The Seventh Circuit affirmed the granting of summary judgment to the insurer based upon an exclusion barring coverage for lost or stolen business property. Nationwide Ins. Co. v. Central Laborers Pension Fund, 2013 U.S. App. LEXIS 721 (7th Cir. Jan. 11, 2013)
The insured was an accountant employed by an accounting firm. Several Pension Funds were clients of the firm. The firm possessed a compact disc containing confidential information, including the names, birth dates, and Social Security numbers of approximately 30,000 individual participants and beneficiaries of the Funds. The firm agreed in writing to ensure that its employees would safeguard the information on the disc.
One evening, the insured parked her car in the open at her residence. A laptop containing the disc was left in the car and stolen during the night. To mitigate potential misuse of the confidential information, the Funds incurred nearly $200,000 in credit monitoring and insurance expenses. The Funds then sue the insured, alleging she had negligently breached her duty to safeguard the disc.
The insured tendered the suit to Nationwide, who had issued a homeowner's policy to the insured. Nationwide filed suit for a declaratory judgment, maintaining that exclusions to the policy prevented coverage. The policy did not cover "property damage to property . . . in the care of the insured." Further, there was no coverage for "property damage arising out of or in connection with a business conducted from an insured location, . . . whether or not the business is owned or operated by an insured . . . ." The district court granted summary judgment to Nationwide based upon these exclusions.
The Seventh Circuit affirmed. Under Illinois law, an "in care of" exclusion applied only if the property lost or stolen was: (1) within the exclusive possessory control of the insured at the time of loss; and (2) a necessary element of the work performed by the insured. Here, the compact disc was stolen while it was within the insured's exclusive possessory control.
The "business" exclusion also precluded coverage. The accounting firm was a business which employed the insured. Therefore, the complaint alleged that the insured had a duty to safeguard the confidential information on the disc because she was an employee of the firm. The insured's failure to safeguard the compact disc was an omission amounting to a breach of the duty.
Consequently, Nationwide had no duty to defend or indemnify.
