HomeProperty InsuranceCourt Differentiates Vandalism from Theft in First Party Insurance Policy

Court Differentiates Vandalism from Theft in First Party Insurance Policy

The United States District Court for the Western District of Washington decided an insurance coverage case involving Plaintiffs Benny and Guangying Cheung and Defendant Allstate Vehicle and Property Insurance Company.  Cheung v. Allstate Vehicle & Prop. Ins. Co., No. C22-1174 TSZ, 2023 WL 9000432 (W.D. Wash. Dec. 28, 2023). The Court considered whether the Plaintiffs’ loss was caused by theft or vandalism, as neither term was defined in the policy.

In Cheung, the Plaintiffs, who resided in California, purchased property in scenic Mount Vernon, Washington, in July 2021, and insured the property through a policy of insurance issued by Allstate. The Plaintiffs did not have a concrete plan on when they would move to Washington, but they did spend one night there in August 2021, and brought some personal effects, appliances and items that they left.

On November 20, 2021, after the home was vacant for an extended period of time, unidentified individuals broke into and damaged Plaintiffs’ property, taking various items. The loss was reported to Allstate on November 24, 2021, and the Plaintiffs filed a claim seeking coverage for the damage to their dwelling and structures in the amount of $200,000.  The claim included the cost to replace various appliances, and an additional $1,310 for the value of other stolen personal property, including certain tools and clothing.

After investigating, Allstate denied coverage, invoking the policy’s vandalism exclusion and increased risk provision. The increased risk provision precludes coverage when a loss is caused by “[a]ny substantial change or increase in hazard, if changed or increased by any means within the control or knowledge of an insured person.” It was Allstate’s position that Plaintiffs’ decision to leave the property vacant for several months increased the risk of loss, and Plaintiffs’ loss would not have occurred if they were living at the property. Interestingly, Allstate’s denial letter focused only on whether coverage was owed for the dwelling and other structures and did not cite to the policy provisions that address personal property.

In August 2022, Plaintiffs filed suit and asserted claims for breach of contract, violation of Washington’s Consumer Protection Act (“CPA”), insurance bad faith, negligence, and violation of Washington’s Insurance Fair Conduct Act (“IFCA”). Plaintiffs argued that the damage was covered under the policy, primarily resulting from theft.

Recently, the District Court addressed the parties’ motions for partial summary judgment. In its decision, the Court discusses the interpretation of the insurance policy and sets forth that, “Insurance policies are construed as contracts, so policy terms are interpreted according to basic contract principles.” Citing to Allemand v. State Farm Ins. Companies, 160 Wn. App. 365, 368, 248 P.3d 111 (2011). The Court added that, “coverage under insurance policies, particularly all-risk policies, is interpreted broadly.” Eagle W. Ins. Co. v. SAT, 2400, LLC, 187 F. Supp. 3d 1231, 1235 (W.D. Wash. 2016). Moreover, the Court also examined the purpose of the criminal behavior at hand and whether the intent was to steal, which the plain and ordinary and popular meaning would determine the act to be “theft,” or whether the intent was to destroy, which would lead to a plain, ordinary and popular meaning of “vandalism.”

Ultimately, the Court denied Allstate’s motion for partial summary judgment and granted in part and denied in part Plaintiffs’ cross motion holding that as a matter of law, Allstate failed to timely and appropriately deny coverage for Plaintiffs’ personal property losses, and as such, was precluded from doing so in this lawsuit. The Court also found that given the facts of the case and the plain and ordinary meaning of the terms “theft” and “vandalism,” the damage to the property resulted from theft, and not vandalism.

The Court further held that Plaintiffs’ stand-alone appliances and personal effects were personal property and that the theft of these items is a covered loss. Finally, the Court concluded that as a matter of law, Allstate may not rely on the vandalism exclusion in the policy to deny coverage as Plaintiffs’ losses resulted from theft, but it may rely upon the increased risk of loss provision defense to coverage for the theft loss as it was raised in its denial letter.

In the intricate landscape of insurance coverage cases, the plain and ordinary interpretation of undefined terms within policies emerges as the linchpin, in Courts rendering their decisions. The devil resides in the details, and a thorough understanding of the language employed in insurance policies becomes paramount. Each term, whether explicitly defined or left to interpretation, serves as a decisive factor that shapes the outcome of coverage disputes. In this realm, precision and clarity in policy language stand as the bedrock of informed decision-making, underscoring the need for both insurers and policyholders to navigate the intricate tapestry of insurance contracts with meticulous attention to the terms therein.

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