N.M. Supreme Court Upholds Arson Exclusion in Recent Ruling

January 19, 2006

On Jan. 9, 2006, the Supreme Court of New Mexico upheld arson
exclusion language by ruling that “vandalism and malicious fraud” includes acts of arson.

“The Battishill v. Farmers Alliance ruling recognized the clear language of the exclusion, and that the clarity of the language necessitated a ruling for the insurer” said Robert Hurns, counsel for the Property Casualty Insurers Association of America (PCI), which filed an amicus brief in the case. “The court has upheld common principles of contract law, and that the common meaning of a word or phrase should not be twisted to achieve a result outside the intent of the contracting parties.”

Battishill owned rental property insured under a homeowner’s hybrid policy issued by Farmers, which provided “all-risk” coverage on the dwelling and “named peril” coverage on personal property. Battishill’s house was partially damaged by a fire, determined after an investigation to be incendiary in nature. Battishill filed a claim under his policy, and Farmers denied coverage based on an exclusion in the policy for loss caused by “vandalism and malicious mischief.”

The trial court granted summary judgment in favor of Farmers, holding that the exclusion was unambiguous and excluded coverage. On appeal, the appellate court reversed.

On review before the New Mexico Supreme Court, the high court concluded that the “phrase ‘vandalism and malicious mischief’ included acts of arson” and that the “clarity of the exclusion in the all-risk section of the policy precludes interpretation of the insured.”

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