Estate of Finley Olson v. Carrie Heller

COURT OF APPEALS
DECISION NOTICE
DATED AND FILED This opinion is subject to further editing. If
published, the official version will appear in
the bound volume of the Official Reports.
July 27, 2021
A party may file with the Supreme Court a
Sheila T. Reiff petition to review an adverse decision by the
Clerk of Court of Appeals Court of Appeals. See WIS. STAT. § 808.10
and RULE 809.62.

Appeal No. 2020AP496 Cir. Ct. No. 2019CV342

STATE OF WISCONSIN IN COURT OF APPEALS
DISTRICT I

ESTATE OF FINLEY OLSON, BY ITS SPECIAL ADMINISTRATOR, RACHEL OLSON,
AND BY HER PARENTS, RACHEL OLSON AND WILLIAM OLSON, INDIVIDUALLY,

PLAINTIFFS-APPELLANTS,

V.

CARRIE HELLER AND TIMOTHY HELLER,

DEFENDANTS,

AMERICAN FAMILY MUTUAL INSURANCE COMPANY,

DEFENDANT-RESPONDENT.

APPEAL from an order of the circuit court for Milwaukee County:
KEVIN E. MARTENS, Judge. Affirmed.

Before Brash, P.J., Donald and White, JJ.
No. 2020AP496

Per curiam opinions may not be cited in any court of this state as precedent

or authority, except for the limited purposes specified in WIS. STAT. RULE 809.23(3).

¶1 PER CURIAM. The Estate of Finley Olson, by its special
administrator Rachel Olson, and Rachel and William Olson individually
(collectively, the Estate) appeal the circuit court order granting American Family
Mutual Insurance Company (American Family) summary and declaratory
judgment that its insureds, Carrie and Timothy Heller (the Hellers), did not have
coverage under their insurance policy through American Family (the Policy) for
the claims related to Finley Olson’s death while in the care of the Hellers. The
Estate argues that the business pursuits exclusion in the Policy would not apply
because the Hellers were not licensed day care providers and the insurance policy
language is vague and ambiguous. Additionally, the Estate contends that because
Carrie was acquitted of criminal charges for running an unlicensed day care, issue
preclusion bars the relitigation of whether Carrie was operating a home day care
service. Alternatively, the Estate asserts that if the Policy’s business pursuits
exclusion applies, then the non-business activities exception would also apply
because Carrie was feeding her own child at the time of Finley Olson’s accident.
We reject all of the Estate’s arguments and accordingly, we affirm.

BACKGROUND

¶2 This case arises out of the death of Finley Olson while she was in the
paid care of the Hellers. Rachel and William Olson dropped off Finley, their six-
month-old daughter, at the Hellers’ house for child care at approximately
8:30 a.m. on January 13, 2016. The Estate alleged in its civil complaint that
Carrie “accidentally dropped Finley onto the hardwood floor” and “may have
accidentally struck Finley Olson in the head with the highchair tray….”

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According to the complaint, Finley’s “eyes closed and her arms went limp.”
Carrie tried to revive Finley, and it “appeared as though Finley was not breathing.”
Carrie subsequently called her husband Timothy for help. The complaint does not
state who called 911, but the Cudahy Fire Department Life Support Unit arrived
on the scene and tended to Finley, who was then “transported to Children’s
Hospital of Wisconsin via ambulance.” Finley died at the hospital.

¶3 Carrie was criminally charged after Finley’s death; however, at trial
in May 2017, the jury found her not guilty of first-degree reckless homicide and
operating a day care center without a license contrary to WIS. STAT. § 48.65(1)
(2019-20),1 but found her guilty of obstructing an officer contrary to WIS. STAT.
§ 946.41(1). In January 2019, the Estate brought a civil suit against the Hellers
alleging one count of negligence and one count of negligent supervision.

