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Seventh Circuit Interprets ‘In the Open’ Exclusion
Insurance Law Update
October 2009
Seventh Circuit Court of Appeals
The Seventh Circuit Court of Appeals affirmed summary judgment in favor of the insured in Twenhafel v. State Auto Prop. and Cas. Ins. Co., 581 F.3d 625 (7th Cir. (Ill.) Sept. 14, 2009), finding that coverage existed for property damage sustained to inventory due to a rainstorm because the inventory was not “in the open” as the term is commonly understood.
Plaintiff Roger Twenhafel Services manufactures wooden cabinets. Some of his inventory was stored outside under an industrial tarp secured by 90-pound blocks and oak beams. During a violent rainstorm, the tarp, blocks, and beams were blown off the cabinets, allowing rain to damage the wood. Twenhafel was insured by State Auto Property and Casualty Insurance Company under an “open peril” policy that covered all losses unless specifically excluded. State Auto declined coverage for the damage to the inventory based on the policy exclusion for “loss or damage caused by or resulting from any of the following … rain, snow, ice or sleet to personal property in the open.” The phrase “in the open” was not defined by the policy.
The district court granted summary judgment in favor of Twenhafel on his declaratory relief action, finding no ambiguity in the policy and holding that the phrase “in the open,” as commonly understood, means to be exposed to the elements without any protection.
On appeal, State Auto relied on the decision in Victory Peach Group, Inc. v. Greater New York Insurance Co., 707 A.2d 1383 (N.J. App. 1998), to argue that the phrase “in the open” means “outside.” The Seventh Circuit rejected State Auto’s argument and instead held that there is coverage if the property is protected from the elements. The court ruled that because the phrase “in the open” was not defined in the policy, it would apply the common or ordinary meaning of the phrase as “being left exposed to the elements or unprotected from the elements.” Therefore, the “in the open” policy exclusion did not apply to bar coverage.
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