Fire Coverage

Fire Started Intentionally In Vacant Building Does Not Fall Within ‘Vandalism And Malicious Mischief’ Exclusion

A California appellate court, applying California law, held that fire damage likely caused by a “warming fire” started by a transient that spread to other parts of the property did not trigger a fire policy exclusion barring coverage for property damage caused by “vandalism or malicious mischief.”

Plaintiff purchased the insured property in 2007. By February 2010, the property was vacant and the gas and electric utilities were turned off. In December 2011, plaintiff submitted a claim to its property insurer, Fire Insurance Exchange (Defendant), for a fire at the property. Defendant’s fire investigator determined that “the fire may have been initiated as the result of an uncontrolled warming fire started by an unauthorized inhabitant.” The fire investigator also observed that the transient may have tried to extinguish the fire once it got out of control. Defendant’s claims adjuster noted that the fire was “unintentionally incendiary” and “likely transient in house and warming fire got out of hand.” Defendant denied coverage for the “intentionally set [] fire,” based on a policy exclusion barring coverage for “Vandalism or Malicious Mischief” where the property was vacant for more than 60 days.

Plaintiff sued Defendant for breach of contract and bad faith. The trial court granted Defendant’s summary judgment motion, finding the “Vandalism or Malicious Mischief” exclusion barred coverage based on the legal meaning of “malice” it borrowed from criminal arson cases: “[t]he unauthorized person or persons who intentionally set the fire on the kitchen floor certainly created an obvious hazard to the dwelling without justification, excuse or mitigating circumstances.”

The appellate court reversed. According to the appellate court, for the exclusion to apply, there must be evidence that the fire was set with actual intent to destroy property or cause harm to someone. The appellate court determined that the conclusion by Defendant’s fire investor that the fire was “unintentionally incendiary,” along with the conclusion by Defendant’s claims adjuster that the damage was caused by a “warming fire [that] got out of hand,” precluded enforcement of the exclusion on summary judgment. The dissenting judge explained that he would have applied the exclusion, because “[s]tarting such a fire would inevitably damage or deface the floor…And it does not matter that the person who started the fire did not intend for it to become as destructive as it did…Starting the fire was vandalism (because it was willful destruction or defacement), so the loss resulting from the fire is not covered.” Ong v. Fire Ins. Exchange, Case No. B252773 (Cal. Ct. App. April 3, 2015).

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