As a child of the 80s, I remember all the television commercials constantly reminding me “reading is fundamental,” and my English teachers testing me to see if I understood how a word or phrase in one part of a book was important to another section of a book. Little did I know, those commercials and my English teachers were teaching me an important lesson about reading an insurance policy.
One of the first things we should do after a loss is carefully read the insurance policy for coverage. You not only want to just read the policy sections that pertain to losses and exclusions; but also read the definitions of the terms, see where else and how else a term may be used within the policy.
Recently, in Capek v. Allstate Indemnity Company,1 the appellate court in New York affirmed a lower court’s decision to grant summary judgment to Allstate based on the vandalism exclusion in its policy.
Charles Capek was the owner of a home in East Setauket, New York. Mr. Capek purchased a “Landlords Package Policy” to insure the home. On December 18, 2010, a fire caused damage to the insured property. Mr. Capek submitted a claim to Allstate for the damage caused by the fire. The fire, however, was deemed incendiary or intentionally set based on a police investigation.
Mr. Capek’s policy stated that Allstate does “not cover loss to the property … consisting of, or caused by … [v]andalism. However, we do cover sudden and accidental direct physical loss caused by fire resulting from vandalism unless your dwelling has been vacant or unoccupied for more than 90 consecutive days immediately prior to the vandalism.” The policy also defined vandalism as “willful or malicious conduct resulting in damage or destruction of property.” Based on the language of the policy, Allstate denied coverage to Mr. Capek.
Mr. Capek brought suit for breach of contract against Allstate. He argued that the policy was ambiguous because it did allow for a fire to be a covered cause of loss, if it was the fire was the result of vandalism. Allstate moved for, and was granted, summary judgment contending that the fire was intentionally set and would now be considered vandalism based on the definitions in the policy and, therefore, excluded from coverage.
The appellate court indicated that:
As with the construction of contracts generally, ‘unambiguous provisions of an insurance contract must be given their plain and ordinary meaning, and the interpretation of such provisions is a question of law for the court’ “ (Vigilant Ins. Co. v. Bear Stearns Cos., Inc., 10 NY3d 170, 177, quoting White v. Continental Cas. Co., 9 NY3d 264, 267 [citation omitted]; see Government Empls. Ins. Co. v. Kligler, 42 N.Y.2d 863, 864). The plain meaning of a policy’s language may not be disregarded to find an ambiguity where none exists (see Bassuk Bros. v. Utica First Ins. Co., 1 AD3d 470, 471). An exclusion from coverage “must be specific and clear in order to be enforced” (Seaboard Sur. Co. v. Gillette Co., 64 N.Y.2d 304, 311).
Here, the court held that the meaning of the definition of vandalism covered “willful or malicious conduct” and that an intentionally set fire would be deemed vandalism. Therefore, there was no coverage for the fire.
It is important to note that here, the cause of loss was an intentionally set fire and not another event which suddenly or accidently caused a fire. For example, the outcome of this case may be different had the fire resulted from a heater being knocked over starting a fire, when someone was vandalizing the property. In this example, the vandalism was intentional, but the resulting fire was an accident.
Finally, I started off this blog indicating that it was important to read the policy for definitions terms in the policy. Why? If a term is not clearly defined in the policy it must be narrowly interpreted in the light most favorable to the insured. In MDW Enterprises V. CNA Insurance Company, the court held that vandalism was not defined in the policy and, therefore, arson does not have to be vandalism.2 The court specifically pointed to the fact that “fire”, “arson” and “vandalism” were all used as separate and distinct terms in the policy for some purposes and could possibly be different for all purposes. The court warned against solely relying on a dictionary definition of the terms in question because it may not take into account how a term is used in the rest of the policy.
Carefully reading the policy, may grant coverage to claim that initially may be excluded or save you from spending resources on a claim that has no coverage. So it seems, my English teachers were correct, reading is fundamental.
1 Capek v. Allstate Indemnity Co., No. 35141/11, 2016 NY Slip Op 02608 (N.Y. App.Div. 2d Dep’t April 6, 2016).
2 MDW Enters. v. CNA Ins. Co., 4 A.D.3d 338, 341 (N.Y. App. Div. 2004).