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Commercial Property |
Breach of Contract |
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Vacancy |
Unfair Settlement
Practices |
In 2004, KPE Firstplace
Land, LLC (KPE), purchased property in Tyler, Texas that included a
90,000-square-foot building. On December 31, 2005, KPE discovered that thieves
had stolen copper coils from the air-conditioning equipment on the roof of the
building, damaging the equipment. KPE filed a report with the Tyler Police
Department that day. KPE's insurance agent reported the loss to KPE's insurance
company on February 13, 2006.
At the time KPE discovered
the damage to the air-conditioning equipment, its building was insured under a
policy issued by CMI Lloyds. The policy provided that there was no coverage for
loss or damage caused by theft if the building had been vacant for more than 60
consecutive days before that loss or damage occurred. At the time KPE's loss
was discovered, the building had been "vacant" as defined by the
policy for more than 60 consecutive days. KPE's claim was denied on March 6,
2006. The parties attempted to settle the matter but were unable to do so. KPE
eventually filed a lawsuit alleging breach of contract, unfair settlement
practices, and failure to comply with the prompt payment statute. The trial
court found in favor of KPE and Lloyds appealed.
The key issue on appeal was
whether the loss "occurred" when the property had been vacant for
more than 60 days. KPE argued that the date the loss "occurred" was
the date the air conditioner became damaged. Lloyds argued that the date the
loss "occurred" was the date the loss manifested itself or was discovered.
The Court of Appeals of Texas concluded that damage "occurred" when
the property actually became damaged. Applying this definition, the court found
that Lloyds could not prove that the building was vacant for more than 60 days
on the date the air-conditioning equipment was damaged. As a result, it
determined that the trial court found properly in favor of KPE.
The lower court's judgment was
affirmed.
Central Mutual Insurance
Company vs. KPE Firstplace Land, LLC-No. 12-07-00314-CV-Court of Appeals of
Texas, Tyler-November 26, 2008-271 South Western Reporter 3d 454