Insurance Condition Requires Following the Intent of the Parties

Post number 5307

Principles of Contract Interpretation Compels Reading Contract as Written

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In Eastside Floor Supplies, Ltd. v. SCS Agency, Inc., Hanover Insurance Company, et al., No. 2024-01501, Index No. 609883/19, 2026 NY Slip Op 01488, Supreme Court of New York, Second Department (March 18, 2026)

In May 2019, a fire damaged business personal property belonging to the plaintiffs, which was stored in portable storage containers at their Manhattan premises. At the time of the fire, the plaintiffs were insured under a businessowners insurance policy (BOP) issued by the defendant Hanover Insurance Company which provided general coverage for business personal property, and which included a specific extension for “Business Personal Property Temporarily in Portable Storage Units” (the portable storage extension).

The portable storage extension limited coverage to property stored in portable storage units used at the premises for 90 days or fewer and capped recovery at $25,000.

FACTUAL BACKGROUND:

The plaintiffs had leased the containers since 2015, under agreements requiring them to insure the containers. At the time of the loss, the containers had been in continuous use for more than 16 months. The plaintiffs were insured under the BOP issued by Hanover Insurance Company, which included a “Business Personal Property Temporarily in Portable Storage Units” extension. Hanover paid for the damage to the containers and for business income loss, but denied coverage for the inventory stored inside, citing a policy limitation that only covered property stored in portable units for 90 days or fewer, with a $25,000 cap.

LEGAL PRINCIPLES:

The court applied principles of contract interpretation to insurance agreements, emphasizing that policies must be construed to give effect to all provisions and avoid rendering any clause meaningless or superfluous.

ANALYSIS & DISCUSSION:

The plaintiffs argued that the storage containers were “structures” and therefore, the loss was covered under the general business personal property provision. The Supreme Court initially agreed, granting summary judgment in favor of the plaintiffs.

The appellate court found that interpreting the containers as “structures” would render the portable storage extension meaningless, contrary to established contract interpretation principles. The court determined that the containers were portable storage units within the plain meaning of the policy, and because they had been in use for more than 90 days, the 90-day limitation applied. Hanover established its entitlement to judgment as a matter of law.

CONCLUSION:

Contrary to the Supreme Court’s determination, the plaintiffs did not establish their prima facie entitlement to judgment as a matter of law by contending that the inventory was covered as business personal property in a structure. Interpreting the storage containers as structures made the portable storage extension functionally inoperative, a result disfavored by principles of contract interpretation.

Contrary to the plaintiffs’ contention, the storage containers were portable within the ordinary meaning of the term and were used for temporary storage, and they thus qualified as “portable storage units” under the portable storage extension. It was undisputed that the storage containers had been in continuous use at the premises for more than 90 days before the loss. Accordingly, Hanover established, prima facie, that the limitation in the portable storage extension applied and barred coverage under the policy for the inventory.

The appellate court reversed the lower court’s decision, holding that the loss to the plaintiffs’ inventory was not covered under the policy due to the 90-day limitation in the portable storage extension.

ZALMA OPINION

Insurance, as I have often said, is nothing more than a contract. The insurer agreed to cover property in “temporary” storage – defined as 90 days – could not overcome the limitation by claiming the portable storage container was a structure was, obviously, a weak and inept argument. No coverage for loss to the contents of the containers by a clear and unambiguous contract condition.

(c) 2026 Barry Zalma & ClaimSchool, Inc.

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