What Is and Is Not Vandalism and Theft Loss in a Property Insurance Policy

Ever wonder what is in thieves and criminals minds when they are rummaging through stuff to either steal or destroy property? One recent Connecticut case, Mercedes Zee Corp. v. Seneca Insurance Company,1 involving the distinction between theft and vandalism would leave jurors to decipher the criminal mind and determine whether the motive of criminals was to act as thieves or vandals. The distinction is critical to coverage in many property insurance policies.

I have often been left scratching my head wondering how to determine when the criminal element was acting as a thief or a vandal. This is how one legal scholar summarized the issues involving vandalism and theft in a 2010 law review article, The Paradox of Insurance Coverage For Vandalism But Not Theft:2

Standard commercial property insurance policies often include coverage for vandalism, but not theft:

“Covered Causes of Loss means the following: Vandalism, meaning willful and malicious damage to, or destruction of, the described property. We will not pay for loss or damage caused by or resulting from theft, except for building damage caused by the breaking in or exiting of burglars.”

Provisions like these, covering vandalism but not theft, have been frequently litigated; the result has been a jumble of confused and conflicting judicial decisions. The present article begins with a case the author litigated and uses it as a springboard to illustrate, and hopefully illuminate, murky issues relating to property insurance that covers vandalism but not theft.

(Emphasis added)

Apparently, the judge in Connecticut was scratching his head as well when he succinctly summarized the issue before him:

Was it vandalism or was it theft? That is a $2 million question that gives rise to this case about whether damages inflicted by intruders inside a vacant building are subject to coverage under the terms of a commercial insurance policy.

His analysis weighed significantly on the intent of the criminal which he found could change during the criminal act:

The first principle is that the policy makes both its coverage for vandalism and its exclusion for theft depend on an assessment of the wrongdoer's purpose or intent.

* * * *

Although the wrongdoer's purpose or intent must be considered, this evaluation does not depend solely upon the wrongdoer's initial purpose or intent upon entering a building.

* * * *

What might start as an escapade by hooligans to vandalize a building may morph into a thieving spree as valuable items happen to be found; what might start as a burglary may morph into vandalism and vengeful destruction of property if no valuable items for the taking are found.

This analysis is unique. Trying to prove the possible changing intents of thieves or vandals is not easy. They usually are not sticking around to provide eyewitness testimony. Indeed, if caught, it might call upon adjusters and coverage counsel to make trips to the pokey to inquire. I doubt whether such individuals have much veracity. Possibly HAAG, Rimkus, or the other usual insurance industry forensic firms will add a new expert classification: vandalism and theft experts.

The judge did summarize three points to his opinion:

I conclude that the vandalism/theft clause must be interpreted in light of three principles. First, the clause requires an inquiry into the wrongdoer's purpose or intent, be it to vandalize or to steal, with respect to each item of claimed damage. The wrongdoer's initial purpose or intent upon entry into the building is not alone dispositive; at most, it is relevant to assessing on an item-by-item basis what purpose or intent accompanied each of the wrongdoer's actual acts of damage within the building. Second, the theft exception applies not only to exclude coverage for loss of stolen property but also to exclude coverage for loss or damage to building components that were necessary to and in furtherance of accomplishing a theft of property. Third, the theft exception does not apply to loss or damage to building components that results from any attempted but unsuccessful act of theft (as opposed to an actual act of theft), and such destruction of property by reason of attempted theft qualifies as an intentional and malicious act of property damage constituting vandalism within the meaning and coverage of the policy.

This decision may add guidelines to this very difficult causation analysis. But it is not making the job any easier for those of us facing these types of losses which are unfortunately becoming more common.

1 Mercedes Zee Corp. v. Seneca Ins. Co., No. 3:14-cv-00119, 2015 WL 9311343 (D. Conn. Dec. 22, 2015).
2 Witus, Morley. The Paradox of Insurance Coverage For Vandalism But Not Theft. 56 Wayne L. Rev. 1747 (2010).

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