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An antiques dealer whose $2 million cache of Biedermeier furniture was damaged in a 2002 flood in Prague has failed to convince a federal judge that since the Czech Republic was “born” in 1993, the court should refuse to enforce an insurance exclusion that bars losses incurred in a “former Iron Curtain country.” In his 15-page opinion in Brown v. Zurich-American Insurance Co., Pennsylvania Senior U.S. District Judge James McGirr Kelly rejected the plaintiff’s argument that the exclusion should not apply since the Czech Republic was formed after the fall of the Iron Curtain and, therefore, cannot be considered a former Iron Curtain country. “The Czech Republic … was not fashioned from whole cloth, but derived from the divorce of the Czechs and the Slovaks that made up Czechoslovakia,” Kelly wrote. “The Czech Republic, then, was previously or at a time in the past, Czechoslovakia, an Iron Curtain country.” According to court papers, plaintiff Adam Brown of New York does business as Iliad Antik and specializes in Biedermeier furniture, a style popular more than 150 years ago in Austro-Hungary, and especially in the city of Prague. In January 2002, Brown leased a workshop and holding facility in Prague where his company restores the furniture to museum quality before shipping it to New York. Prior to leasing the workshop, Brown had obtained a $1 million insurance policy from Zurich-American to protect against damage of his goods either while in his possession or in shipping. But the policy contained a “territorial limits” clause that said it applied “anywhere in the world excluding the former Iron Curtain countries.” In August 2002, a flood occurred in Prague that damaged about $2 million worth of inventory on the second floor of Brown’s workshop. But when Brown filed a claim, Zurich-American denied coverage on the basis of the “former Iron Curtain countries” exclusion. Kelly found that lawyers on both sides agreed about the meaning of the term “Iron Curtain,” a phrase that was coined by Winston S. Churchill in a March 1946 speech at Westminster College in Fulton, Mo. In the speech, Churchill said: “From Stettin in the Baltic to Trieste in the Adriatic, an iron curtain has descended across the continent. Behind that line lie all the capitals of the ancient states of central and eastern Europe. Warsaw, Berlin, Prague, Vienna, Budapest, Belgrade, Bucharest and Sofia — all these famous cities and the populations around them lie in what I must call the Soviet sphere.” Likewise, the lawyers did not dispute the history of Czechoslovakia — that it was among the Iron Curtain countries; was formed by a merger of the closely related Czechs and Slovaks of the former Austro-Hungarian Empire; and that, following the collapse of Soviet authority in 1989, it regained its freedom through a peaceful “Velvet Revolution” and, in 1993, underwent a “velvet divorce” that formed its two national components, the Czech Republic and Slovakia. The dispute, Kelly found, centered on the plaintiff’s argument that the phrase “former Iron Curtain countries” should not apply to a country that did not exist at the time of the Iron Curtain. Brown’s lawyers also argued that, even if the court construed the term to include the Czech Republic, it should nevertheless find in favor of coverage to avoid an “absurd result.” The court’s task, Kelly said, was to determine if the disputed phrase is “clear and unambiguous.” The policy contains no definition of the phrase, Kelly found, and does not list the countries included in it. But Kelly found that since the lawyers had agreed on its meaning — and on the inclusion of Czechoslovakia — the dispute over whether the Czech Republic was included in it turned on the meaning of the words “former” and “country.” Turning to the dictionary for guidance, Kelly concluded that when the ordinary meanings of the two words are applied, the phrase “former Iron Curtain countries” is a geographic term that describes “all of the territory previously occupied by the Iron Curtain nations, of which Czechoslovakia was indisputably one.” Analyzing the phrase grammatically, Kelly said he arrived at the same conclusion. “The word, ‘former,’ used here to modify the phrase ‘Iron Curtain country,’ or simply the word ‘country,’ means ‘coming before in time’ or ‘having been previously.’ Putting the words together, we understand the phrase, ‘former Iron Curtain country,’ to include any political state that was previously an Iron Curtain country, without regard for what form that political state is in now,” Kelly wrote. As a result, Kelly said, the plaintiff “is hard-pressed to advance its strained interpretation that the Czech Republic, simply because it did not exist in its current geographic or political form before the fall of the Iron Curtain, is not formerly known as Czechoslovakia, an indisputable Iron Curtain country.”

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