Storage of Business Property in Detached Structure Found Not to Constitute Excluded Business Use of Structure

HOMEOWNERS – PROPERTY – OTHER STRUCTURES USED FOR BUSINESS PURPOSES EXCLUSION
R.B. Woodcraft, Inc. v. Acadia Ins. Co.
(4th Dept., decided 3/27/2009)

The owners of RB Woodcraft, Inc., insured their home with State Farm. Both a residence and a detached pole barn were located on plaintiffs' property. When a fire destroyed the pole barn, plaintiffs submitted a claim to State Farm for the loss of the barn and their personal property located in it. State Farm paid the claim with respect to the personal property but denied coverage for the pole barn itself, relying on a policy exclusion for "other structures . . . used in whole or in part for business purposes[.]" State Farm's policy defined "business" as "a trade, profession or occupation."

The insureds brought this action against State Farm and their agent. Both sides eventually moved for summary judgment, and Onondaga Supreme denied both motions. On its cross motion and appeal, State Farm contended that that the storage of business items inside the pole barn established that the pole barn was being used in part for business purposes.

Although plaintiffs had not cross-appealed, the Fourth Department MODIFIED the motion court's order to
grant plaintiffs' motion for summary judgment, finding that the exclusion State Farm relied upon to deny coverage was ambiguous:

Rather, we conclude with respect to the second cause of action that plaintiffs are entitled to summary judgment determining that State Farm is obligated to pay their claim with respect to the pole barn and to a money judgment for that claim. We therefore modify the order accordingly, and we remit the matter to Supreme Court to determine the amount owed by State Farm to plaintiffs for the loss of the pole barn and to direct the entry of judgment in favor of plaintiffs for that amount together with interest, costs, and disbursements. We reject defendants' contention that the storage of business items in the pole barn established as a matter of law that the pole barn was being used in part for business purposes. Rather, we conclude that State Farm "may not deny coverage based upon the use of the barn for the storage of business items. The phrase 'used in whole or in part for business purposes' is ambiguous in the absence of any qualifying language . . . and therefore must be construed in favor of the insureds" (Roland v Nationwide Mut. Fire Ins. Co., 286 AD2d 872, 872).

The policy's definition of "business" apparently wasn't sufficient "qualifying language" to prevent the Fourth Department from finding the business use exclusion to be ambiguous. In the Fourth Department, therefore, something more than merely storage use is required before a structure may be said to being used for a business purpose. The business use must also result directly in economic gain. See, Pepper v. Allstate Ins. Co., 20 AD3d 633 (3rd Dept. 2005).