A recent Mississippi case reminds commercial and residential policyholders alike of the importance of updating insurance coverage when circumstances change to avoid a coverage dispute or the loss of coverage altogether. Commercial insureds should coordinate with stakeholders within their organizations to ensure prompt reporting of changing exposures to the personnel responsible for insuring risks. The insured did not do so in Clark v. Alfa Insurance Corp., No. 2022-CA-01251-COA, 2024 WL 3506638 (Miss. Ct. App. July 23, 2024), and found himself uninsured for liabilities arising out of a driver’s accident with his newly purchased cattle. The insured purchased 10 black heifers and penned them inside a barbed-wire enclosure behind his home rather than on separate property used for commercial purposes. The cattle escaped and wandered onto the adjacent highway that very night, causing a car accident that injured the driver. The driver sued the insured and Alfa Insurance Company, which had issued a homeowners policy providing coverage for injury to others “caused by an animal owned by or in the care of an insured.”

The insurer did not dispute that the cattle caused the driver’s alleged injuries and thus fell within the policy’s coverage grant. The insurer instead turned to a farming exclusion to bar coverage. The policy excluded coverage for “bodily injury or property damage arising out of business or farming engaged in by an insured” (emphasis added). The policy defined “farming” as “the operation of an agricultural… enterprise…” but did not define the term “enterprise.” 

Despite the murkiness of the terminology, the court concluded that the insured’s purchase and ownership of the cattle constituted an “enterprise” within the scope of the exclusion — while acknowledging established Mississippi law resolving ambiguities in insurance policies in favor of insureds and narrowly construing exclusions to preserve coverage. The court reached this result by turning to two dictionary definitions, which themselves defined “enterprise” differently. The court did not discuss a recent Mississippi Supreme Court case citing dictionary definitions of the terms “irritant” and “contaminant” utilized in a pollution exclusion to find an ambiguity favoring coverage(see Omega Protein, Inc. v. Evanston Ins. Co., 336 So. 3d 128, 132 (Miss. 2022)). Instead, the court considered the conflicting definitions and then, rather than concluding that an ambiguity existed, said that “[i]t is not unreasonable that purchasing, raising, feeding, breeding, selling, and caring for cattle is an ‘agricultural enterprise’ even when no profit is involved” (emphasis added). The court noted that every business must begin somewhere, profit or not. The court thus indicated that its own interpretation of “enterprise” was the only logical one.

The court cited the insured’s federal income tax return to buttress its conclusion. The insured owned 620 acres of timberland, separate from his personal residence, and listed timber as his “principal crop or activity” on tax returns. He also listed the cost of the cattle and their feed as a loss to offset profit from his farming income. Although the insured had never before purchased cows and “did not have any specific plans for the cows, other than to purchase them in hopes of attempting to raise them with his son,” his purchase and ownership of the cows constituted an excluded enterprise in the court’s view.

Clark provides a cautionary tale to insureds who should evaluate coverage when circumstances change. The appellate court said as much, stating that the insured “should have notified Alfa before the heifers were delivered and obtained appropriate insurance coverage.” Although insureds typically evaluate liabilities at insurance renewals, periodic checks on exposures — including coordination with other stakeholders — can avoid coverage gaps like the one in this case.