Homeowners' insurance policy covers party held in warehouse

Law Reporter, Nov 2004

Erie Ins. Exch. v. Szamatowicz, 597 S.E.2d 136 (N.C. Ct. App. 2004).

A homeowners' insurance policy covers a birthday party held in a warehouse miles away from the house, because the warehouse was used in connection with the home, a North Carolina appellate court held.

Here, Szamatowicz had a homeowners' policy for his residence. He rented a warehouse for a birthday party so that he could accommodate many guests. A fire started at the warehouse, and two guests were injured. When they sued him, Szamatowicz asked his insurer to cover the claims. The insurer filed a motion seeking a declaration that the policy did not cover the fire. Szamatowicz and the injured partygoers requested summary judgment. The trial court granted their motion, and the insurer appealed.

Affirming, the appellate court noted the homeowners' policy defined an "insured location" to include any premises used in connection with a residential premises. The phrase "in connection with" has been applied broadly to locations where the incident occurred, the court said. Further, the court refused to limit the location to only "reasonable geographic limits" unless the policy expressly requires such a restriction. Here, the court concluded Szamatowicz rented the warehouse because it provided a more appropriate area for an activity that normally would have taken place in his residence. Thus, the use of the warehouse was in connection with his residence, as contemplated by the policy. The court further rejected the insurer's argument that the business pursuits exception, which excludes coverage for injuries arising out of or in connection with an insured's business activities, precludes coverage. The court determined cases cited by the insurer were inapplicable because they involved incidents that occurred at a place of business. Though the insured rented the space with an undefined future business enterprise in mind, he had not established a business there and did not collect a profit from his guests. Thus, he was not engaged in a business activity.

Appellees' Counsel

Mark A. Whitson, Raleigh, N.C.

* Adriana C. Corder, Greenville, N.C.