she provided, but instead on the fact

that Sarah did not charge Joe Decker because of the relationship between Joe and

Sarah’s fiancé, Mark.

[¶15.]       Whether Sarah was compensated for purposes of this insurance policy

depends on whether, under the policy language, Sarah’s activities with L.E.D. can

be isolated to the day L.E.D. was injured, or whether Sarah’s regular and

continuous child care must be examined in a more general sense. True, on the day

L.E.D. was injured, Sarah received no compensation for her care of L.E.D. Yet, to

disregard the fact that Sarah was paid in direct relation to her providing child care

on a regular basis would require us to narrowly define the word “compensated”

beyond its plain meaning and effect. There is no dispute that Valerie paid Sarah

$1,684 to care for her children in 2000. There is also no dispute that in regularly

providing care for others Sarah was compensated by the parents. Sometimes she

charged parents $1.50 per hour, per child, and other times less, if more than one

child in a family was cared for. Under a reasonable interpretation of the policy

definition of “business,” Sarah was regularly providing care for others for which she

was compensated.

[¶16.]       We must next construe a second policy provision. Valerie argues that

even if Sarah’s child care services can, in a broad sense, be regarded as a business

under the policy, the policy provides in its definition of business that business does

not include “activities that are related to ‘business’ but are not usually viewed as


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‘business’ in nature.” Because Sarah did not charge Joe for L.E.D.’s care on

January 11, 2001, and free child care as a favor to a family member or friend is not

usually viewed as business in nature, Valerie contends that the exception to the

exclusion applies.

[¶17.]       While babysitting on a single occasion for a family member or friend,

or even occasionally, with or without compensation, might not ordinarily be viewed

as business in nature, on January 11, 2001, Joe dropped L.E.D. off to be cared for by

Sarah as part of a continuing arrangement. The care that day was beyond a casual

accommodation for Joe or Valerie’s sake and was not an isolated or episodic favor to

a friend or family member. Sarah’s care for L.E.D. that day was related to her

business of providing child care and must be viewed as business in nature.

[¶18.]       Valerie offers multiple scenarios for when the activity of caring for

another would not be viewed as business in nature. These scenarios, however, are

not the facts of this case. And simply because child care can be viewed as business

in nature in one instance and not in another does not make the insurance policy

ambiguous. Under these facts, the policy is not “capable of more than one meaning

when viewed objectively[.]” See Ziegler Furniture and Funeral Home, Inc. v.

Cicmanec, 2006 S.D. 6, ¶ 16, 709 N.W.2d 350, 355 (citation omitted). With

reference to the entire policy, the “plain meaning and effect of the words” in the

policy are clear. See Econ. Aero Club, Inc. v. Avemco Ins. Co., 540 N.W.2d 644, 645

(S.D. 1995) (citation omitted). Sarah was caring for L.E.D. as part of her business

activity.




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[¶19.]       The third policy provision we must construe is: “A mutual exchange of

like services is not considered compensation.” Valerie argues that Sarah provided

care for free in exchange for the relationship between Joe and Mark and as part of

what was expected of her having been raised on a Hutterite colony. But there are

no facts to support the notion that Joe or Valerie exchanged any service equivalent

to what Sarah provided in caring for Joe and Valerie’s children. The mutual-

exchange-of-like-services clause does not apply here.

[¶20.]       Finally, Valerie argues that because her complaint asserts a claim

against Benjamin for negligent supervision — and he was not compensated and did

not provide regular care of others — the business exclusion clause is not implicated

against him. The insurance policy does not pay for bodily injury “resulting from

activities related to the ‘business’ of an ‘insured’” “regardless of other causes or

‘occurrences’ that contribute to or aggravate the ‘bodily injury[.]’” Even assuming

that Benjamin was somehow negligent or contributed to L.E.D.’s injury, the fact

that L.E.D.’s injury resulted from Sarah’s business activities precludes coverage.

[¶21.]       Affirmed.

[¶22.]       GILBERTSON, Chief Justice, and ZINTER, MEIERHENRY, and

SEVERSON, Justices, concur.




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