¶4 American Family provided defense counsel to the Hellers, but
retained counsel to challenge the Hellers’ coverage under their Policy for the
Estate’s claims, and deposed Carrie and Timothy with regard to those coverage
issues. In Carrie’s deposition, she testified that she required parents to sign a
contract and had rules and guidelines including a sick child policy, a medication
release form, and an inventory form to notify parents of supplies that needed to be
restocked. She charged $30 per day per child, which was to be paid in cash on a
weekly basis. Carrie advertised for child care clients on Craigslist, limited the
number of children she would care for—in addition to her own three children—to

1
The version of the statute in effect when Carrie was charged was amended in 2017 to
the current version; however, the change is not relevant to this appeal.

All references to the Wisconsin Statutes are to the 2019-20 version unless otherwise
noted.

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six; and set formal hours of operations from 7:00 a.m. until 5:00 p.m. Monday
through Friday. Carrie also testified that she did not apply for a child care license
with the state of Wisconsin, she did not incorporate her business into any type of
business entity, and she did not report her income on her taxes. In Timothy’s
deposition, he testified that Carrie managed the advertising, interviewing, and
billing for what he described as a “babysitting service.” Timothy worked a full-
time third shift job and when he was home, he would take the older children—the
five- and six-year-olds—outside and help care for them.

¶5 American Family moved for declaratory judgment arguing that there
was no coverage for the Estate’s claims against the Hellers and for summary
judgment and dismissal from the suit because American Family had no duty to
defend or indemnify the Hellers as a matter of law. In January 2020, after
reviewing briefing and hearing oral arguments, the circuit court declared and
ordered that there was no coverage under the Policy for the Estate’s claims and
granted American Family’s motions for declaratory and summary judgment and
dismissed American Family with prejudice from the lawsuit. The Estate filed a
motion for reconsideration, which the circuit court denied in March 2020 after
briefing and oral argument.

¶6 This appeal follows. Additional relevant facts are included below.

DISCUSSION

¶7 The Estate argues that the circuit court erred when it concluded that
there was no coverage in the Policy for the Estate’s claims against the Hellers and
when it granted declaratory and summary judgment in favor of American Family.
First, the Estate argues that the business pursuits exclusion in the Policy would not
apply. Additionally, the Estate argues that Carrie’s criminal acquittal of the

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charge of operating a day care without a license means that American Family is
estopped by issue preclusion from arguing that the Hellers were engaged in a
business pursuit excluded by the Policy. Finally, the Estate argues that if the
business pursuits exclusion does apply, then the non-business activities exception
to the business exclusion would restore coverage. We reject the Estate’s
arguments.

¶8 This appeal reviews the circuit court order granting American
Family’s motion for declaratory judgment and summary judgment. The decision
to grant or deny declaratory judgment is within the discretion of the circuit court.
See Jones v. Secura Ins. Co., 2002 WI 11, ¶19, 249 Wis. 2d 623, 638 N.W.2d
575. However, when the court’s discretion “turns upon a question of law, we
review the question” de novo. Olson v. Farrar, 2012 WI 3, ¶24, 338 Wis. 2d 215,
809 N.W.2d 1. “We review a grant of summary judgment de novo, relying on the
same methodology as the circuit court.” Estate of Sustache v. American Fam.
Mut. Ins. Co., 2008 WI 87, ¶17, 311 Wis. 2d 548, 751 N.W.2d 845. It is proper
for the circuit court to grant summary judgment where “there is no genuine issue
as to any material fact” and “the moving party is entitled to a judgment as a matter
of law.” WIS. STAT. § 802.08(2).

