(Article from Insurance Law Alert, July/August 2026)
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Holding
An Illinois appellate court affirmed that a vacancy exclusion barred coverage for water damage to a commercial property that had remained vacant for more than 60 consecutive days before the loss. The court rejected the insured’s argument that the insurer was on notice that the property was vacant when it issued the policy and therefore waived the exclusion or was estopped from relying on it. Argus Inv., Inc. v. W. Bend Mut. Ins. Co., 2026 Ill. App. LEXIS 291 (Ill. App. Ct. July 28, 2026).
Background
Plaintiff Argus Investment, Inc. operated a brewery at the insured property. Argus was insured by West Bend under a CGL policy containing a “vacancy exclusion,” which provides that “[i]f the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs . . . We will not pay for any loss or damage caused by . . . [w]ater damage.”
Argus ceased operations at the property in March 2020. Argus’s CGL insurance policy from West Bend covering the property was renewed automatically in 2021. In January 2022, the property sustained water damage from flooding, and Argus submitted a claim to West Bend. West Bend denied coverage based on the vacancy exclusion. Argus then sued for breach of contract and alleged bad faith under section 155 of the Illinois Insurance Code. West Bend counterclaimed for a declaration that it owed no coverage because the vacancy exclusion applied. The trial court granted summary judgment to West Bend, concluding that the exclusion was unambiguous, applied to the loss, and had not been waived.
Decision
The appellate court affirmed. The court first emphasized that the insured “bears the burden of knowing the content of its insurance policies” and that an insurer “has no duty to review the adequacy of the insured’s coverage.” The court noted that Argus did not dispute that the vacancy exclusion was unambiguous or that the property was vacant when the policy renewed in June 2021.
Argus argued that West Bend waived the vacancy exclusion because it knew, or should have known, that the property was vacant based on a third-party audit of Argus’s worker’s compensation policy. The audit disclosed that the brewery was closed and that Argus had no employees other than an office manager. The property insurance policy was not audited, and it was renewed automatically in 2021. The court rejected Argus’s argument, holding that the worker’s compensation audit did not establish that West Bend knew the property was vacant. The audit reflected only that the brewery had ceased operations and reduced its workforce; it did not communicate that Argus was requesting a change to its property coverage or that the building met the policy’s definition of “vacant.”
The court also rejected Argus’s estoppel argument. The court held that West Bend was not estopped from relying on the vacancy exclusion because Argus failed to establish any misleading act or statement by West Bend. Specifically, the court held that Argus could not show that West Bend misled it into believing coverage would apply if the property remained vacant, that Argus never sought to alter its coverage to reflect a change in status prior to renewal, and that an insurer has no duty to review the adequacy of the insured’s coverage. The court further noted that the onus was on Argus and its employees to read the policy and familiarize themselves with its exclusions, and that Argus could not rely on its own failure to review the policy to establish estoppel.
Comments
The decision relies on several important principles of insurance law, including that insureds are presumed to know the contents of their policies, that insurers generally have no duty to advise insureds regarding the adequacy of their coverage, and that policy renewals incorporate existing policy terms absent modification.