131_C156

WATER DAMAGE CAUSED BY VANDALISM AS POLICY DEFINED IT

Commercial Property	Accidental Discharge of Water
Vandalism	Breach of Insurance Contract

Wai Kun Lee owned a duplex in Brooklyn, NY. In January 2005, Lee returned from a two-week vacation. He discovered that a tenant who knew he was being evicted (and with whom Lee had an acrimonious and contentious relationship) had moved out. The tenant had turned down the thermostat in the unit to its lowest setting, essentially shutting off the heat. This caused a pipe in the attic to burst, resulting in extensive water damage to the premises.

Lee filed a claim under the policy that Otsego Mutual Fire Insurance Co. (Otsego) wrote that covered the building. Otsego denied the claim stating that coverage did not apply to loss due to a frozen pipe or accidental discharge of water. Lee commenced legal action, alleging that his loss was the result of vandalism, a covered peril. Lee also maintained that Otsego breached the insurance contract by denying the claim. Otsego moved for summary judgment to dismiss the complaint in its entirety. The trial court denied the part of Otsego’s motion for summary judgment dismissing the first cause of action seeking to recover damages for breach of contract. Otsego appealed.

In order to prevail on its motion for summary judgment to dismiss the complaint, Otsego had to establish its entitlement to judgment as a matter of law by demonstrating that Lee’s loss was not the result of the covered peril of vandalism. The appellate court approached this case by examining the insurance contract by testing “common speech” and “the reasonable expectation and purpose of the ordinary businessman.” The common meaning of the term “vandalism” is the “malicious or ignorant destruction of public or private property.” Otsego did not suggest that Lee’s loss resulted from anything but vandalism. The court noted that even if the term “vandalism” was “susceptible of two reasonable interpretations” (and ambiguous), it must be construed in favor of the insured.

The trial court affirmed the trial court’s decision that denied the part of Otsego’s motion for summary judgment dismissing the first cause of action.

Supreme Court, Appellate Division, Second Department, New York. Wai Kun Lee, Respondent, v. Otsego Mutual Insurance Co., Appellant. March 25, 2008. 49 A.D.3d 863 854 N.Y.S.2d 211