¶9 “Interpretation of an insurance contract presents a question of law,”
which we review de novo. SECURA Ins. v. Lyme St. Croix Forest Co., LLC,
2018 WI 103, ¶13, 384 Wis. 2d 282, 918 N.W.2d 885. Our procedure for
insurance coverage determination follows three steps. American Fam. Mut. Ins.
Co. v. American Girl, Inc., 2004 WI 2, ¶24, 268 Wis. 2d 16, 673 N.W.2d 65.
“First, we examine the facts of the insured’s claim to determine whether the
policy’s insuring agreement makes an initial grant of coverage.” Id. Second, “[i]f
the claim triggers the initial grant of coverage,” we examine whether any policy

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exclusions preclude coverage of the claim. Id. Third, if a particular exclusion
applies, we examine “whether any exception to that exclusion reinstates
coverage.” Id.

¶10 American Family argues that the business pursuits exclusion
precluded coverage for claims resulting from the Hellers’ home day care service.
No party disputes an initial grant of coverage, therefore, the focus of this appeal is
the application of Policy exclusions and exceptions. We begin our examination
with the language of the Policy:

COVERAGE D – PERSONAL LIABILITY COVERAGE

….

We will pay, up to our limit, compensatory damages
for which any insured is legally liable because of bodily
injury or property damage caused by an occurrence covered
by this policy.

….

EXCLUSIONS – SECTION II

Coverage D – Personal liability and Coverage E –
Medical Expense do not apply to:

….

4. Business. We will not cover bodily injury or
property damage arising out of business pursuits or the
rental or holding for rental of any part of any premises
except:

a. activities which are normally considered non-
business

(Bold emphasis omitted). One final relevant section of the Policy is the definition
of business:

Business means any profit motivated full or part-time
employment, trade, profession or occupation and including
the use of any part of any premises for such purposes. The

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No. 2020AP496

providing of home day care services to other than insureds,
for which an insured receives monetary or other
compensation for such services is also a business.

¶11 American Family argues that the Hellers provided regular day care
services for which they received monetary compensation; therefore, the business
exclusion would preclude coverage for Finley’s death while in the Hellers’ care.
The Estate argues this is inaccurate for two reasons: first, because the phrase
“home day care services” is undefined and ambiguous in the Policy, and second,
because Carrie was acquitted of criminal charges related to operating a day care
center without a license, therefore, the doctrine of issue preclusion bars this
application. Finally, the Estate argues that the non-business activities exception
would restore coverage under the Policy. We reject all of the Estate’s arguments.

A. Ambiguity in the Policy

¶12 The Estate argues that the exclusion for “home day care services” set
forth in the Policy was vague and ambiguous and it was not specifically defined.
We interpret the language of an insurance policy to give “its plain and ordinary
meaning as understood by a reasonable person in the position of the insured.”
Hirschhorn v. Auto-Owners Ins. Co., 2012 WI 20, ¶22, 338 Wis. 2d 761, 809
N.W.2d 529. If we determine language in the policy is ambiguous, that language
is “construed against the insurer, the drafter of the policy.” Id., ¶23. The Estate
contends the application of the business pursuits exclusion for the Hellers’
babysitting is ambiguous and when the Policy language is construed against
American Family, coverage would not be excluded.

¶13 American Family argues that the policy was not ambiguous because
there was an exclusion for business pursuits, not a distinct exclusion for home day
care services. The Policy states a business is “any profit motivated full or part-

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No. 2020AP496

time employment … including the use of any part of any premises for such
purposes.” American Family asserts that the plain meaning of those words
encompasses the Hellers’ work caring for Finley. American Family relies on
Carrie’s deposition testimony, which stated that Carrie provided care for up to six
children (in addition to her own) at a time, required parents to sign a contract,
which stated that the hours of operations were from 7:00 a.m. until 5:00 p.m.
Monday through Friday, and received weekly cash payments for care. Timothy’s
deposition showed that he participated in caring for children who were not his own
on a daily basis, and that while he did not participate in the management of the day
care, he was aware that Carrie was paid for this child care. Therefore, American
Family contends that the Hellers were providing child care in their home as a
regular, full-time, profit-making endeavor, which would exclude coverage for
claims resulting from these business pursuits.

