Claims Queue BY DIANA REITZ, CPCU
RAMPANT COPPER THEFT
RAISES COVERAGE QUESTIONS
a Look at Vacancy and Cause of Loss Provisions
With the price of copper at all time highs—between $3.50 and $25 per pound, depending on type—its ability to tempt enterprising thieves has also escalated. Four former employees of Duke Energy, the largest elec- tric power holding company in the United States, were among nine indicted recently for stealing copper wire from Duke and selling it to recyclers. Nearly every
day we hear reports of the copper tubing from HVAC units being stolen. Contractors often
employ 24/7 security guards to discourage thieves from stealing copper piping and fittings.
All of this translates into an escalating number of questions about how insurance coverage can be tapped to reimburse property owners for such high-value losses. We at
FC&S Online receive weekly questions about insurance coverage and the theft of copper. They generally fall into two categories: theft of copper piping or fittings from vacant
buildings and situations where occupied buildings are damaged while the copper is being removed. In the latter case, question frequently turns on whether this ancillary damage qualifies as vandalism for the purpose of coverage.
low the $5,000 deductible, so Essex paid
The policy in question did provide coverage for vandalism, but it excluded damage caused by or resulting from theft. As is
frequently seen in commercial property
forms, there was an exception to the theft
exclusion for building damage caused by
the “breaking in or exiting of burglars.” After
Essex denied the claim, Eldridge sued. The
trial court held that the damage to Eldridge’s
property was covered by the Essex policy,
awarding actual damages of $300,000, prejudgment interest, and attorney’s fees.
The court analyzed the policy provisions,
especially the question of whether the ancil-
lary damage could be considered vandalism
or whether it was a part of the copper theft.
The policy defined vandalism as “willful and
malicious damage to, or destruction of the
described property.” Eldridge argued that
the property damage was vandalism and
only the property that was removed should
be considered theft. Alternatively, Eldridge
stated that the damage was caused by the
intruders breaking into parts of the build-
ing in order to get the copper, thus making it
“building damage caused by the breaking in
or exiting of burglars.”
Essex countered, saying that the copper
theft did not qualify as vandalism, it was
expressly excluded as theft, and it did not
fit the narrow definition of damage caused
by breaking in or exiting of burglars.
On appeal, the court concentrated on
the wording of the exception to the theft
exclusion. As it stated, theft is excluded
within a paragraph that provides coverage
for vandalism. As such, the appeals court
reasoned, the theft exclusion was “clearly
intended as an exclusion or exception to
the vandalism coverage,” meaning that
the theft exclusion would prevail unless
the breaking-in exception applied.
Vandalism and Theft
When dealing with these types of questions there are two main policy areas that must
be considered: vacancy provisions and causes of loss provisions. For example, the Insurance Services Office (ISO) business owners and commercial property policy forms
include vacancy provisions that exclude coverage for vandalism, theft, and attempted
theft when a building has been vacant for more than 60 consecutive days. When policies
include this type of wording, it is fairly clear that neither the copper theft nor the ancillary damage is covered.
There are situations, however, involving vacant buildings where this language is not
involved. An example of this is the Texas case, Essex Insurance Co .v. Eldridge Land,
L.L.C.. Eldridge owned a vacant building, which had been used as a grocery store. Intruders forced their way into the building and damaged sheetrock, ceiling tiles, electrical conduit boxes, and wall coverings in order to remove and steal copper wiring and
pipe. Essex denied the claim based on a policy exclusion for loss or damage caused by or
resulting from theft. In addition, the damage done by breaking into the building was be-
“Breaking In” vs. “Breaking Into”
According to the appeals court, the
“breaking in” exception did not mean
“breaking into” fixtures, walls, ceilings, or
floors in order to remove pipes or wiring.