An order was recently handed down in Colorado federal court interpreting a policy theft exclusion.1 The plaintiff owned and insured a manufacturing facility. The policy provided coverage for damage caused by vandalism or malicious mischief, defined as "the willful and malicious damage to or destruction of the property covered." It excluded coverage for loss "by pilferage, theft, burglary or larceny, except this Company shall be liable for willful damage to the building(s) covered caused by burglars in gaining entrance to or exit from the building(s) or any part of the building(s)."
During the policy period, the building was broken into and copper pipes, among other things, were stolen. A check for damages was issued by the insurance company, but coverage was denied for amounts requested that were deemed the result of theft or directly caused by attempts to steal and remove items from the property.
The parties to the lawsuit disagreed whether the theft/burglary exclusion applied only to the value of the property stolen or if it extended to damage incurred to effectuate the theft. The insured argued that the theft exclusion was ambiguous, thus construed against the insurer. The trial court followed Colorado contract interpretation and found an exception to the exclusion for "willful damage to the building(s) covered caused by burglars in gaining entrance to or exit from the building(s) or any part of the building(s). Thus, damage caused by burglars entering or exiting the property was covered.
The court gave the exception its plain meaning and found that collateral damage caused by burglars during the course of their theft was not covered, except for collateral damage caused by entering or exiting the property. The court found that the theft exclusion unambiguously excluded coverage for any damage directly caused by and for the purpose of theft or burglary at the property and that its gaining entrance/exiting exception contemplates more than ‘knocking holes in walls once inside." The court held that the exclusion was unambiguous and precluded coverage for the items removed from the property during the course of the theft, and also any collateral damage caused by the theft except for damage caused by the burglars breaking into or exiting the property.
Reading your insurance policy is important, both the terms of coverage and exclusions. While ambiguous clauses are construed against the insurance company, others are given their plain and ordinary meaning.