¶14 The Estate attempts to establish that “home day care services” is
ambiguous through multiple arguments, although none are availing. The Estate
argues that while “business” is defined in the Policy, “home day care services” is
not. The Estate further argues that the Policy does not address licensure for home
day care services—it is undisputed that the Hellers were not licensed. The Estate
argues that it is unclear what day care services would be excluded by the Policy,
raising hypotheticals about sporadic babysitting or care for older children or
adults. However, in assessing ambiguity, we consider “the text of the … exclusion
clause in relation to the facts of this case.” See Peace ex rel. Lerner v.
Northwestern Nat’l Ins. Co., 228 Wis. 2d 106, 136, 596 N.W.2d 429 (1999).
Here, the business exclusion applies to activity that is for profit, performed on a
full-time or part-time basis, and performed in the home. We conclude that the
undisputed facts indicate that the Hellers’ home day care service satisfied these

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three requirements. Therefore, it is proper to apply the business exclusion to the
Estate’s claims.

¶15 The Estate argues that granting summary judgment was a “drastic
measure” and inappropriate in this case. See Lecus v. American Mut. Ins. Co. of
Bos., 81 Wis. 2d 183, 189, 260 N.W.2d 241 (1977). The Estate asserts that there
is a genuine issue of material fact as to whether the Hellers were providing home
day care services to which the business pursuits exclusion would apply.2
However, it fails to offer material facts or reasonable inferences from the
undisputed facts that disturb the material determination that the Hellers were
operating a home day care service and that the Hellers’ business activities satisfied
the requirements for the business pursuits exclusion under the Policy. The Estate
points to no facts or inferences to support that the Hellers were not engaged in
regular child care, that the Hellers were not profit motivated or being paid for their
work, or that the day care did not take place in their home. Accordingly, we
conclude that the business pursuits exclusion applied and there was no coverage.

B. Issue preclusion

¶16 The Estate argues that Carrie Heller was acquitted of running a
licensed day care in the criminal case, meaning the issue has been litigated to a

2
We interpret the Estate as appearing to concede the facts in the record are undisputed
when it does not dispute any of the material facts, but instead argues multiple reasonable
inferences exist. The Estate relies on our supreme court’s holding “that where the undisputed
facts lead to more than one reasonable inference about when discovery occurred, summary
judgment is not proper.” Schmidt v. Northern States Power Co., 2007 WI 136, ¶3, 305 Wis. 2d
538, 742 N.W.2d 294. The applicability of this holding is uncertain because there is no dispute
over discovery of damage or a statutory deadline as was at issue in Schmidt.

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No. 2020AP496

final conclusion. Therefore, the Estate contends issue preclusion applies.3 Issue
preclusion bars the litigation of issues actually litigated and determined in a prior
suit. Jensen v. Milwaukee Mut. Ins. Co., 204 Wis. 2d 231, 235, 554 N.W.2d 232
(Ct. App. 1996). The Estate asserts that the question of whether Carrie ran a day
care service was decided in her criminal trial when she was acquitted of the charge
of operating an unlicensed day care. Therefore, the Estate contends that American
Family should be estopped from arguing Carrie was operating a day care or from
challenging that issue.4 The Estate’s position misstates that factual question
answered by the jury. The jury was asked whether Carrie violated the licensure
laws for child care centers, not whether she provided day care services. Therefore,

3
We note that the Estate uses the terms collateral estoppel and res judicata; however,
those terms have been replaced. Wisconsin adopted the “terms ‘claim preclusion’ and ‘issue
preclusion’” in 1995 in sync with the U.S. Supreme Court and the Restatement (Second) of
Judgments. Northern States Power Co. v. Bugher, 189 Wis. 2d 541, 549-50, 525 N.W.2d 723
(1995) (citation omitted). “The term claim preclusion replaces res judicata; the term issue
preclusion replaces collateral estoppel.” Id.

