states that whether the "activity" referred to in the exception was Hager's dive into the lagoon, or Myrtil's failure to warn Hager, or Myrtil's failure otherwise to supervise the activities of the guests at the party, the "activity" was associated with Myrtil's business pursuit, her party. Defendant argues, therefore, that since plaintiffs have not shown that Hager had any conceivable connection with Myrtil other than a business-related one, his injuries were not covered under her homeowner's policy. Defendant reasons that were it not for the company party, Hager would never have had any contact whatsoever with Myrtil, and the opportunity for such an accident would never have arisen.
I disagree. The exclusion is not intended to deny coverage to all activities which occur during the course of an insured's business pursuits. Coverage is to be afforded, says the exception, to a limited class of such activities, i.e., those which ordinarily would be associated with non-business matters. While Myrtil's party was a part of her business, the running of a restaurant, Hager's act of diving into the lagoon certainly was not. Myrtil was not running a recreational facility for swimmers, but a restaurant. Thus, while Hager's accident was an aspect of Myrtil's party, it arose from an activity which ordinarily would be incident to one of Myrtil's non-business pursuits.
Obviously, the matter is not free of doubt. In fact, this clause has been the subject of considerable litigation, see cases cited in Annot., 48 A.L.R.3d 1096 (1973), and "nearly all of the courts have found the language difficult of interpretation and application." Robinson v. Utica Mutual Insurance Co., 585 S.W.2d 593, 595 (Tenn.1979). Many courts have found the language of the exclusion ambiguous. See Gulf Insurance Co. v. Tilley, 280 F. Supp. 60, 65 (N.D.Ind.1967), aff'd, 393 F.2d 119 (7th Cir. 1968); Stanley v. American Fire & Casualty Co., 361 So.2d 1030, 1032 (Ala.1978) ("The provision does not lend itself to clarity, resulting in a split of opinion over whether it is ambiguous with the consensus that it is poorly worded."). Moreover, courts have found, as I do, that the exception itself is ambiguously worded and "tends to obscure rather than elucidate the meaning of the clause." State Farm Fire & Casualty Co. v. National Union Fire Insurance Co., 87 Ill.App.2d 15, 230 N.E.2d 513, 515 (1967). In the State Farm case, the court, concluding that the exception was equivocal and ambiguous, stated: "We believe that further inquiry into the enigma of the meaning of the exception to the exclusionary clause would be fruitless." Id. at 516.
The divergent approaches taken by many courts has been noted in two articles that deal with the business pursuits exclusion, and both point out the problems courts face in applying this ambiguous clause. In the first commentary, after analyzing the decisions that have construed the clause, the author concluded that "there has been little uniformity among the various courts as to when the "business pursuits' exclusion becomes operative," Frazier, The "Business Pursuits" Exclusion in Personal Liability Insurance Policies: What the Courts Have Done with It, 1970 Ins.L.J. 519, 521, and, as a result, "the cases have, on somewhat similar facts, reached varying and sometimes questionable results." Id. at 533. This same author updated his article seven years later; during the interim period, the clause was increasingly the subject of litigation. Yet, the confusion of the courts persisted: "Unfortunately, the line between what is covered and what is excluded is often difficult to draw with precision in all situations, and frequently the court decisions are in irreconcilable conflict." Frazier, The Business-Pursuits Exclusion Revisited, 1977 Ins.L.J. 88, 89.
As this discussion shows, intelligent people for years have differed in their interpretation of the business pursuits clause and divergent results have been reached as a consequence. If reasonably intelligent people differ as to the meaning of a policy provision, ambiguity exists. Celley v. Mutual Benefit & Health Association, 324 A.2d at 434. Moreover, the defendant could cure the ambiguity by using more explicit language which would place the meaning of the clause beyond question. See id. Since the exclusion is ambiguous, coverage must be provided. Pennsylvania law is in accord.
Although the parties did not address this issue, one further reason exists for finding coverage in the instant case. In Hionis v. Northern Mutual Insurance Co., 230 Pa.Super. 511, 327 A.2d 363, 365 (1974), the court held that since insurance policies are viewed as contracts of adhesion with the purchaser possessing virtually no bargaining power, as part of its affirmative duty of showing that an exclusionary clause is applicable, an insurer must also establish "that the insured was aware of the exclusion or limitation and that the effect thereof was explained to him."
The defendant has not done so.
First, defendant has not offered any evidence that Myrtil was informed of the exclusionary provision and the effect that it would have on her policy. Second, unlike the case of Brokers Title Co. v. St. Paul Fire & Marine Co., 610 F.2d 1174, 1181 (3d Cir. 1979), in which the Third Circuit concluded that Pennsylvania would not apply the Hionis rule in situations where the parties negotiate from relatively equal bargaining positions, we are not dealing here with a sophisticated insured. Myrtil was a retired Broadway actress, who became the proprietor of a restaurant. There has been no showing that she knew anything about insurance or that she obtained it in a manner different than that of a typical purchaser of insurance, who, for the most part, has virtually no bargaining power. Therefore, applying the Hionis rule, coverage should have been afforded Myrtil under her homeowner's policy.
Plaintiffs contend that they are entitled to be reimbursed by defendant for their costs, expenses, and attorney's fees because defendant wrongfully and in bad faith denied coverage to Myrtil under her homeowner's policy. The question whether attorney's fees may be awarded to an insured who brings a declaratory judgment action against his insurer to enforce the contractual duty to defend has recently been considered in Kelmo Enterprises, Inc. v. Commercial Union Insurance Co., 285 Pa. Super. 13, 426 A.2d 680 No. 2324 Oct. Term, 1978 (Pa.Super.1981), the only Pennsylvania appellate court to deal precisely with this issue. The court in Kelmo Enterprises held that
an insured who is compelled to bring a declaratory judgment action to establish his insurer's duty to defend an action brought by a third party may recover his attorneys' fees incurred in the declaratory judgment action if the insurer has, in bad faith, refused to defend the action brought by the third party.