Background
Argus Investment, Inc. owned Chicago property where it had operated a commercial brewery. The brewery closed in March 2020 during the COVID-19 pandemic and never reopened. West Bend Mutual Insurance Company insured the property under a policy that excluded water-damage coverage if the building had been vacant for more than 60 consecutive days before the loss. The policy defined the building as vacant unless at least 31% of its square footage was rented and used for customary operations or used by the owner for customary operations.
After flooding damaged the property in January 2022, Argus sought coverage for building, inventory, and equipment losses. West Bend denied the claim under the vacancy exclusion. Argus sued for breach of contract and unreasonable claims handling under section 155 of the Illinois Insurance Code, while West Bend sought a declaration that it owed no reimbursement. The circuit court granted summary judgment to West Bend, finding the exclusion unambiguous and concluding that West Bend had neither waived it nor assumed a duty to advise Argus about the adequacy of its coverage.
The Court’s Holding
The appellate court affirmed summary judgment for West Bend. Argus forfeited its waiver argument by presenting it inadequately on appeal, but the court also rejected the argument on the merits. Information developed through audits of a separate workers’ compensation policy showed that the brewery had ceased operations and had one clerical employee, but it did not establish that West Bend knew the building was vacant under the property policy’s specific definition. West Bend also took no action after the claim that could constitute an intentional relinquishment of the vacancy defense.
Argus likewise forfeited its estoppel argument by failing to raise it properly in the circuit court, and the argument failed on the merits. West Bend made no representation misleading Argus into believing that vacant-property losses were covered, the vacancy provision had existed before renewal without modification, and Argus’s chief executive admitted he had not read it. The court further held that the workers’ compensation audits and related communications did not create a genuine factual dispute over West Bend’s knowledge of vacancy for purposes of the property policy.
Key Takeaways
- An insurer does not waive a vacancy exclusion merely by automatically renewing a policy after receiving information that the insured’s business operations have ceased, particularly when that information does not establish vacancy as the policy defines it.
- Estoppel requires proof that the insurer misled the insured, that the insured reasonably relied on the representation, and that the reliance caused prejudice; issuing an unchanged renewal policy did not satisfy those requirements here.
- An insured is charged with knowing an unambiguous policy’s terms, and the insurer generally has no duty to review whether the coverage remains adequate for the insured’s changing circumstances.
Why It Matters
The decision distinguishes knowledge that a business has stopped operating from knowledge that insured premises are “vacant” under a policy’s technical definition. Evidence concerning workforce reductions or business closure will not necessarily defeat a vacancy exclusion without proof connecting that information to the building’s use and the policy’s occupancy threshold.
The opinion also underscores the importance of preserving and developing waiver and estoppel arguments in both the trial court and appellate briefing. Businesses that cease operations should promptly review property-policy vacancy provisions and communicate changed circumstances to their brokers or insurers rather than relying on automatic renewal as confirmation that vacant-property losses remain covered.