Dead storage claim a non-starter in new case -- just like the motorcycle that burned down the storage facility

John Marx collected motorcycles and he rented two storage bays from M & S Rentals, Inc. in Morris, Illinois in which to keep them. Marx considered the bikes to be collectors’ items; whether Marx’s 1976 Honda Goldwing, 1980 Honda Goldwing, and two 1979 Yamaha 750 cc motorcycles actually were collector’s items is not resolved by the Appellate Court’s opinion in Standard Mutual Ins. Co. v. Marx, 2006 WL 2381967 (Ill.App.3rd Dist. 8/15/06).

Marx came by the storage units from time to time to visit his collection. But he didn’t just visit; he sometimes rode the bikes, too. But only the 1980 Honda was actually licensed and insured.

And he wasn’t riding the Honda on September 1, 2003; on that day, Marx had come to visit one of the ‘79 Yamahas. He’d operated this bike without incident only a month before, but when he went to start the machine on this occasion, there was an explosion – and a fire. Marx tried to put the fire out with a towel, but failed; he subsequently called 911. The fire caused more than $177,000 worth of damage to the storage facility. M & S Rentals’ insurer, Springfield Fire & Casualty Co., paid the claim and brought a subrogation suit against Marx.

Marx tendered the suit to his homeowner’s carrier, Standard Mutual; the newly reported opinion arises from the declaratory judgment action that Standard Mutual filed in response to the tender.

The Circuit Court of Grundy County found for Standard Mutual, agreeing that the homeowner’s carrier did not have a duty to defend Marx in this suit. The Appellate Court, in a unanimous opinion by Justice Kent Slater, affirmed.

Marx was not a party to the appeal: He failed to file a timely notice of appeal; his subsequent motion to adopt Springfield Fire’s brief was denied by the Appellate Court. This may seem odd to persons unfamiliar with coverage litigation, but it happens frequently. The underlying plaintiff and the insured do have a common interest: Both want the insurer’s carrier to remain on the risk – but is it not logical to assume that the insured will want this just a little bit more? It is the insured’s assets that are at risk; the easy collectibility of an eventual judgment against the insured is all the underlying plaintiff really has at stake.

In affirming the judgment in Standard’s favor, the Appellate Court noted that the “homeowner’s policy issued to Marx by plaintiff excluded liability and medical payments coverage for injury or property damage arising out of: ... The ownership, maintenance, use, loading or unloading of motor vehicles or all other motorized land conveyances, including trailers, owned or operated by or rented or loaned to an ‘insured’[.]”

On the other hand, the court noted that the policy provided that this exclusion did not apply to:

“A vehicle or conveyance not subject to motor vehicle registration which is:

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(c) In dead storage on an ‘insured location’[.]”

The Standard Mutual court held that the exploding Yamaha was neither in “dead storage” nor at an “insured location.”

Courts around the country have split on what constitutes “dead storage”; the Standard Mutual court indicated that it was the first Illinois court to construe the term.

These are the cases cited by the Standard Mutual court as supporting the position that Marx’s Yamaha was in dead storage:

Allstate Insurance Co. v. Burns, 837 N.E.2d 645 (Ind.Ct.App.2005) (unlicensed car which had been inoperable for over a month was in dead storage notwithstanding that fire occurred while insured was attempting to start car); Allstate Insurance Co. v. Geiwitz, 86 Md.App. 704, 587 A.2d 1185 (1991) (car kept by insured as collectible rather than for transportation was in dead storage despite fact that car was occasionally driven on property where it was stored and accident occurred while repairing gas gauge); Nationwide Mutual Fire Insurance Co. v. Allen, 68 N.C.App. 184, 314 S.E.2d 552 (1984) (motorcycle which had been inoperable for six months prior to fire caused when insured was “inspecting” cycle in his living room was in dead storage); Sharpe v. State Farm Fire & Casualty Co., 558 F.Supp. 10 (E.D.Tenn.1982) (old, unlicensed vehicles that were not driven on highway but were occasionally driven on insured’s property were in dead storage).

