In a case of first impression in Connecticut, a Connecticut federal court recently addressed when property damage caused by intruders breaking into a building while stealing items from within the building constitutes damage from vandalism covered under a property policy versus damage from theft excluded under the policy. Mercedes Zee Corp., LLC v. Seneca Ins. Co., 2015 WL 9311343 (D.Conn. Dec. 22, 2015). You may read the decision here.
In Mercedes Zee Corp., LLC, intruders broke into and damaged the interior of and fixtures within a building owned by the plaintiff. The intruders also stole copper piping from inside the building. The building owner filed a claim for property damage under a property policy purchased from Seneca Insurance Co. that provided coverage for damage caused by vandalism, but not damage caused by or resulting from theft. The policy defined the term “vandalism” to mean “willful and malicious damage to, or destruction of, the described property.” The policy excluded from vandalism coverage any damage caused by or resulting from “theft”, except for damage to the building caused by burglars breaking into or exiting the building. The policyholder sought payment for $2 million in damage to the interior of the building claimed to have been caused by the intruders, but did not seek coverage for the value of copper piping or other items stolen from inside the building. The insurer denied most of the policyholder’s claim, contending that a majority of the damage to the interior of the building resulted from theft of the copper piping which was excluded under the policy, and any damage caused by vandalism was less than the $10,000 policy deductible.
The court denied the motion for summary judgment filed by each party after rejecting the policy interpretation offered by each party. After analyzing a number of cases throughout the country that have addressed the vandalism/theft issue, the court ruled that whether a particular loss is covered under the vandalism clause or excluded by the theft clause depends on three principles. First, whether the wrongdoer intended to vandalize or steal when entering the building. If the wrongdoer intended to commit willful and malicious damage to, or destruction of, property upon entering the property, the court ruled that such conduct would be more consistent with the term “vandalism.” The Mercedes Zee Corp. policy did not define the term “theft”, so the court relied upon a dictionary definition to conclude that the term means an act of stealing or unlawful taking of property. Therefore, if an intruder breaks into a building with the intent to steal or take property upon entering the building, the court determined that such an intent would be more consistent with theft. The court ruled, however, that the intent of the wrongdoer is not the sole inquiry. One must also determine whether the damage to the property was necessary to or in furtherance of an act of theft. If so, the loss would likely fall within the definition of “theft” rather than “vandalism.” Finally, the court ruled that property damage stemming from an act of attempted theft which does not result in actual theft was a covered act of vandalism because the Mercedes Zee Corp. policy exclusion for theft did not apply to attempted theft. The court also determined that an act of vandalism is not limited to situations in which one has an urge to destroy property. Rather, the malice necessary for an act of vandalism can arise from an urge to destroy property or any other deliberate wrongful reason. The court artfully quoted lyrics from Carrie Underwood’s 2005 hit song, Before He Cheats (Artista Records 2005), to conclude that although vandalism entails an act of destroying property for no more than a demented enjoyment of destroying property, one is no less a vandal if they act for reasons of vengeance or a vendetta against the property owner. Thus, damage from vandalism that is covered under a property policy may arise from one’s intent to destroy property solely with the unrealized hope of stealing what lies within the property.
The Mercedes Zee Corp. case is another example of how courts construe ambiguities in policy terms against an insurance company and how they strictly construe policy provisions which exclude coverage. Because the term “malice” in the Mercedes Zee Corp. policy definition of “vandalism” was not limited to situations in which one simply has an urge to destroy property, the court interpreted the term broadly to include the intent to damage property for any deliberate wrongful reason. Similarly, the court strictly interpreted the exclusion for damage caused by “theft” to not apply to damage caused by attempted theft.