Breeding Sled Dogs to Support Mushing Hobby is a Business, so Homeowner’s Policy Does Not Cover Bite

Paul Hougas, an aficionado of mushing for ten years, had three adult Siberian huskies, a male and two females.  In addition to using the dogs for his passion, he sold puppies from their litters.  The puppies were advertised in the Chicago Sun Times at $450 each, though lower prices were always reached with buyers. 

Hougas apparently did not regard the mushing, or the breeding of his dogs, as a business.  According to the Illinois appellate court, he “never claimed business losses on his tax return as a result of his mushing activities. He also never wrote off any business expenses or depreciated equipment in connection with his mushing.”

Jocelyn Davis came to the Hougas’ home looking for a puppy to purchase.  At the time of her visit, Hougas had 13 puppies for sale from two litters.  Each female husky had a litter, both fathered by the male.  While looking at the puppies, Davis was bitten by the adult male dog. She filed suit against Paul and Lana Hougas under the Illinois Animal Control Act to recover damages for the dog bite. 

Hougas sought indemnification under the homeowner’s policy he and his wife had with Allstate.  That policy contained a business activities exclusion stating: “We do not cover bodily injury or property damage arising out of the past or present business activities of an insured person.”  A business was defined as “any full or part-time activity of any kind engaged in for economic gain including the use of any part of any premises for such purposes.”

The trial court granted summary judgment to Allstate, finding that the exclusion applied. Davis appealed, presumably because she could not expect to recover significant damages from the Hougases alone. 

Appellate Decision

The Illinois Appellate Court, 3d District, noted that in determining whether a business activities exclusion applies in a dispute, Illinois courts apply a two-part test:

1. Was the activity regular and continuous?
2. Did the activity provide at least some portion of the insured’s livelihood?

Allstate Insurance Co. v. Mathis, 302 Ill.App.3d 1027, 706 N.E.2d 893 (1999).  Davis argued that there were questions of fact precluding summary judgment in her case, so the appellate court summarized the facts:

“Paul had been involved in mushing for at least 10 years. He kept the adult dogs in separate kennels, and had to put them together for the purpose of mating. Both female dogs had other litters previously, and the puppies had been advertised for sale in the Chicago Sun Times. He had sold or given away all of the puppies, and at least 10 puppies had been sold, for a maximum of $400.”

Davis argued that Hougas was motivated by a cost recovery motive rather than a profit motive, essentially that he was breeding the dogs to cover some of the costs of the expensive mushing hobby.  The trial court had concluded that there was a profit motive, and the appellate court agreed, saying that “there was no evidence to support any other conclusion… There was no evidence that Paul Hougas ever kept any of the puppies, or that the puppies were necessary for some purpose related to mushing.” 

The appellate court said that the trail court had been correct in finding that there was no genuine issue of material fact and affirmed the trial court’s grant of summary judgment. 

Conclusion

It is quite likely that Paul Hougas did not see his activity as a business, but the case is correctly decided.  It was, in fact, a business, even though mushing was undoubtedly a hobby, probably a somewhat expensive one if Hougas traveled very far to use the dogs. 

Had the bite occurred when there were no puppies in the house, and no advertisements in the Chicago Sun Times, the issue of the breeding business might never have come up.  Since the mushing was a hobby and not a business engaged in for profit, and presumably provided no portion of Hougas's livelihood, it would have been more difficult for Allstate to deny coverage because of a business exclusion. 

People trying to fly under the radar of tax and licensing authorities in maintaining small-scale breeding operations should take note of this case.  The reason for the business exclusion in a homeowner’s policy is that the insurance company expects someone running a business, even a small-scale one like this, to have separate insurance coverage for that activity.  Of course, paying for business insurance may make the activity more visible to other authorities, meaning that the business may be subject to business taxes and licensing fees that would make it even less profitable. Still, for individuals who are not judgment-proof, getting the insurance may be economically wise in the long run.

Allstate Insurance Co. v. Davis, 2013 Ill.App.3d 120646-U, 2013 WL 3154966 (Ct.App. 2013)

A dispute on whether to euthanize a sled dog is presently taking place in Alaska.  A girl visiting the sled dog farm of Jake Berkowitz was attacked by a dog, Wizard, that broke loose from his chain.  A Mat-Su Borough Commission deadlocked in June over Wizard’s fate.  Berkowitz is a well-known Iditarod sledder.  Thanks to Eric Krieger for telling me about this case.