Based upon our interpretation of this provision, we denied coverage to the insured as the cause of loss did not fit within the specified cause of loss provisions of the commercial property policy.

Upon reconsideration, we agreed to pay this claim on the basis that it may be reasonable for the insured to argue that the insurance policy was intended to cover all of the insured's inventory with issuance of this policy and the inclusion of the special causes of loss (open perils) forms.

This claim presents the question of whether our inclusion of the special form obligates the insurer to provide all risks coverage for glass which otherwise may not be covered under the strict interpretation of the form. Payment was eventually issued on the understanding that it may be the insured's reasonable expectation that the policy would cover all risks for the insured's inventory regardless of the nature of that inventory. We would appreciate your review and opinion.

North Dakota Subscriber

A

We believe that the fragile articles exclusion does eliminate coverage for all but damage by the specified perils. If ordinary glass such as one finds in windows were not included among the “fragile articles” then there would be no need to make an exception of and cover “glass that is part of a building or structure.”

Perhaps an insured with a large inventory of fragile articles would succeed in an argument that it was reasonable for him to expect that your policy covering his business personal property on an open perils basis would not carry a clause restricting coverage on a large part of inventory to named perils rather than open perils.  The counter to that argument is that the policy does cover fragile articles for those perils that represent the primary exposures and that, secondly, the commercial insured is not relieved from the obligation to read the insurance contract and to obtain an understanding of its provisions. And, as the insured raised no objections, it was the company's  reasonable expectations that he had done just that, that is, read and understood the contract.

How North Dakota courts have handled the reasonable expectations matter up to now is bound to be significant, of course. And, if there has been no ruling, your desire to avoid being part of a precedent setting decision is understandable.

A Michigan subscriber, and the editors, would like it made clear that the narrowing of perils for building glass does not also extend to auto glass. As the subscriber says, there is nothing “fragile” about a windshield, certainly not in the sense of the examples the form drafters use: “glassware, statuary, marbles, chinaware, and porcelains.”