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(Article from Insurance Law Alert, October 2016)

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An Illinois federal district court denied an insurer’s summary judgment motion, finding that the term “commencing” was ambiguous and that there were questions of fact relating to the timing of the commencement of the property damage at issue.  Temperature Serv. Co., Inc. v. Acuity, A Mutual Ins. Co., 2016 WL 6037968 (N.D. Ill. Oct. 14, 2016).

Policyholders sought coverage under a commercial property policy issued by Acuity for damages caused by the “differential settlement” of soil around the insured property.  Acuity denied coverage, and litigation ensued.  During discovery, Acuity issued an interrogatory asking for “the date on which the direct physical loss you claim is covered pursuant to the Acuity policy first occurred.”  Policyholders argued that the phrase “first occurred” was vague and overly broad, but responded that “at this time [Plaintiffs] cannot state when the direct physical loss ‘first occurred’, but the direct physical loss is ongoing and occurred after . . . the inception date of the Acuity policy.”  On this basis, Acuity argued that there was no coverage as a matter of law because policyholders had not established that property damage had “commenced” during the coverage period. 

Addressing this matter of first impression under Illinois law, the court ruled that the policy’s use of the word “commenced” was ambiguous because it could be interpreted to mean “the first occurrence of the type of loss claimed,” or “each occurrence of the loss in a series of multiple losses.”  The court further held that a question of fact existed as to whether any of the alleged damage “commenced” during the policy period.  In this context, the court noted that resolution would likely require the weighing of conflicting expert testimony and that the policyholder bears the burden of establishing coverage.