Adman Products Co. v. Federal Ins. Co

In Adman Products Co. v. Federal Ins. Co., 187 Ill. App. 3d 322, 543 NE2d 219, 134 Ill. Dec. 936 (Ill. App. 1989), the insured was in the business of assembling advertising displays. It suffered a fire on its premises that destroyed materials owned by a third party, which sued the insured for damages. Id. at 219-220. In language substantially the same as is at issue here, the policy excluded "property while on premises owned or occupied by or rented to the insured for the purpose of having operations performed on such property by or on behalf of the insured." Id. at 220. On appeal from the underlying declaratory judgment action, the insured argued that the exclusion did not apply to finished goods because those goods were property waiting for pickup and not on the premises for purposes of performing operations. Id. at 221. The Appellate Court of Illinois disagreed: We agree that the very purpose for the third party's goods to be on insured's premises was to have work performed on the goods. Despite this fact, insured argues that the policy does not preclude coverage of finished goods because operations are not being performed on finished goods. To adopt insured's interpretation would require us to believe that the parties contemplated that goods delivered to insured's premises would be covered until insured began performing operations on the goods, at which time coverage ceased, and then coverage would again commence when insured completed its work on the goods. Insured provides no explanation as to why it would desire such a policy or why insurer would provide such a policy. We do not believe that this is what the parties contemplated upon binding themselves to the policy. The policy is unambiguous. It excludes coverage of property that is on insured's premises for the purpose of having operations performed on such property. The excluded property is defined by the purpose for which it is on premises owned or rented by insured. Id. at 222.