Covered Property

Grand Prairie insurance lawyers need to be able to discuss with a client how courts interpret insurance policies. The Houston Court of Appeals [14th Dist] issued an opinion in April 2014, that is worth reading. The style of the case is “ACGS Marine Insurance Company v. Spring Center, Inc.” Here is what the case tells us.
Spring Center owns a business park in the Houston area consisting of eleven buildings, all surrounded by a single fence. It leases space within its eleven buildings to various businesses, including those providing light manufacturing, storage, and light machine repair, among others. Spring Center also has a management office located on the property that is staffed during normal business hours.
A vacant building in the business park was broken into and “completely stripped of electrical wiring.” Major damage was done to the offices and exterior doors were broken. Spring Center timely notified ACGS of the damage and requested coverage under the Policy. During its investigation, ACGS learned from Spring Center’s representative that the building had been vacant for about four months prior to the loss. ACGS informed Spring Center in writing that it would not cover the damage based on the following Policy condition:
Vacancy – Unoccupancy – “We” do not pay for loss caused by attempted “theft”; breakage of building glass; sprinkler leakage (unless “you” have protected the system against freezing); “theft”; vandalism; or water damage occurring while the building or structure has been:
a. vacant for more than 60 consecutive days; or b. unoccupied for more than:
1) 60 consecutive days; or 2) the usual or incidental unoccupancy of a “covered location”;
whichever is longer.

Unoccupied means that the customary activities or operations at a “covered location” are suspended, but business personal property has not been removed. The building or structure will be considered vacant and not unoccupied when the occupants have moved, leaving the building or structure empty or containing only limited business personal property. Buildings or structures under construction are not considered vacant or unoccupied.
Following ACGS’s denial of coverage, Spring Center sued ACGS. ACGS moved for summary judgment on, as is relevant here, whether it properly denied coverage for Spring Center’s loss under this Policy condition. The trial court denied ACGS’s motion, stating: “The Court believes that a ‘covered location’ for purposes of the insurance policy in question included all eleven buildings contained within the fenced area. These eleven buildings were collectively insured as one property by one policy with one vacancy clause that applied to the property as a whole.”
Spring Center filed a partial summary judgment motion on liability, centering on “an interpretation of the Policy’s vacancy exclusion.” ACGS filed a response, asserting similar arguments as it had in its summary judgment motion and arguing that its previously denied summary judgment motion should be reconsidered and granted. The trial court granted partial summary judgment in favor of Spring Center on the following grounds:
The court finds an ambiguity exists in the insurance policy regarding whether the vacancy clause applies to each of the 11 buildings at the covered location separately as ACGS contends, or to all 11 buildings collectively as Spring Center contends. The vacancy/unoccupancy condition uses both the phrases “the building or structure” and “covered location” in defining what must be not vacant/occupied in order for coverage to exist. Notably this condition does not use the phrase “each building or structure.” It is undisputed that the “covered location” is 22820 Interstate 45 North, Spring, TX 77373, which is a fenced business park with 11 separate buildings. The Schedule of Coverage references the property contained on the Location Schedule with regard to what property was covered. The Location Schedule describes the “Covered Property” as a “Building” with a single limit of $10,350,000.
The coinsurance provisions state: “If there is more than one ‘limit’ indicated on the ‘schedule of coverage,’ this procedure applies separately to each covered property for which a ‘limit’ applies. If there is one ‘limit’ indicated on the ‘schedule of coverage,’ this applies to the total of all covered property to which the ‘limit’ applies.” This language eliminates any ambiguity regarding whether the coinsurance clause is to be applied to each building separately or to the property as a whole.
The Windstorm or Hail Deductible provisions state: “The windstorm or hail percentage deductible applies separately to: a. each building or structure . . . .” This language also eliminates any ambiguity regarding how the windstorm or hail deductible is to be applied.
No similar language is used regarding the vacancy/unoccupancy condition, making the condition ambiguous. ACGS Marine does not dispute that ambiguities in insurance policies are construed in favor of the insured. The court therefore construes the vacancy/unoccupancy condition as applying only if the entire business park at the covered location was vacant or unoccupied. Since it is undisputed that the entire covered location was not vacant at the time of the loss, there is coverage for Plaintiff’s damages pursuant to the terms of the policy.