Texas Appellate Court Affirms Partial Summary Judgment In Favor Of Insured When Insurer Unable To Prove Date When Property Damage Occurred
December, 2008
In Central Mutual Ins. Co. v. KPE Firstplace Land, LLC, a Texas appellate court affirmed the trial court’s entry of partial summary judgment in favor of the insured where insurer Central Mutual (“Central”), “could not meet its burden of proof with regard to the exclusionary vacancy provision at issue.” --- S.W.3d ---, 2008 WL 5005535, *5 (Tex. App.-Tyler, Nov. 26, 2008). Central Mutual holds that the insurer’s inability to demonstrate that the insured property had been vacant for sixty days on the date the loss “occurred” -- as that term was interpreted by the court -- doomed its appeal challenging coverage.
Facts
On December 29, 2004, the insured, “KPE,” purchased real estate in Tyler, Texas. “At some time prior to December 31, 2005, thieves removed copper coils from the air conditioning equipment located on the roof of the building, which caused the air conditioning equipment to become damaged. KPE discovered the damaged air conditioning equipment on December 31, 2005 and reported the loss to the Tyler Police Department that same day.” KPE’s insurance agent reported the loss to Central on February 13, 2006. The actual date of the theft and concomitant damage was unknown to both parties.
The policy in place on December 31, 2005 contained a vacancy provision: “b. Vacancy Provisions *** If the building where loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs: 1) We will not pay for any loss or damage caused by any of the following even if they are Covered Causes of Loss: a) Vandalism; *** e) Theft; or f) Attempted theft.” “KPE’s property had been ‘vacant’ … for more than sixty consecutive days at the time the loss was discovered on December 31, 2005.”
Central denied KPE’s claim and KPE filed suit “seeking recovery for breach of contract, unfair settlement practices, and failure to comply with the prompt payment statute.” KPE ultimately moved for partial summary judgment arguing that “Central could not prove that its claim was excluded under the ‘Vacancy’ clause because it could not demonstrate that the property had been vacant for sixty days at the time the loss ‘occurred,’ i.e., the date on which the air conditioning equipment was damaged.” Central also moved for summary judgment: it argued that the “Vacancy” “clause excluded KPE’s claim because the property had been vacant for sixty days at the time the loss ‘occurred,’ that is, the date on which the loss ‘manifest[ed] itself or [was] discovered.’” The trial court granted KPE’s motion and denied Central’s. This appeal followed.
Analysis
Central Mutual focuses on when loss or damage “occurs” as that language is used within the policy’s vacancy provision:
In the case at hand, the parties disagree about the meaning of the term ‘occurs’ as it is used in the policy’s vacancy provision. KPE argues that Central could not prove its claim was excluded under the vacancy provision because it could not demonstrate that the property had been vacant for sixty days at the time the loss ‘occurred,’ that is the date on which the air conditioner became damaged. To the contrary, Central argues that the vacancy provision excluded KPE’s claim because the property had been vacant for sixty days at the time the loss ‘occurred,’ that is, when the loss manifested itself or was discovered.
The appellate court sided with KPE. Recognizing the distinction between first-party and general liability insurance, the court nonetheless deemed “instructive” a recent Texas Supreme Court case which considered the meaning of “occurs” within the context of a liability policy, Don’s Building Supply, Inc. v. OneBeacon Ins. Co., 2008 WL 3991187 (Tex. Aug. 29, 2008). In Don’s Building, the Texas Supreme Court stated that “[o]ccurred means when damage occurred, not when discovery occurred.” (Emphasis in original.) Taking from Don’s Building as well as the plain American Heritage definition of “occur,” the Central Mutual court concluded that “when the language of the instant contract is properly construed, damage ‘occurs’ when the property becomes damaged.” Because Central could not prove the date the air conditioner sustained damage, it could not meet the burden necessary to apply the terms of the vacancy provision to KPE’s insurance claim.
Learning Point
Absent evidence establishing when damage by theft actually happened – as opposed to when such damage was discovered – a vacancy provision requiring vacancy for more than 60 days before loss or damage “occurs” would not be applied to preclude coverage.
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