131_C110

BPP Meant All Merchandise With An Insurable Interest

Commercial Property	Consignment Agreement
Business Personal Property	Ownership

Italian Designer Import Outlet, Inc. d/b/a Casa Italia (Casa) was a retail men's clothing store that leased space from its landlord, Island Holding, LLC. Casa was insured under a Businessowners Special Policy issued by New York Central Mutual Fire Insurance Company (NYC Mutual) that covered Business Personal Property.

On December 7, 2005, a steam pipe burst and caused at least $229,464.62 in water damage to Casa's inventory. Casa brought legal action after NYC Mutual denied coverage for any amount above $2,500. NYC Mutual moved for an order to dismiss all claims and cross claims against it. It argued that the policy covered only business personal property owned by Casa and that there was no coverage for damaged merchandise that Cantoni I.T.C. USA, Inc. (Cantoni) owned and Casa held on consignment.

Casa's opposition was based on NYC Mutual’s failure to establish admissible prima facie evidence of whether particular inventory items were on consignment or purchased outright. It argued that, in any event, both were covered for the damage sustained.

Since NYC Mutual did not deny coverage for owned merchandise, the evidence it submitted on its motion created at least a triable issue that Casa owned at least some of the damaged goods because NYC Mutual did not clearly establish prima facie evidence to dismiss Casa's motion. In addition, it did not identify, describe or value the merchandise Casa held on consignment. Even if it was correct that such merchandise was not covered, it did not establish that it was entitled to summary dismissal of Casa's claim or that it was entitled to judgment as a matter of law.

On appeal, ambiguity became the key factor. An ambiguous word or phrase is one capable of more than one meaning when viewed objectively by a reasonable person who has examined the context of the entire integrated statement and understands customary practices, usage and terminology in the particular trade or business. Other policy provisions revealed that business personal property was not limited only to property Casa owned.

One provision stated that it "includes…your interest in personal property of others to the extent of your labor, material and services." Since "business personal property" can exist in the "personal property of others," "ownership" in any exclusive sense was clearly not required. In addition, whatever the "interest" created by "labor, material and services," it appeared not to be commonly understood as "ownership."

On appeal, it was determined that items Casa held pursuant to "sale or return" transactions under consignment agreements with suppliers were covered. Under the agreement, Casa bore the risk of loss or damage to the merchandise and was required to insure it. Coverage clearly applied to Casa's insurable interest, and there was no extrinsic evidence that the term meant merely ownership.

The trial court's finding was upheld, subject to Casa satisfying all other policy conditions for payment.

Supreme Court, Kings County, New York. Italian Designer Import Outlet, Inc. d/b/a Casa Italia, Plaintiff, v. New York Central Mutual Fire Insurance Company and Island Holdings, LLC, Defendants. November 18, 2009. 26 Misc.3d 631, 891 N.Y.2d 260