Court of Appeals Rules that "Arson " is not Encompassed by a "Vandalism and Malicious Mischief" Exclusion
Foster Swift Property Insurance/Premises E-News
November 6, 2008
In Johnson v State Farm Fire and Casualty Co, No. 278267 (Oct 28, 2008), the Michigan Court of Appeals addressed for the first time in Michigan whether a vandalism exclusion in a property insurance policy encompasses a claim arising from an arson fire. On this occasion and this policy, the Court of Appeals answered in the negative. The case is unpublished and therefore not binding precedent.
State Farm issued an "all perils" insurance policy for a rental home owned by Johnson. There was no dispute that the home was destroyed by arson and that the home had been vacant for more than 30 consecutive days before the fire. State Farm denied Johnson's insurance claim pursuant to the policy exclusion that precluded coverage for losses caused by "vandalism and malicious mischief . . . if the dwelling has been vacant for more than 30 consecutive days immediately before the loss."
The Michigan Court of Appeals acknowledged that other jurisdictions have differed whether "vandalism and malicious mischief" includes arson, and disagreed with defendant that the case should turn on whether the policy was an "all risk" policy versus a "named perils" policy. While Michigan courts have recognized that "arson is an act of vandalism," the Court observed that "in common speech vandalism and arson are separate, distinct activities." The Court then turned to the language of the actual policy at issue and pointed out how the language in the policy treated "fire" and "vandalism" as different perils. Thus this policy did not cover vandalism and malicious mischief after a 30-day period of building vacancy but did cover arson.
This case appears to be the first Michigan case to address whether arson is included in vandalism and malicious mischief policy exclusions. The fact that the decision turned on the language of the particular policy should cause both insurers and insureds to give careful attention to the definitions and usages in the policy at issue.