...the “Consequential Loss” or “Consequential Reduction In Value” clause, which provides in relevant part:
This policy also insures the reduction in value to the remaining part or parts of any lot merchandise usually sold by lots or sizes, color ranges, or other classifications due to damage to or destruction of a part of such lots or other classifications due to a cause of loss not otherwise excluded.
The answer is still obvious—the policy covers matching furniture.
A hotel’s primary source of rev- enue is the rooms it sells. In the context of a policy sold to a hotel, the relevant “merchandise” is the hotel’s rooms and their contents, and in that context there can be little doubt that furniture is “mer- chandise” that is part of a set. Fur- ther, there is an after-market for used hotel furniture, on which it is bought and sold as merchandise on a regular basis. Nor does hotel furniture fail to satisfy the second prong of the “consequential loss” clause, as it is sold by “classifica- tions”—room rates vary based on, among other things, the quality of the furnishings.
The holding in Hartwell v. Cali- fornia Ins. Co. , is consistent with the conclusion that hotel furniture is “merchandise.” 24 A. 954 (Me. 1892). Hartwell addressed the meaning of “merchandise” in an insurance policy sold to a painter, and concluded (a) that the term “has no fixed legal or technical signification” and (b) that for non- merchants, such as a painter, “mer- chandise” must include items held for use rather than sale, because to hold otherwise would render cov- erage meaningless. Id . at 954.
Similarly, “merchandise” cov- erage for a hotel is essentially meaningless if it does not apply to rooms and their contents, includ- ing furniture.
This result also is consistent with common sense, because ho- tels generally have very little in the way of retail operations. If the “merchandise” coverage sold to a hotel is to have any meaning, it must cover hotel furniture. Fur- thermore, this result is not unfair, because the insurer is protected by its salvage rights, as per the gen- eral salvage provision of the policy.
Contrary to standard insurer ob- jections, this result is not contrary to the plain meaning of the word “merchandise.” For example, Black’s Law Dictionary (8th ed.) defines “merchandise” as, among other things, “a movable object involved in trade or traffic . . . .” Black’s Law Dictionary (8th ed. 2004) at 1008. Hotel furniture obvi- ously fits that definition. Similarly, insurers argue that “merchandise” means “the commodities or goods that are bought and sold in busi- ness.” (A definition they find in Webster’s Third New International...