RENDERED: JUNE 17, 2021
TO BE PUBLISHED
Supreme Court of Kentucky
2020-SC-0061-DG
JULIE G. THOMAS, INDIVIDUALLY AND APPELLANTS
AS NEXT FRIEND FOR S.T., A MINOR;
DONALD F. THOMAS, INDIVIDUALLY AND
AS NEXT FRIEND FOR S.T., A MINOR;
ELIZABETH RENNER, AS NEXT FRIEND
AND PARENT OF C.R., A MINOR AND
JEFFERY RENNER AS NEXT FRIEND AND
PARENT OF C.R., A MINOR
ON REVIEW FROM COURT OF APPEALS
V. NOS. 2017-CA-1875 & 2014-CA-1876
MADISON CIRCUIT COURT NOS. 16-CI-0133 & 16-CI-0169
STATE FARM FIRE AND CASUALTY APPELLEES
COMPANY; BESSIE PERKINS AND JERRY
PERKINS
OPINION OF THE COURT BY JUSTICE VANMETER
AFFIRMING
The issue in this case is whether Jerry and Bessie Perkinses’
homeowner’s insurance with State Farm Fire and Casualty Insurance
Company provided coverage as to Bessie’s in-home child care services. The
Madison Circuit Court granted summary judgment in favor of State Farm, and
the Court of Appeals affirmed. We likewise affirm.
I. Factual and Procedural Background
Two couples, Donald and Julie Thomas and Jeffrey and Elizabeth
Renner, were each expecting a child. Jerry Perkins informed Donald Thomas
that Jerry’s wife, Bessie, had been recently dismissed from her position at ABC
Daycare and was looking to provide childcare services in her home at a rate of
eighty dollars per week. Jerry told Donald that Bessie’s termination was a
result of the company’s decision to terminate older employees because they
commanded higher compensation. This statement was a lie. Shortly
thereafter, Donald informed Jeffrey Renner of the Perkinses’ offer.
Both couples agreed to the proposed arrangement and Bessie Perkins
began caring for S.T. and C.R. in the summer of 2015. In November 2015,
Jeffrey noticed that C.R. appeared sick when he collected the child from the
Perkinses’ home. When C.R. had not improved by the morning, the Renners
took him to the pediatrician, where C.R. began twitching. Following a battery
of tests, the pediatrician diagnosed C.R. with “shaken baby syndrome.” The
diagnosis prompted a report to social services and a law enforcement
investigation, in which a forensic physician diagnosed the Thomas child, S.T.,
with two leg fractures.
In the resulting civil action against Bessie and Jerry Perkins, the
Renners claimed that C.R. suffered permanent brain damage, among other
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conditions, which was the direct result of the Perkinses’ conduct.1 As the
Perkinses’ insurer, State Farm filed an intervening complaint, seeking
summary judgment on grounds that the Perkinses’ behavior implicated the
“child care services exclusion,” relieving State Farm of liability. Meanwhile, the
Thomases filed a separate complaint against the Perkins, alleging negligent
behavior by both Perkins and grossly negligent behavior by Bessie. State
Farm, similarly, sought summary judgment as to the Thomases’ case. The
Madison Circuit Court entered a declaratory judgment in State Farm’s favor as
to both sets of plaintiffs, finding that the child care services exclusion applied.2
In the consolidated appeal which followed, the appellants challenged only
the coverage determinations as to Jerry Perkins. The Court of Appeals affirmed
the trial court’s application of the child care exclusion as to him. Thereafter,
this Court granted discretionary review.
II. Standard of Review
On appeal, the standard of review for a summary judgment is to
ascertain whether the trial court correctly determined that no genuine issue of
material fact existed, entitling the moving party to judgment as a matter of law.
Coomer v. CSX Transp., Inc., 319 S.W.3d 366, 370–71 (Ky. 2010). In
1 The concurrent criminal action against Bessie Perkins ended when she pled
guilty to assault in the first degree and two counts of criminal abuse in the first degree
for which she is currently serving a prison sentence.
2 Additionally, the trial court determined that State Farm’s “intentional acts
exclusion” precluded coverage for claims regarding Bessie’s conduct. The trial court
also granted summary judgment in favor of State Farm on the bad faith claims.
Neither plaintiff appealed either decision.
