It’s a sad truth that building owners have to worry about burglars breaking into their buildings to steal copper wire and pipes. Many insurance companies don’t cover damage as a result of theft, but a lot of them do cover any damage related to burglars breaking in and exiting a building. However, a recent case from the Texas Court of Appeals demonstrates that you may not be covered for everything you thought you were.
In a case of first impression, Essex Ins. Co. v. Eldridge Land, L.L.C., no. 14-09-619, 2010 WL 1992833 (Tex. App. – Houston [14th], May 20, 2010, pet. pending), the Texas Court of Appeals for the 14th District in Houston interpreted provisions in a commercial property insurance policy concerning vandalism and damage from theft. In Essex, Eldridge owned a vacant building insured by Essex. On March 28, 2006, Eldridge’s property sustained considerable damage when some intruders forced their way into the building and damaged sheetrock, ceiling tiles, electrical conduit boxes, and wall coverings. They also removed copper wiring and copper pipe from the building.
With respect to vandalism, the policy stated:
8. Vandalism, meaning willful and malicious damage to, or destruction of the described property. We will not pay for loss or damage . . . [c]aused by or resulting from theft, except for building damage caused by the breaking in or exiting of burglars.
Eldridge argued that: (1) the damage caused to the property in the course of removing the copper wiring and pipes was vandalism and was not excluded from coverage by the theft exclusion; (2) alternatively, the damage was caused by the intruders “breaking in” to parts of the building to retrieve the copper and thus fell under the exception to the theft exclusion; and (3) at a minimum, Eldridge’s interpretation was reasonable and the contract should be construed in its favor.
The Court construed the policy “in accordance with the ordinary rules of construction,” according to the ordinary and generally accepted meaning of the terms used unless the policy states otherwise. With respect to ambiguous policy language, the Court “construe[s] an ambiguous insurance policy strictly against the insurer and liberally in favor of the insured.”
The Court ruled in favor of the insurer for two reasons. First, the Court did not believe the language was ambiguous. Second, the Court concluded that the evidence was clear that all of the damage was done for the purpose of removing the stolen pipes and wiring, which the Court determined was not “breaking in,” and was not covered by the policy. The Court decided that the only damage covered by the policy was that caused by the intruders in entering and exiting the building – as in through a door or window.
Because Essex was a case of first impression, you should expect additional case law in the future that will better define what is and is not covered under theft exclusions. For the time being, however, be aware that insurers with policies having language addressing “breaking in or exiting” the building may attempt to disclaim coverage because of the language in this opinion.