A tornado destroys an insured's shed and its contents, including a windmill head worth approximately $3,000. The insured submits a claim for the windmill head under their blanket farm personal property policy—form FF 3 EZ 08 95—but the insurer denies coverage based on the property not covered section of the policy, which contains an exclusion for “windmills.”

Q: Since the windmill head was stored in a shed and not attached to the windmill, we think it’s a "part," not a windmill, and should be covered. Did the carrier deny the claim incorrectly?

Response 1: When the windmill head is in storage, it’s a part. The form excludes coverage for certain structures that are out in the open, like buildings and fences.

Response 2: If the exclusion included machine parts, then the item would be excluded. Under the property not covered section, the exclusion includes fences and other standalone property items, not parts. It’s not a windmill unless it’s erected and should be covered.

Response 3: It's not a windmill, it's a windmill part. Until it's fastened onto the windmill, the windmill head should be covered as farm personal property. If the carrier wanted to exclude parts, they should have excluded them. The insured should be afforded coverage.  

Response 4: On farm policies, it’s really important for the agent to review the property not covered list with the insured because most of those items can still be covered, it just needs to be added via an endorsement.

I agree with the carrier. Trying to a say a windmill part is not a windmill because it wasn’t installed has no merit in my opinion—it’s still a windmill. The exclusion doesn’t say “a working, installed windmill.”   

Response 5: The policy excludes "fences, windmills and windchargers and their towers." Not "fences, windmills and windchargers, their towers and parts."

The carrier should cut the check and change their policy language if they don't want to cover damage to parts of windmills that aren’t connected to the windmill at the time of loss. The purpose of insurance is to insure, not to look for loopholes when there is clearly coverage.

Response 6: I agree with you. The windmill was not destroyed, a spare part in storage was destroyed.

Response 7: The question reminds me of a case when a carrier denied coverage for two unassembled wind turbines that were destroyed in a fire. In this example, the decision was not in the insured’s favor, but perhaps some of the nuances expressed will be of interest to you.

This question was originally submitted by an agent through the VU’s Ask an Expert Service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.