3
conducting our review, we give no deference to the rulings below because only
legal questions are involved. De novo review extends to the trial court’s
interpretation of the insurance contract as a matter of law. Cincinnati Ins. Co.
v. Motorists Mut. Ins. Co., 306 S.W.3d 69, 73 (Ky. 2010).
Additionally, we adhere to our long-held standard that when we interpret
insurance contracts, perceived ambiguities and uncertainties in the policy
terms are generally resolved in favor of the insured. Kentucky Ass’n of Cnties.
All Lines Fund Tr. v. McClendon, 157 S.W.3d 626, 630 (Ky. 2005). When
analyzing challenged terms for clarity we note that the terms of insurance
contracts have no technical legal meanings and must be reasonably interpreted
as they would be understood by a lay reader. Id. If, after our analysis, we
determine that the policy is unambiguous and reasonable, then the contract
terms will be enforced. Id.
III. Analysis
Appellants assert that because they only appealed with regards to Jerry,
we must interpret the policy exclusion at issue as either inclusive, providing
coverage; or ambiguous, providing coverage.3 We disagree.
3 Notably, neither Jerry nor Bessie Perkins is claiming insurance coverage in
this appeal.
4
Our analysis begins by addressing the relevant policy language.4 In
section II of the policy—entitled EXCLUSIONS— State Farm excludes coverage
for:
[A]ny person who makes a claim because of bodily injury to any
person who is in the care of any insured because of child care
services provided by or at the direction of:
(a) any insured;
(b) any employee of any insured; or
(c) any other person actually or apparently act[]ing on behalf of any
insured.
This exclusion does not apply to the occasional child care services
provided by any insured, or to the part-time child care services
provided by any insured who is under 19 years of age[.]
Despite Appellants’ assertions to the contrary, the term “any insured” is
unambiguous. Applying the analytical framework laid out in McClendon, that
insurance terminology does not carry the imprimatur of a legal definition, we
must interpret the policy as a reasonable lay consumer would. 157 S.W.3d at
630. In doing so we note that no ambiguity exists as to who the “insured[s]”
are because both Jerry and Bessie were specifically named in the policy
declarations as an “insured”. Similarly, in context, “any” cannot be defined
arcanely, as Appellants insist, to apply to Jerry and Bessie as if they carried
two identical, but separate, policies from State Farm.
Instead, the far more natural reading of the exclusion is that it applies to
either Perkins in providing regular child care services at their home. The
The policy also includes a more general “business pursuits” exclusion.
4
However, State Farm has chosen not to rely on that exclusion in its defense and
consequently we do not review the applicability of the provision.
5
regularity of care, for profit, and at the Perkinses’ home by Bessie clearly
invoked the policy exclusion. Given these facts, Jerry’s actions are quite
simply immaterial to the question before us.
Our reasoning comports with long-standing federal and state court
precedent. Sales v. State Farm Fire & Casualty Co. defined “any insured” as
“unambiguously express[ing] a contractual intent to create joint obligations
and to prohibit recovery by an innocent co-insured.” 849 F.2d 1383, 1385
(11th Cir. 1988) (citing Spezialetti v. Pacific Emps. Ins. Co., 759 F.2d 1139 (3rd
Cir. 1985)). See also State Farm Fire & Casualty Co. v. Davis, 612 So.2d 458,
466 (Ala. 1993).
In Thoele v. Aetna Cas. & Sur., 39 F.3d 724 (7th Cir. 1994), the Seventh
Circuit faced a similar factual scenario. In that case, Sharon Thoele was
operating a child care service out of her home when a child began choking.
Her husband, who had no connection to her business, attempted to provide
emergency care. Although the child survived, she suffered permanent injuries
because of the incident. Id. at 725. Just as the Perkins, the Thoeles only
carried a homeowner’s policy. Id.
The district court dismissed the plaintiff’s action in Thoele reasoning
that, despite Sharon’s husband having no relationship with her business, the
policy’s language excluded coverage for injuries “arising out of business
pursuits of any insured.” Id. at 726. The Seventh Circuit affirmed, agreeing
with the district court’s reasoning that by using the term “any” the insurance
company “broadened the exclusion to include injuries triggered by one insured
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in connection with the business pursuit of another.” Id. at 727. We find that
reasoning persuasive.5
Next, Appellants argue that the inclusion of the severability clause in the
Perkins’s homeowner’s policy operates to return coverage at least for Jerry.6
We disagree. In K.M.R. v. Foremost Ins. Group, our Court of Appeals upheld an
exclusion despite the existence of a severability clause. 171 S.W.3d 751, 755
(Ky. App. 2005). In doing so the court reasoned that “a clearly worded
exclusion is not treated as ambiguous or rendered unclear by the mere
existence of a severability provision.” Id. The court’s reasoning continued,
stating, “the purpose of severability clauses . . . is not to negate bargained-for
exclusions which are plainly worded.” Id. (quoting Natl. Ins. Underwriters v.
