No business wants to face a vandalism loss. Yet it happens, and when it does, business owners should expect to be compensated under their insurance policies covering the property that was damaged. However, some insurers, look for ways to avoid paying what they owe. Sometimes, they turn to buried exclusions in the policy depending on how the vandals caused the damage. When that occurs, Minnesota law (and other states across the country) may still require the insurer to pay.
The Minnesota Supreme Court in Fawcett House, Inc. v. Great Central Ins. Co., 280 Minn. 325, 159 N.W.2d 268 (1968) considered whether a general exclusion in an insurance policy negated specific coverage for vandalism and malicious mischief and held there was coverage. That case involved a vandalism claim to a property owner’s business in northern Minnesota. In January of 1966, the vandals entered into the property and turned off the electric power, which then caused the heat to not work. Unsurprisingly, given that it was January in northern Minnesota, the temperature dropped in the building, and there was a freeze-up which damaged the plumbing system and the heating system. The insurance company denied the claim arguing that a policy exclusion for damages “resulting from change in temperature” excused it from paying any coverage.
The Minnesota Supreme Court rejected that argument. “The fact that, after the vandals had turned off the heating plant, freezing temperatures caused a rupture of the heating and plumbing systems is neither clearly nor necessarily a loss ‘resulting from change in temperature’ within the usual and ordinary meaning of paragraph 4(d) or within the contemplated intent and purpose of the exclusionary provision.” Rather, “loss from ‘change in temperature or humidity’ encompassed only losses directly caused by such changes, not those incidentally aggravated by a change in temperature but which would not have occurred except for the acts of vandalism, the risk of which was specifically covered by the policy. From this viewpoint, the loss here is covered because it was directly caused by a specifically covered risk, even though indirectly and incidentally enhanced by another peril expressly excluded from coverage.’” In the end, the court forced the insurer to pay the coverage that it owed to the business owner because it was the vandalism incident that led to the damage. Had it not occurred, no damage would have occurred either.
Minnesota is not alone in this viewpoint. In Kuo v. Home Ins. Co., 117 A.D.2d 320 (N.Y. App. Div. 1986), the Supreme Court of New York analyzed a strikingly similar vandalism claim. The insured, who was a landlord, paid additional to have vandalism and malicious mischief coverage. The landlord got into a dispute with the tenant, and the tenant stole or destroyed virtually all of the furniture, furnishings and fixtures. The tenant also shut off emergency shut-off switches on the furnace and hot water heater, causing the pipes to freeze and burst, resulting in water damage. Like Fawcett House, the policy also had an exclusion for “change in temperature”, and the insurer denied the claim relying on that exclusion. The New York Supreme Court refused to allow the denial to stand. Adopting the reasoning in Fawcett House, the Kuo court concluded, “We consider it reasonable and proper to interpret the subject loss as a covered one because it allegedly was directly caused by a specifically covered risk, an act of vandalism, even though incidentally enhanced by another peril which may be expressly excluded from coverage.” Id. at 326.
Businessowners have a reasonable expectation that if a vandalism loss occurs, that there will be coverage for the damage that results. Kuo and Fawcett House support that expectation.
 The Kuo court did remand the case as a fact question existed as to whether the vandals, in fact, threw the switches. Id. at 326-7.