The Standard Mutual court found other cases more persuasive, particularly North Star Mutual Insurance Co. v. Carlson, 442 N.W.2d 848 (Minn.Ct.App. 1989). Justice Slater’s opinion quotes the Minnesota Court:

“We believe this determination appropriately highlights the distinction between homeowners and automobile insurance policies. Motor vehicles are inherently dangerous instrumentalities and homeowners policies generally do not contemplate coverage of injuries when the vehicle is maintained or used in one of its inherently dangerous capacities. One inherently dangerous aspect is a motor vehicle’s use of highly volatile materials (gasoline) around ignition sources (spark plugs). This was precisely the cause of the accident in this case. Accidents caused by maintenance or use of a vehicle in such an inherently dangerous capacity are not appropriately covered in a homeowners policy, but rather in an automobile policy which requires consequently higher premiums for the increased risk of injury.”

(Quoting Carlson, 442 N.W.2d at 855.)

The Standard Mutual court stated that the focus should properly be on “the vehicle’s status at the time the accident occurred. For example, if the fire at the rental facility had been caused by spontaneous combustion of oily rags while Marx was absent, the Yamaha might very well have been considered to be in dead storage.” On the other hand, quoting American Family Mutual Insurance Co. v. Van Gerpen, 151 F.3d 886, 888 (8th Cir.1998), another case relied upon by the Standard Mutual court, “The ‘dead’ in ‘dead storage’ suggests, at the least, that the engine would not be running.”

Other cases cited by the insurer for the proposition that a vehicle “undergoing maintenance” or being started is not in dead storage were Nationwide Mutual Insurance Co. v. McMahon, 365 F.Supp.2d 671 (E.D.N.C.2005); David v. Tanksley, 218 F.3d 928 (8th Cir.2000) (same); Holliman v. MFA Mutual Insurance Co., 289 Ark. 276, 711 S.W.2d 159 (1986); and Broadway v. Great American Insurance Co., 465 So.2d 1124 (Ala.1985).

The underlying plaintiff suggested that this split of authority nationwide supported a conclusion that the term “dead storage” was at least ambiguous. Rejecting this argument, however, the Standard Mutual court stated, “A vehicle which is periodically driven by its owner, even briefly on private property, is not in dead storage, and an accident caused by an attempt to start that vehicle is not the type of risk contemplated by the parties to a homeowner's policy. We find no ambiguity under these circumstances.”

Besides, even if the old Yamaha could be said to be in “dead storage,” the Appellate Court concluded that it was not at an “insured location”:

“As defined in the policy, an insured location includes “premises occasionally rented to an ‘insured’ for other than ‘business' use.” * * * [I]n this case, the storage units where the fire occurred cannot be said to have been rented to Marx on an irregular or infrequent basis. According to Marx’s deposition testimony and his answers to plaintiff’s request to admit facts, Marx had rented the same two storage bays for a period of three years prior to the fire. Such extended and continuous use cannot be characterized as “occasional” and therefore, even if the motorcycle was considered to be in dead storage, it was not in an “insured location” within the terms of the policy.

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It did not matter to the coverage determination, but I have to admit to some curiosity about where Springfield Fire’s claimed $177,000 in damages came from.

Because Marx could come and go and visit his motorcycles as he pleased, Springfield’s insured, M & S Rentals, was probably a self-service storage facility, regulated under the Self-Service Storage Facility Act, 770 ILCS 95/1 et seq. Section 2(A) of the Act provides expressly that a “self-service storage facility is not a warehouse for purposes of Article 7 of the Uniform Commercial Code” (unless the owner “issues any warehouse receipt, bill of lading, or other document of title for the personal property stored,” in which case the provisions of the Act do not apply.)

If a self-service storage facility is not a warehouse, it can limit its liability to customers; it is not bound by §7-204(2) of the UCC (815 ILCS 5/7-204(2)), which allows warehousemen to limit liability only on a “per article or item” basis, or by “value per unit of weight.” Of course, a warehouse has to know what is coming in and going out of its facility; what comes in and out of the self-service storage facility is limited only by the amount of space the customer rents (and, hopefully, by §7 of the Act which provides, “No occupant may use a self-service storage facility for residential purposes,” 770 ILCS 95/7).

So did M & S Rentals limit its liability to customers in the Standard Mutual case – and, if so, where did the $177,000 in damages come from? It must have been some fire.