Lexington Flying Club, Inc., 603 S.W.2d 490, 492 (Ky. App. 1980) (internal
citation omitted)).
Five years later, our appeals court revisited the question of severability
clauses. Holzknecht v. Kentucky Farm Bureau Mut. Ins. Co., 320 S.W.3d 115
(Ky. App. 2010). Another case involving an at-home daycare service, Sarah
Holzknecht sued the Mays when her daughter was mauled by the Mays’ family
dog. As in the present case, the insurer sought summary judgment based on
an exclusionary provision in their homeowner’s policy. The trial court granted
5 Although no longer material to the case, we note that the exception to the
exclusionary language is inapplicable here because our conclusion is based on
Bessie’s actions and does not require us to resolve whether the exception for
“occasional” childcare would reinstate Jerry’s coverage.
6 The severability clause reads: “This insurance applies separately to each
insured. This condition shall not increase our limit of liability for any one occurrence.”
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summary judgment and the Court of Appeals denied Holzknecht’s claims,
reasoning that a severability clause does not operate to expand coverage or
shrink valid, bargained for, exclusions. Id. at 122. The panel concluded that
“[s]ince severability clauses are not drafted to negate policy exclusions, the
existence of that clause in [the insurer’s] policy does not render the exclusion
ambiguous.” Id. We endorse this reasoning. Likewise, here, the severability
clause does not fill the gaps in coverage created by the Perkinses’ own conduct.
Finally, we address Appellants’ concern that by affirming the trial court
we are rendering insurance coverage illusory and negating the Perkinses’
reasonable expectations when they purchased their homeowner’s insurance.7
Neither argument is persuasive. Illusory coverage applies when an insurer’s
interpretation of a contract term would deny the insured “most if not all of a
promised benefit.” Sparks v. Trustguard Ins. Co., 389 S.W.3d 121, 128 (Ky.
App. 2012) (internal citations omitted). The child care exclusion was clear, and
no testimony was presented by either policy holder that the coverage was
intended to extend to a daycare service in the home. Similarly, Appellants’
reasonable expectations claim fails because, as we have already discussed, the
childcare exclusionary language was not ambiguous, and the reasonable
expectations doctrine “applies only to policies with ambiguous terms.” Metzger
7 Appellants’ public policy claim is similarly ineffective. While we agree that
promoting the health and safety of our children is always paramount, Appellants have
categorically failed to show how making State Farm liable under these facts would
effectuate such an outcome.
8
v. Auto-Owners Ins. Co., 607 S.W.3d 695, 699 (Ky. 2020) (quoting True v.
Raines, 99 S.W.3d 439, 443 (Ky. 2003)).
IV. Conclusion
For the reasons discussed above, the Court of Appeals’ opinion affirming
the trial court’s summary judgment in favor of State Farm is affirmed.
All sitting. All concur.
COUNSEL FOR APPELLANTS,
JULIE G. THOMAS AND DONALD
F. THOMAS, INDIVIDUALLY AND
AS NEXT FRIEND FOR S.T., A MINOR:
Kevin Crosby Burke
Jamie Kristin Neal
Burke Neal, PLLC
Michael Faulkner Eubanks
Shumate, Flaherty, Eubanks & Baechtold, P.S.C.
COUNSEL FOR APPELLANTS,
ELIZABETH RENNER AND
JEFFERY RENNER, AS NEXT FRIEND
AND PARENT OF C.R., A MINOR:
Kevin Crosby Burke
Jamie Kristin Neal
Burke Neal, PLLC
Zachary LeRoy Taylor
Taylor Couch, PLLC
COUNSEL FOR APPELLEE,
STATE FARM FIRE AND CASUALTY:
David T. Klapheke
Boehl Stopher & Graves, LLP
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COUNSEL FOR APPELEES,
BESSIE PERKINS AND
JERRY PERKINS:
Douglas Loy Hoots
Miller, Griffin & Marks, P.S.C
Joseph Stan Lee
Sturgill, Turner, Barker & Moloney, PLLC
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