On April 3, 2015, over a dissenting opinion, the state Court of Appeal in Los Angeles held in Ong v. Fire Ins. Exchange that a vacancy vandalism coverage exclusion was not triggered by a transient who, to get warm, set a dwelling kitchen fire that got out of control.
The policyholder purchased the dwelling in 2007, the last tenants vacated the property in February 2010, and utilities were disconnected. In December 2011, the insured submitted a fire loss insurance claim under a policy containing a coverage exclusion for loss caused by vandalism or malicious mischief if the dwelling had been vacant for more than 30 consecutive days on the date of loss. An experienced fire investigator hired by the insurer reported that it appeared the fire was started in the kitchen as a warming fire by an unauthorized inhabitant who tried to halt the spread of the fire but lost control. The insurance company denied coverage for the loss based on the exclusion. The policyholder sued the insurance company for breach of contract and insurance bad faith. The insurance company moved for summary adjudication, which was granted by the trial court. On appeal the policyholder contended that the exclusion did not apply to the loss because the fire was ignited negligently, whereas the definition of vandalism requires intent to destroy property under the ordinary and popular sense of the term.
The Court of Appeal agreed with the policyholder and reversed the judgment. The Court held that the goal of judicial contract interpretation is to give effect to the mutual intention of the parties based on the language of their contract, the policy. If the contractual language is clear and explicit, it governs, and the policy language is to be interpreted in its ordinary and popular sense unless used by the parties in a technical sense or special meaning is given to them by usage.
Using dictionary definitions, the Court of Appeal found that vandalism in its ordinary and popular sense is the willful destruction of property, or the destruction of property with a desire to cause harm. The Court of Appeal faulted the trial court for not looking to the dictionary to define the term “malicious” in its ordinary and popular sense. Rather, the trial court adopted what it referred to as the meaning of malice in the “legal sense.” The Court of Appeal pointed out in the case under discussion that malice in law is not the same as the “ordinary and popular sense” of the term malice, which is malice in fact. Here, according to the appellate court, evidence negated malice, since the transient who set the fire “‘apparently kicked the firewood in an attempt to knock it out the door and stop the spread of the fire and the fire was ‘unintentional[ly] incendiary.’”
The dissenting justice pointed out that it was undisputed that the insurer’s investigators concluded that a transient intentionally started the fire on the floor of the kitchen in order to keep warm, but did not intend the fire to grow as large and destructive as it did. That conduct, according to the dissenting justice, constituted vandalism in and of itself. The dissenting opinion observed that the dictionary defines vandalism as the willful or malicious destruction or defacement of property. Vandalism, therefore, need not be malicious as long as it is willful, and the term “willful” means only that the conduct was “done deliberately” and is synonymous with intentional. The majority opinion, in a footnote, found that there was a question of fact as to whether the conduct of the squatter was “willful”, pointing to the fact that he tried to stop the spread of the fire. The dissenting justice disagreed that the transient’s efforts to stop the spread of the fire created a disputed issue of fact as to whether intentionally starting a fire on the kitchen floor is willful destruction or defacement of property. That justice stated that starting such a fire would inevitably damage or deface the floor and therefore constitutes vandalism under the dictionary definition.
Nor does it matter, according to the dissenting justice, that the person who started the fire did it to keep warm. What is relevant, that justice said, is that someone intentionally started a fire on the kitchen floor which itself qualifies as willful destruction or defacement of property. The dissenter quarreled with the majority over its analysis of the issue of malice, as well, pointing out that intentionally starting a fire on the kitchen floor constitutes intentionally damaging or injuring the kitchen floor, so the undisputed facts show intent to injure, too. In brief, according to the dissent, the policyholder did not pay for insurance for this loss, because the undisputed facts show that it is excluded from coverage.
Richard Wolf is a partner in the Los Angeles office of the nationwide law firm of Lewis Brisbois Bisgaard & Smith LLP. Since 1970 Wolf has specialized in insurance coverage advice and litigation.
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