Background
Wesley Gibson owned Pine Manor, a twenty-four thousand square foot mansion in southern Illinois. He renovated the property and transformed it into a luxury country inn and resort, hosting weddings, corporate retreats, and short-term vacation stays. Although Gibson and his family used the mansion for personal stays, the estate was primarily a rental facility, and Gibson reported it on his tax returns as a business property with three hundred sixty-five days of commercial use. In October two thousand and nineteen, a lightning strike caused a devastating fire that destroyed the mansion and its contents. Gibson held a homeowner’s policy with Chubb National Insurance Company that provided eight point seven five million dollars for the mansion and three point five million dollars for contents. The policy excluded coverage for business property under the contents section, capping recovery for such losses at twenty-five thousand dollars. Chubb paid the full amount for the mansion but denied the contents claim, paying only the twenty-five thousand dollar sublimit. Gibson sued for breach of contract and violations of state insurance and consumer-fraud statutes. The district court granted partial summary judgment for Chubb, finding that most of the contents were business property, and the parties settled the remaining issues before final judgment.
The court’s reasoning
The Seventh Circuit reviewed the case de novo under Illinois law, which requires giving effect to the parties’ intent as expressed in the policy language. The court agreed with the district judge that the policy’s definition of business property was clear and unambiguous. The policy defined business property as furniture, supplies, equipment, inventory, books, records, and electronic data processing property used to conduct the insured’s business. The definition of business was broad, encompassing any activity intended to realize a financial gain on a full-time, part-time, or occasional basis. The court rejected Gibson’s argument that the phrase used to conduct your business modified only the last item in the list, noting that the comma and structural placement indicated it applied to all items. The court also found that the policy’s exclusion for drones, which specified use in whole or in part, implied that the general definition covered property used partially for business. Because Gibson operated Pine Manor as a commercial lodging and events venue, the furnishings were overwhelmingly used to conduct that business. The court noted that Gibson kept only a few areas, such as a wine cellar and locked closets, off-limits to guests, and those items were correctly excluded from the business-property classification. The court affirmed that the statutory claims for vexatious conduct and consumer fraud failed because the insurer’s interpretation of the policy was justified and not deceptive.
What it means going forward
The decision reinforces that homeowners who operate their residences as commercial businesses may face significant coverage limitations under standard homeowner policies. Insurers can rely on clear business-property exclusions to limit payouts for contents used in commercial activities, even if the property also serves personal purposes.