Inventory Not “in the Open” When under Tarp

 

In Twenhafel v. State Auto Prop. and Cas. Ins. Co., 2009 WL 2914281 C.A.7 (Ill.), the United States Court of Appeals, Seventh Circuit, reviewed whether the loss to an insured business owner's wood inventory fell within his insurance policy's exclusion for rain damage to personal property “in the open.”

 

Roger Twenhafel, who insured his business property through a policy issued by State Auto Property and Casualty Insurance Company, sought coverage under the policy for loss of his raw wood inventory damaged by rain as a result of a severe storm. The policy State Auto issued to Twenhafel was an “open peril” policy which covered all losses unless specifically excluded under the terms of the policy. State Auto denied his claim on the basis that the loss was excluded from coverage because the inventory was damaged by rain while it was “in the open.”

 

Twenhafel filed suit in circuit court, alleging that State Auto breached the policy. State Auto removed the case to federal court, where the parties filed cross-motions for summary judgment on the issue of liability. Twenhafel also moved for summary judgment on the issue of damages. The district court entered summary judgment in favor of Twenhafel and awarded damages, interest, and costs. State Auto appealed.

 

The tarp Twenhafel used to store the wood was secured with oak beams and large concrete blocks which had been placed on top of the tarp. 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 storm, Twenhafel's wood inventory was damaged by rain.

 

In considering the meaning of the phrase “in the open,” the district court found the policy contained no ambiguity and that “in the open” was commonly understood to mean something that was exposed to the elements with no protection at all. And, because Twenhafel's wood inventory was covered by the tarp, it was not exposed to the elements.

 

The district court therefore granted summary judgment in favor of Twenhafel and against State Auto. State Auto asserted that the district court erred in finding that Twenhafel's wood inventory loss was not excluded from coverage under the terms of the policy. State Auto contended that “in the open” meant “outside.”

 

The appeals court explained that because the damaged property was located in the interior of the building, it was not left “in the open.” There was nothing that would reasonably suggest there was a gaping hole which exposed the interior of the building openly to the elements. Thus, coverage applied in those instances where property was protected from exposure to the elements.

 

State Auto contended that equating the phrase “in the open” with “exposed to the elements” would lead to an absurd result because such an interpretation did 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 court found State Auto's contention without merit because a reasonable person would not think that newspapers would protect property from exposure to the elements.

 

Therefore, the court affirmed the district court holding that the loss to Twenhafel's wood inventory was covered under the terms of the policy because it did not fall within the policy's exclusion.