Damage Occurring from Theft of Copper Is the Damage Covered As by Wayne D

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Volume 5, sEPTEMBER 2011 www.claimsadvisor.com Damage Occurring from Theft of Copper Is the damage covered as By Wayne D. Taylor, Esq. & vandalism or excluded as theft? Ruth M. Pawlak, Esq.

Incidents of copper theft are a matter damages to residential and commercial results in a Covered Cause of Loss, we of growing concern throughout the buildings that can exceed the value of the will pay for the loss or damage caused by country. Thieves are stealing copper stolen metal. that Covered Cause of Loss.” coils and wiring from houses, busi- Many of these copper thefts result nesses, electrical substations, utility in claims submitted under property What the Courts Have Said poles and trucks, and warehouses. insurance policies. But, under a first- Many courts have examined whether Copper is valued by both thieves as party insurance policy, is damage caused claims for damage caused by the removal well as legitimate entities because it during theft covered as vandalism or ex- of copper are classified as “vandalism,” is an effective conductor of electric- cluded as theft? Most first-party property which typically is covered, or “theft,” ity and works for almost all types of policies contain an exclusion for theft that which largely is excluded. The court wiring. Stolen copper is redeemed for generally provides that the insurer “will decisions generally fall in two catego- quick cash from scrap yards before it is not pay for loss or damage caused by or ries: (a) courts which hold that property shipped to developing nations, such as resulting from theft.” The theft exclusion damage caused during theft of copper is China, India and South Korea, where it endorsement CP1033 0695 adds: “But considered theft because the damage was is in high demand. we will pay for: (1) Loss or damage that inflicted in the process of gaining access Copper prices have increased from occurs due to looting at the time and to the copper that was stolen; and (b) approximately $0.77 per pound in 2003 place of a riot or civil commotion; or (2) courts which hold that property damage to $4.00 per pound in 2011. Beyond the Building damage caused by the breaking caused during theft of copper is consid- direct loss costs, theft of copper causes in or exiting of burglars. And if a theft ered vandalism regardless of whether

| REPRINTED FROM THE SEPTEMBER 2011 ONLINE EXCLUSIVE OF CLAIMS ADVISOR MAGAZINE Copyright© by Claims Advisor, Inc. All Rights Reserved. Reprinted with Permission. the metal was removed from the insured damage caused in the commission of the Considerations for Future Cases premises. theft is considered theft, not vandalism. It is worth noting that none of the The first line of cases holds that All of these courts also noted that an second series of cases discussed above property damage caused during the exception to the theft exclusion for dam- have been followed by any court in removal of copper is considered theft, age caused during entry and exiting the many years because the policy language which is not a covered loss, for example: insured’s building did not apply to dam- considered (some of which specifically Essex Ins. Co. v. Eldridge Land, L.L.C.— age caused during the course of removing covered willful damage caused to struc- no coverage for damage caused by or the copper. tures during theft) is different than the resulting from theft; Certain Underwrit- The other line of cases, which ap- theft exclusion typically found in current ers at Lloyds London v. Law—damage pears to be a slight majority, holds that policies. It is this difference in policy “in furtherance of a theft or attempted property damage that results during language, as well as the application of theft is damage that falls within the theft the theft of copper is to be treated as the efficient proximate cause rule, which exclusion”; General Star Indemnity Co. vandalism, which is a covered loss, for persuaded the courts in this line of cases v. Zelonker—damage caused to a meter example: Aetna Casualty & Sur. Co. to take a more expansive view of what is box and conduits when electric wir- v. Ardizone—damage to a structure considered vandalism. ing is stolen is not covered because it which occurred during theft of cop- When a structure is vacant, there was “caused by or resulting from theft”; per is covered as vandalism; Sterling v. is no coverage for theft or vandalism. Smith v. Shelby Ins. Co. of the Shelby Audubon Ins. Co.—damage to build- Most current policies contain a vacancy Ins. Group—no coverage for damage ing during a burglary is covered under provision that precludes coverage for all to a building’s interior that was caused clear language of the policy; Pryor v. damages caused by vandalism, theft or at- when electrical wiring, plumbing pipes State Farm Fire & Cas. Co.—the policy tempted theft when the insured premises and condenser coils in air conditioning allows recovery for willful damage to a has been vacant (as that term is defined in system were removed and stolen. In structure caused by burglars; Acorn Inv. the policy) for more than 60 days before each of these cases, the insured’s proper- Co. v. Mich. Basic Prop. Ins. Ass’n.— the loss or damage occurs. Generally, the ty was damaged in the process of a theft, water damage caused by removal of only exception to the vacancy provision and the damage was inflicted during the plumbing fixtures falls within the com- arises when the vacant structure is in the course of gaining access to the copper mon understanding of term vandalism; process of undergoing construction or that was the object of the theft. Cresthill Industries, Inc. v. Providence renovation activities. Important to these courts was the Washington Ins. Co.—damage from With the dramatic increase in reason for the damage. The courts in a water leak caused by the removal of incidents of copper theft, the existence of this set of cases have referred to a strict plumbing fixtures resulted from act coverage for damage caused during the definition of vandalism—that is, dam- of vandalism; Beauty Supplies, Inc. v. course of the theft will be a significant aging something simply for the sake of Hanover Ins. Co.—vandalism was the coverage issue. Claims for damage under damaging it. Under the facts of these proximate cause of loss while the theft property insurance policies for losses aris- cases, the courts noted that the damage to of plumbing fixtures was only concur- ing out of the theft of copper should fall the insured property occurred during the rent cause; State Auto. Mut. Ins. Co. v. within the policy’s theft exclusion, with thieves’ efforts to access and remove the Trautwein—the unlawful act of theft the result that there is no coverage for copper. In short, the courts in these cases established the malice required under the theft or any damage to the property looked to the perpetrators’ intent when the policy’s vandalism provision. occurring as a consequence of the theft. causing the damage. According to the The courts in this series of cases have Only “[b]uilding damage caused by the Smith v. Shelby court: taken a more expansive view of what is breaking in or exiting of burglars” should This definition [of vandalism] considered vandalism, which includes be covered, as provided in the excep- refers to the type of damage caused by damage that occurred during the com- tion to the theft exclusion. Of course, vandals as that concept is ordinarily mission of the theft. Most of these courts determining whether there is coverage for understood, i.e., damaging something determined that the proximate cause damage occurring in the course of a theft simply for the sake of damaging it. The of the loss was vandalism, which is an of copper will depend on the specific concept of theft is entirely different. A insured risk. The Cresthill court found: language of the policy at issue and the thief enters a building in order to steal jurisdiction where the loss occurred. something; certainly a thief’s primar- …i]t seems undeniably clear that there ily focus is not the malicious defacing, was an act of vandalism or malicious Wayne D. Taylor ([email protected]) is a destroying, or damaging of property. If mischief committed, since the severing partner at Mozley, Finlayson & Loggins L.L.P. the motivation and end result is that of of the pipes and fixtures prior to their in Atlanta, Ga. Ruth M. Pawlak (rpawlak@ theft and the claimed loss is “caused by removal constituted a completed act of mfllaw.com) is a senior associate at the firm. or result[s] from [that] theft,” there is vandalism, etc., the essential character Their practice focuses on insurance coverage no coverage. of which could not be changed by what advice and litigation, primarily involving cata- Where the motivation was to steal was subsequently done with them— strophic losses and bad faith. For more call copper, these courts concluded that any their removal from the premises. (404) 256-0700 or visit www.mfllaw.com.