Earlier this year, the Western District of Washington considered application of a vacancy provision in a commercial property loss claim in a case titled Hartford Cas. Ins. v Mark, 2014 WL 300989 (W.D. Wash. Jan. 28, 2014). The case involved a family-owned business that operated in a building in downtown Tacoma, Washington. The portion of the building where the business operated shared walls with the neighboring businesses—each of which had their own tax parcel numbers. In addition, the local municipality operated a parking garage above the businesses, which also had a separate address. The premises where the business operated was damaged when sewage backed up. At the time of the loss, the business premises had been vacant for several months. The business filed an insurance claim for the loss.
The declarations page in the applicable insurance policy listed only the business address. Notably, it did not list the entire building as being covered property. The applicable insurance policy included a provision that excluded coverage for damage caused by sewer backup while the insured premises are vacant:
If the building where the physical loss or physical damage occurs has been vacant for more than 60 consecutive days … we will not pay for physical loss or physical damage caused by … water damage.
The insurance company filed a declaratory judgment action against the insured seeking a determination that it did not owe insurance benefits pursuant to the above exclusion. The insured counterclaimed that the insurer breached the contract, acted negligently and in bad faith, and violated the Consumer Protection Act. The insured argued that the provision did not apply because the term “building” meant the entire building—not simply the business address that the insured occupied. The parties filed cross-motions for summary judgment on whether the insured was entitled to coverage for the loss.
The court found in favor of the insurance company, finding that the term “building” referred only to the business address and not the entirety of the building. In making its ruling the court consulted the common dictionary definition of the term building, which defined the term as “a constructed edifice design to stand more or less permanently, covering a space of land, usually covered by a roof and more or less completely enclosed by walls.” The court determined that when the definition was considered in conjunction with the fact that the “building” listed in the declarations page of the insurance policy included only the address of the insured business—and not all of its neighbors, the only plausible reading of the policy meant the policy covered the business address only. Accordingly, because the “building” was vacant at the time of the loss, the insurer did not owe coverage for the loss and granted its motion for summary judgment.
MLR frequently litigates cases involving insurance claims for water loss and issues regarding vacancy provisions in policies. Please contact us with any questions about this case, or any other matter you see addressed in the Insurance Coverage Blog.