The Home Daycare and the Icy Sidewalk
Maria owns a detached home in Hamilton insured under a standard homeowners form with $2 million personal liability and a $1,000 deductible. She has run a licensed home daycare for six children for three years but never told her broker; the policy contains a 'business pursuits' exclusion. In February, a parent slips on ice on the municipal sidewalk in front of Maria's house and fractures a wrist. The city had not cleared the sidewalk for four days. Two weeks later, a daycare child falls from a trampoline in Maria's backyard and breaks an arm; Maria had installed the trampoline last summer and did not disclose it. The insurer denies both claims, citing the business pursuits exclusion and a 'trampoline exclusion' in the homeowners form. Maria says her broker told her 'a home policy covers everything at the house.'
1. Analyze whether the insurer's denial of the parent's sidewalk claim is likely to succeed, considering the business pursuits exclusion, occupiers' liability, and municipal responsibility.
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The claim is against Maria, but the sidewalk is municipal property. Under Ontario's Occupiers' Liability Act, the city is the occupier of the sidewalk and owes a duty to keep it reasonably safe; a homeowner is generally not responsible for a municipal sidewalk merely because it abuts the property. Maria may be liable if she created the hazard, for example by directing downspouts or snow onto the sidewalk.
The business pursuits exclusion is a second hurdle: a home daycare is a business, and a parent's fall during drop-off or pick-up arises out of that business. Homeowners policies typically exclude liability arising from business pursuits, so the insurer has a strong argument that it owes no defence or indemnity. The broker's alleged statement that 'a home policy covers everything' does not create coverage; it may create an E&O problem.
2. Analyze coverage for the trampoline injury and explain the effect of the non-disclosure.
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Personal liability coverage under a homeowners form responds to accidental bodily injury on the premises, but the policy may contain a trampoline exclusion or a disclosure requirement. If the trampoline exclusion applies, the insurer owes no defence or indemnity for the child's injury. If there is no specific exclusion, the insurer may still argue material non-disclosure: Maria installed the trampoline last summer and did not tell the broker. A fact is material if a reasonable insurer would want to know it in deciding whether to issue the policy or what premium to charge. A trampoline used by daycare children is clearly material. The insurer's remedy could be denial or voiding the policy. Maria should report the claim immediately, cooperate, and not repair or remove evidence.
3. What should the broker have done at each renewal, and what should Maria do now?
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At each renewal the broker should have asked about business activities at the home, including the daycare, the number of children, hours, and any employees; about trampolines, pools, and other attractive nuisances; and about any changes. The broker should have documented the answers and placed the risk with a homeowners insurer that permits home daycare, or with a commercial general liability policy or a daycare endorsement.
Maria should notify her insurer in writing, cooperate with the investigation, and seek independent advice. She may have an E&O claim against the broker if the broker failed to ask or failed to place proper coverage. The broker should notify the E&O insurer and preserve the file.