N.D. IL / Ambiguity

Lost Diamond Ring “Being Worn” Requirement a Fact Question

The United States District Court for the Northern District of Illinois, in an opinion written by Judge Kness, applying Illinois law, denied Crestbrook Insurance Company’s (“Crestbrook”) motion for judgment on the pleadings after finding that Crestbrook did not prove, beyond a doubt, that the term “being worn” was unambiguous. Crestbrook filed a declaratory judgment action against Alan and Arlynn Freeman, asking the court to find that it had no duty to provide coverage for the loss of a 6.63ct diamond ring. Alan Freeman lost the diamond ring when it fell down his bathroom sink drain as he was cleaning the ring, and it could not be recovered. He filed a claim under his Personal Collections Insurance Policy (“Policy”) from Crestbrook. The Policy language provided that the loss of the ring would not be covered unless the ring was contained in a locked safe at his home or “being worn” at the time of the loss. Crestbrook denied coverage on the grounds that the ring was not “being worn” at the time of loss because Mr. Freeman was not “wearing” the ring when it fell down the sink.

Crestbrook filed a Rule 12(c) motion for judgment on the pleadings. The Court explained that, under Illinois law, when a court determines that a term is ambiguous, its construction is question of fact, and parol evidence is then admissible to explain and ascertain what the parties intended. Additionally, ambiguous policy terms are strictly construed against the insurer.  However, if the term is not ambiguous, the construction of the term is considered a question of law and is interpreted based on its plain and ordinary meaning.

Crestbrook argued that the term “being worn” is unambiguous, and therefore, should be given its plain and ordinary meaning. Crestbrook cited to different dictionary sources and asserted that the plain and ordinary meaning of “wear” meant that an item must be on a person’s body for the purpose of clothing, decoration, or protection. The Court disagreed and found that “being worn” was ambiguous and required a factual exploration into the term. The Court explained that even though Crestbrook’s interpretation of the term was reasonable, it was not the only reasonable interpretation of the term, and it was not for the Court to determine which interpretation was better at this stage. In sum, the Court denied Crestbrook’s Rule 12(c) motion because it could not prove that the policy term at issue was unambiguous. Crestbrook Ins. Co. v. Freeman, 2021 U.S. Dist. LEXIS 115047 (N.D. Ill. June 21, 2021).