BARN’S BUSINESS USE BY NEIGHBOR BARS COVERAGE
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Homeowners |
Unowned Property |
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Business use exclusion |
Property held for sale |
On September 15, 1996, a
barn owned by Victor and Lorrain Salzi collapsed during a hurricane. The
Salzis, who were insured by a homeowners policy issued by Virginia Farm Bureau,
filed a claim for the loss of their barn. However, the insurer denied coverage
when it discovered that, when the loss occurred, the barn contained thousands
of bales of hay. The hay belonged to the Salzis’ neighbor, a tobacco farmer.
The farmer intended to sell the hay to a customer, and the Salzis let him use
the barn for storage. Since the hay was for sale, the insurer’s position was
that the barn was used for a business purpose, excluding it from protection
under the policy.
The insured based its
denial on the following policy wording:
"Coverage B does
not cover:
". structures used
for business"
Both parties requested a
summary judgment and the lower court granted one in favor of the insurer, and
the policyholders appealed.
In appealing the
decision, they re-argued the loss circumstances. They pointed out that their
neighbor, Mr. Marsten, was permitted free use of the barn if he needed
additional storage. Although he did once give the Salzis $100 in appreciation,
he did not pay any rent or fees related to his access to their barn. While the
Salzis acknowledged the policy exclusion, they contended that the prohibition
of business use applied only to an insured’s business activity. They asked the
court to construe coverage because the exclusion was ambiguous, vulnerable to
more than one interpretation.
Unfortunately for the
Salzis, the higher court was not as flexible. After examining the policy’s
exclusion of business use and its definition of business, the court found the
wording to be clear and quite applicable to the loss circumstances. In its
opinion, at the time of loss, the barn was being used for business, triggering
the business exclusion. The lower court decision in favor of the insurer was
affirmed.
Victor H. Salzi et ux.,
Plaintiffs-Appellants v. Virginia Farm Bureau Mutual Insurance Company,
Defendant-Appellee, VaSCt. No. 010438 Filed January 11, 2002. 2002 Va. LEXIS 4
Affirmed. CCH Fire and Casualty Cases Paragraph 6835