Absent evidence that someone started the
fire with the intent to harm, the warming
fire did not qualify as vandalism. Therefore, the vacancy exclusion did not apply,
and the damage was covered.
Under Ong, a deliberately set fire is excluded under the vacancy exclusion only
if it was set in order to cause damage. It
follows that the vacancy exclusion will
not apply to a fire claim unless the insurer
can prove someone started the fire in order to cause damage. Making that determination will require facts indicating the
mental state and purpose of the person
who started the fire.
The Phillips case (TN) —
Arson is definitely not excluded
Shortly after Botee and Ong, a Tennessee
court concluded that arson is not excluded by the vacancy exclusion. [Southern
Trust Insurance Co. v. Phillips, 474 S. W.3d
660 (Tenn. Ct. App. 2015).] When Mr.
Phillips’ vacant house was substantially
damaged by an arson fire, the insurance
company denied coverage based on the
The insured argued that the average
person did not believe that arson and
vandalism were the same thing. The
court agreed, observing that in everyday
speech, vandalism and arson are seen as
separate and distinct activities. Likewise,
in its list of specified perils, the policy list-
ed “fire” as one peril, and “vandalism or
malicious mischief” as another separate
peril. The court concluded the average
insured reading that list would presume
that “arson” qualified as “fire,” and would
expect that the exclusion of “vandalism
and malicious mischief” did not apply to
“arson.” Therefore, under Phillips, the va-
cancy exclusion does not exclude arson.
Three issues to consider
On a practical level, this review of recent
cases highlights three principles that ap-
ply in any jurisdiction:
icy applies to a loss;
report facts; and
ing a coverage determination.
1. Keep an open mind
Even though Botee, Ong and Phillips dealt
with similar facts, applied similar policies,
and used the same method of interpretation, they came to divergent answers on
the same question. So it is not surprising
that an adjuster and an insured may have
different opinions about how a policy applies to this type of claim. Therefore, the
first tip drawn from these cases is a fundamental principle of claim investigation
— keep an open mind about how policy
terms apply to the loss at hand.
2. Use objective and neutral language
to report facts
In the Ong claim, the adjuster and the
insurance company’s fire investigator described the fire as a “warming fire,” and
the court relied on that description when
it analyzed coverage. Significantly, the
court explained that previous cases did
not apply to this claim because they did
not involve a “warming fire.” This demonstrates that other people will presume
that an adjuster’s summary is accurate
and objective. A neutral description of
the loss scene or interview allows a coverage determination based on the facts and
not necessarily on the adjuster’s initial interpretation of them.
3. Check the law
Imagine an adjuster with three losses involving vacant houses damaged by arson.
The houses are in Florida, California, and
Tennessee. Whether the loss is covered
or excluded depends on the jurisdiction.
Due to widely differing views on the scope
of the vacancy exclusion, adjusters should
check the current law before reaching a
coverage decision on such claims.
Although the facts and the law change,
the purpose of claim adjustment remains
the same — to properly apply the policy
to the loss. Following these three principles will help the adjuster arrive at the
Brendan J. Fogarty ( email@example.com)
is a partner at LHB Pacific Law Partners,
LLP. He represents insurers on claims and in
litigation. Andrew P. Collier (acollier@plawp.
com) is an associate at LHB Pacific Law
Partners, LLP. Before becoming a lawyer, he
was an adjuster and a claims supervisor.
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Under Ong, a deliberately
set fire is excluded under
the vacancy exclusion
only if it was set in order
to cause damage.