Seventh Circuit Interprets Exclusion For Property "In The Open" As Excusing Coverage Only When Insured Property Is Left Unprotected From The Elements
November, 2009
by Don R. Sampen and Daniel R. Bryer
In Twenhafel v. State Auto Property and Casualty Ins. Co., 2009 WL 2914281 (7th Cir.), the Seventh Circuit examined a policy provision excluding coverage for property left "in the open," and held that the exclusion may only be invoked when property is left exposed to the elements or unprotected from the elements, and not when outdoors but covered by a tarp.
Facts
Twenhafel manufactures kitchen and bathroom cabinets. He stores some of the raw cabinetry wood outdoors under an industrial covering tarp. The tarp is secured with six-by-six oak beams and large concrete blocks which weigh about ninety pounds each. In September, 2006, a violent storm blew through Murphysboro, Illinois, where Twenhafel's business is located. The storm lifted the tarp, along with the beams and blocks, and dropped them on the roof of a building about 150 feet away. As a result of the violent storm, the wood inventory was damaged by rain.
Twenhafel insured his business property through an "open peril" insurance policy issued by State Auto. Twenhafel made a claim under the policy for the loss of his wood inventory. State Auto denied Twenhafel's claim, relying on the following specific policy exclusion: "We will not pay for loss or damage caused by or resulting from any of the following: Rain, snow, ice or sleet to personal property in the open."
Twenhafel filed suit alleging that State Auto breached the policy terms by refusing to pay for the damage to the wood inventory. Twenhafel moved for summary judgment arguing that he was entitled to coverage under the policy because the wood inventory was covered by an industrial tarp, and, therefore, was not "in the open." State Auto cross- moved for summary judgment contending that the loss was not covered because the inventory was damaged by rain while it was "in the open." The phrase "in the open" was not defined in the policy.
The district court granted summary judgment in favor of Twenhafel holding that the policy contained no ambiguity and that "in the open" is commonly understood to mean something that is exposed to the elements with no protection at all. The court concluded that because Twenhafel's wood inventory was initially covered by an industrial tarp, it was not exposed to the elements.
Analysis
Noting that the primary objective in construing the language of an insurance policy is to ascertain and give effect to the intentions of the parties as expressed by the language of the policy, the Seventh Circuit initially observed that the phrase "in the open" must be interpreted according to its common and ordinary meaning. That meaning, the court stated, must be ascertained from the terms of the policy "as written" because they are clear and unambiguous, and not susceptible to more than one interpretation. Applying these fundamental principles of policy interpretation, the court held that the phrase "in the open" means being left exposed to the elements or, in other words, being unprotected from the elements.
The court then addressed State Auto's argument that equating the phrase "in the open" with "exposed to the elements" would lead to an absurd result because such an interpretation does not take into account the adequacy of the protection in question. State Auto argued that under such an interpretation, a pile of wood covered by newspapers would not be "in the open" because the wood was not "exposed to the elements." The Seventh Circuit responded that a reasonable person would not think that newspapers would protect property from exposure to the elements, and therefore, its interpretation does not lead to absurdity. The court also noted that State Auto, as the drafter of the policy, was in the best position to define what was meant by "in the open," and did not do so.
The court concluded that Twenhafel's wood inventory was not "in the open" when it was damaged because it was securely covered by a tarp and not left exposed to the elements. As such, the loss to Twenhafel's wood inventory did not fall within the subject exclusion and was covered under the policy.
Learning Point: Exclusions, in Illinois as elsewhere, are construed narrowly. The court here narrowly construes "in the open" to make the term inapplicable where inventory, even though left out of doors, is nevertheless protected from most weather conditions.
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