The Estate appears to argue both doctrines might apply, but its argument focuses on issue
preclusion. The doctrine of “issue preclusion bars relitigation of issues of law or fact that have
been litigated in a previous action.” Reuter v. Murphy, 2000 WI App 276, ¶7, 240 Wis.2d 110,
622 N.W.2d 464. The rule “is based on the assumption that fairness to the defendant requires that
at some point, litigation involving the particular controversy must end.” Lindas v. Cady (I), 175
Wis. 2d 270, 279, 499 N.W.2d 692 (Ct. App. 1993), aff'd as modified, 183 Wis. 2d 547, 515
N.W.2d 458 (1994).

Under the doctrine of claim preclusion, “a final judgment is conclusive in all subsequent
actions between the same parties as to all matters which were litigated or which might have been
litigated in the former proceeding.” Lindas v. Cady (II), 183 Wis. 2d 547, 558, 515 N.W.2d 458
(1994) (citation omitted). The elements of claim preclusion are identity between the parties,
identity between the causes of actions, and a final judgment on the merits. See Northern States,
189 Wis. 2d at 551. Although there have been some cases of criminal convictions being invoked
in claim preclusion, that doctrine is not applicable to this case. The charge of operating a day
care without a license is not the same cause of action as the Estate brings here.
4
Further, the Estate makes claims against both Timothy and Carrie in the operation of
the day care business, and Carrie’s criminal case has no bearing on Timothy’s insurance
coverage.

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a finding that the State did not prove beyond a reasonable doubt that Carrie was
required to license her business does not establish that Carrie did not operate a
business providing day care within her home.

¶17 The Estate relies on Crowall v. Heritage Mut. Ins. Co., 118 Wis. 2d
120, 122, 346 N.W.2d 327 (Ct. App. 1984), to argue that issue preclusion may be
based on a criminal case. There, an insured sued his insurance company for
refusing to pay his personal injury claim after the insured was convicted of
operating a motor vehicle under the influence of intoxicants. Id. at 122-23. This
court concluded that the insured was estopped from relitigating his claim in the
insurance context, in which he argued he was not driving. Id. at 126-27. The
Estate’s reliance on this case is misplaced. The Estate asserts that Carrie’s
acquittal shows that she was not running a business, but Crowall also expressly
states that “an acquittal cannot be asserted as collateral estoppel because it only
means that the proof did not overcome all reasonable doubt of guilt.” Id. at
122 n.2. While the insured in Crowall was convicted, here, Carrie was acquitted.

¶18 We conclude that the issue of whether the Hellers (or even Carrie
alone) operated a home day care business has not been litigated and reduced to a
judgment. Therefore, issue preclusion does not apply to the determination of
coverage under the Policy because the fundamental question of law has not been
decided.

C. Non-business activities exception

¶19 The Estate argues that the circuit court erred when it granted
American Family summary judgment because the non-business activities
exception to the exclusions in the Policy coverage would apply. To understand
this argument, we return to the record. The Estate contends that Carrie was

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feeding both her own child and Finley, who were each placed in high chairs. The
Estate alleges that Carrie was cleaning her own child’s high chair tray at the time
of the accident. Therefore, the Estate contends Carrie would have been feeding
her own child whether or not Finley was present as a day care client, and the act of
cleaning the tray was a non-business activity.

¶20 The Estate argues that a babysitter taking care of her home or herself
was not an action within a babysitter’s function and therefore any claims in that
scenario have coverage under the non-business activities exception, relying on
several out-of-state cases. See e.g. State Farm Fire & Cas. Co. v. Moore, 103 Ill.
App. 3d 250, 430 N.E.2d 641 (1981); Crane v. State Farm Fire & Cas. Co., 5
Cal. 3d 112, 485 P.2d 1129 (1971). We decline to address these cases because
they have no authority over this court and they do not reflect the approach utilized
in Wisconsin. Under Wisconsin law, the non-business activities exception is
construed “narrowly in favor of the insured and against the insurance company.”
Vandenberg v. Continental Ins. Co., 2001 WI 85, ¶40, 244 Wis. 2d 802, 628
N.W.2d 876. “[I]n determining coverage, a court must examine the immediate
context of the activity from which the claim arises.” Ruff v. Graziano, 220
Wis. 2d 513, 518, 523, 583 N.W.2d 185 (Ct. App. 1998).

