Washington: No Water Damage Coverage For Unoccupied Building

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WASHINGTON, June 9 – The Supreme Court of the state of Washington has ruled that there is no coverage under a property insurance policy for water damage to a vacant building, rejecting  the policyholder’s claims that provisions relating to vacancy and building occupation were ambiguous.

Essex Insurance Company issued a property insurance policy to Kat Suen and May Far Lui . The insureds had evicted the building tenant, but did not provide notice to Essex that the building was no longer occupied.  Subsequently, water damage was caused on the property after a a sprinkler pipe froze and burst.

After issuing  payments totaling $293,598.05, Essex discovered that the building had been unoccupied for almost 60 days at the time of the loss. Essex sent a denial letter to the Luis, referencing a policy provision which suspended coverage when the insured property was vacant or unoccupied.

Essex offered the Luis not to recoup the $293,598.05 paid if the Luis waived additional payment on the claim, which the Luis contended was  $758,863.31 in total.  The Luis declined, and sued Essex to recover the full claimed amount plus bad faith damages. In doing so, they claimed that the vacancy exclusion did not apply because the property was not vacant for  60 consecutive days.  That was not disputed by either side.

The trial court denied Essex’s summary judgment motion but an appeals court reversed.  In a unanimous opinion, the Washington Supreme Court affirmed an appeals court’s finding of no coverage, and held that a typical insured would understand that the policy in question substantially limited coverage from the first day an insured structure became vacant, and suspended coverage altogether if the building stays vacant for 60 days, calling the language plain and unambiguous.  The Court further found that water damage was a coverage which was restricted after the first day the insured building became vacant, concluding therefore that  there was no coverage for the water damage.

The Supreme Court rejected the insured’s argument that the vacancy provisions of the policy were vague and ambiguous, finding that such arguments ignored the plain meaning of the provisions and would create an unresolvable contradiction between the vacancy provisions which, in the opinion of the Court, simply did not exist.

Lui v. Essess Ins. Co., (Wash. June 9, 2016)Lui v. Essex Ins. Co., (Wash. June 9, 2016)

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Author: CJ Haddick

C.J. Haddick is a Director with the law firm of Dickie, McCamey, & Chilcote, PC, based in Pittsburgh, Pa. He has advised and represented insurers in insurance coverage and bad faith litigation for more than a quarter of a century, and written and spoken throughout the United States on insurance coverage and bad faith prevention and litigation. He is Managing Director of the firm's Harrisburg, Pa. office. Reach him at chaddick@dmclaw.com or 717-731-4800.

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