## Facts

- Sherry Bassett operated a licensed, compensated in-home day-care business for about nine years, caring for up to eight children daily.
- Bassett purchased a homeowner’s policy from Economy Fire & Casualty Co. through local insurance producers associated with Burnett Insurance Agency.
- Bassett disclosed to the producers that she babysat for pay; the producers allegedly knew she ran an ongoing day-care operation and Bassett relied on them to obtain appropriate coverage.
- During a child pick-up at Bassett’s home, a parent’s vehicle struck and injured three-year-old Dylan Jones in the driveway.
- Dylan (through a guardian) sued Bassett and the driver for personal injuries; Economy defended Bassett under a reservation of rights and filed a declaratory action to deny coverage based on the policy’s business-pursuits exclusion.
- Bassett and Dylan filed third-party claims against the producers alleging failure to procure appropriate insurance and related breach of duties.

## Issues

1. Whether Dylan’s injuries “arose out of” Bassett’s business pursuits so that the homeowner’s policy business-pursuits exclusion barred coverage.
2. Whether the insurance producers could be liable to Bassett and Dylan for failing to procure day-care/business coverage or for failing to advise of the need for such coverage.
3. Whether the producers’ knowledge or conduct could be imputed to Economy as the insurer’s agent to expand coverage despite the exclusion.

## Decision

- The court affirmed the declaratory judgment that Economy owed no coverage under the homeowner’s policy because the claim fell within the business-pursuits exclusion.
- The court affirmed that the producers were not agents of Economy in a manner that would bind Economy to coverage contrary to the policy’s unambiguous exclusion.
- The court reversed in part the judgment for the producers on the third-party claims and remanded, holding that factual disputes existed as to whether the producers breached duties in procuring coverage.

## Legal Principles

- A regular, compensated, licensed in-home day-care operation constitutes a “business pursuit” under a homeowner’s policy business-pursuits exclusion.
- An injury may “arise out of” business pursuits when it occurs in the course of, and is causally connected to, ordinary incidents of the business (including child pick-up activities at the premises).
- An insurer is not bound to provide coverage contrary to an unambiguous exclusion based solely on a producer’s knowledge or alleged failures in procurement or explanation.
- Insurance producers may owe insureds a duty to use reasonable skill and diligence to procure requested coverage and may face liability where the insured’s disclosed needs and reliance create triable questions about failure to obtain appropriate coverage.

## Conclusion

The appellate court held that the homeowner’s policy did not cover injuries to a day-care child during pick-up because the claim arose from the insured’s excluded business pursuits, but it allowed claims against the insurance producers to proceed where evidence suggested they knew of the day-care operation and may have failed to procure suitable coverage.


Economy Fire & Casualty Co. v. Bassett, 525 N.E.2d 539 (Ill. App. Ct. 5th Dist. 1988)