¶21 In Ruff, a day care provider took children in her paid care to a beach
along with her own children; one of the children in her care disappeared and
drowned. Id., at 516.5 We concluded that although “a trip to the beach may

5
The Estate protests that Ruff is inapplicable because the day care provider there was
licensed. This argument fails. The rationale to look at the context for the non-business activities
and the business pursuits did not hinge on the child care provider’s licensure. Here, we have
determined that licensure is not material to the coverage determination.

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ordinarily be non-business related … in this context it was directly related to [the
babysitter’s] business activities.” Id. at 523. Because the accident occurred in the
context of her day care business, the exception did not apply. Id. Similarly, the
context for Finley’s accident was mealtime in the paid care of Carrie and Timothy
during their regular day care service provided within their house. Although Carrie
was also feeding her daughter, which would be ordinarily a non-business activity,
in this context, mealtime and the follow-up cleaning occurred as part of Carrie’s
day care services and within the operation of her business.

¶22 In Vandenberg, a home day care provider placed one of the children
she was caring for in a child seat on the floor for a nap. Id., 244 Wis. 2d 802, ¶8.
While she was downstairs, her son unwittingly placed several pillows over the
child’s face and the child died from suffocation. Id. Under “the undisputed facts”
of the Vandenberg case, our supreme court concluded that the exception clause
was “ambiguous” because a reasonable person could believe coverage existed and,
therefore, the court narrowly construed in favor of coverage. Id., ¶42. The
application was predicated on the babysitter being “negligent in supervision and
control of her own child.” Id., ¶43. Our supreme court explained that the
exception would not apply if the child had injured himself or if the babysitter’s
own negligence caused the injury. Id., ¶45.

¶23 Although the language of the Vandenberg insurance contract is
similar to the instant case, the facts are not, and accordingly, the exception is not
applicable and the exclusion to coverage remains in force. Finley’s accident was
alleged to have happened because of Carrie’s negligence, primarily. Although the
Estate argued that Timothy was negligent in his supervision of Carrie, that claim is
not the same as negligent supervision of a five-year-old child. Carrie’s act of
feeding her own child and wiping down high chair trays does not remove Finley’s

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accident from Carrie’s own negligence. We conclude that the non-business
activities exception does not apply to the undisputed facts of this case. Therefore,
the business exclusion bars coverage.

CONCLUSION

¶24 We conclude that the Policy exclusion for business pursuits applied
to the Estate’s claims against the Hellers and that the non-business activity
exception did not apply. Therefore, a declaratory judgment that there was no
coverage under the Policy was the correct statement of law. We uphold the circuit
court’s discretionary decision because it “examined the relevant facts, applied a
proper standard of law, and, using a demonstrated rational process, reached a
conclusion that a reasonable judge could reach.” Loy v. Bunderson, 107 Wis. 2d
400, 415, 320 N.W.2d 175 (1982).

¶25 Further, we conclude that the circuit court properly granted summary
judgment in favor of American Family because there were no genuine issues of
material fact and coverage is precluded by the business pursuits exclusion.
Therefore, as a matter of law, American Family had no ongoing duty to defend or
indemnify the Hellers, and were properly dismissed from the action. See
Sustache, 311 Wis. 2d 548, ¶59. Accordingly, we affirm the order of the circuit
court.

By the Court.—Order affirmed.

This opinion will not be published. See WIS. STAT.
RULE 809.23(1)(b)5.

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