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By: Jessica Samford
As the witching hours of Halloween draw nearer, the time has come for the next installment of the FMG insurance coverage blog’s glossary of insurance terms. While the thought of interpreting a lengthy insurance policy may seem frightening to some, let’s take a quick look at one commonly utilized phrase in all types of insurance policies—“arising out of”—using the spirited theme of Halloween as inspiration.
Imagine a costumed homeowner is giving out candy to a group of rambunctious trick-or-treaters on her porch when all of a sudden her dog gets spooked and darts out of the door, knocking one unlucky ghoul down the steps. Such an occurrence is likely to fall within the liability coverage provided by a homeowner policy, which typically has language covering liability resulting from bodily injury “arising out of” the ownership, maintenance, or use of real or personal property.
Now conjure up a vision of that same homeowner on her porch collecting $5 admission fees from her neighbors as they enter her homemade haunted house attraction, of which her costumed dog is the feature creature. If a neighbor is cursed with a dog bite in this spooky scenario, the “arising out of” phrase may come up a second time when analyzing applicable coverage exclusions. This is because most homeowner policies contain some sort of business activity exclusion, which typically provides that coverage is excluded for bodily injury “arising out of” business pursuits of an insured.
Interestingly, courts are likely to interpret the phrase differently within the same policy. Generally, courts construe “arising out of” quite broadly when used in the grant of coverage, frequently finding that almost any causal connection triggers the phrase. At the same time, courts have construed “arising out of” narrowly in determining whether an exclusion applies, traditionally applying a “but-for” standard of causation: but for the insured’s new Halloween business venture, would the neighbor have been bitten? It would seem unlikely under these fictional facts. No matter what arises this Halloween, don’t be bewitched by these divergent interpretations of “arising out of” and stay tuned for more spellbinding installments of FMG’s insurance blog.