Business Person or Just Good Friend … Her Insurer Would Like to Know (NJ)

Homeowner’s policies contain a business exclusion.  So when an insurer believes that a claim arises out of a homeowner’s business activity, it is likely to decline coverage.  This scenario presented itself recently in Bay State Insurance Company v. Jennings The claim arose when a child was injured while under the care of the homeowner.  While shopping, the caretaker fell causing a shopping cart to topple with the toddler inside.  The toddler was injured and a claim presented.

During the course of discovery, the insurer learned that the homeowner was caring for the child while her parents worked.  The insured testified that she was not engaged in a child care business but rather was simply helping her best friend.  The child’s mother testified that she only gave her friend $35 per day to cover costs associated with food, diapers, etc.

After a hearing, the judge found that the homeowner was in fact not motivated for financial gain but rather by her love for her friend and the child.  She held that the business exclusion was inapplicable.  The appellate division affirmed and noted that receiving money for childcare does not establish a profit motive and that the insurer bore the burden to prove this motivation.

For more information contact Denise Fontana Ricci at