Battishill v. Farmers Alliance Ins. Co.

• Decision Date: 29 June 2004
• Docket Number: No. 24,196.,24,196.
• Parties: Cary BATTISHILL, Plaintiff-Appellant, v. FARMERS ALLIANCE INSURANCE COMPANY, Defendant-Appellee.
• Court: Court of Appeals of New Mexico

97 P.3d 620

136 N.M. 288

Cary BATTISHILL, Plaintiff-Appellant, v. FARMERS ALLIANCE INSURANCE COMPANY, Defendant-Appellee.

No. 24,196.

Court of Appeals of New Mexico.

June 29, 2004.

Certiorari Granted, August 23, 2004.

James E. Templeman, Templeman and Crutchfield, Lovington, NM, for Appellant.

Lee M. Rogers, Jr., Cord D. Borner, Atwood, Malone, Turner & Sabin, P.A., Roswell, NM, for Appellee.

Certiorari Granted, No. 28,812, August 23, 2004.

OPINION

SUTIN, Judge.

{1} Our task in this appeal is to interpret words in an insurance policy coverage exclusion. Plaintiff Cary Battishill sustained damage to his vacant rental house caused by arson and sued his insurer, Farmers Alliance Insurance Company, after Farmers denied coverage based on its reading of the vacant-dwelling/vandalism exclusion in its insurance policy. The district court entered summary judgment against Plaintiff, from which Plaintiff appeals. We reverse.

BACKGROUND

{2} The facts are not in dispute. After his rental home (the dwelling) sustained fire damage, Plaintiff filed a claim under his "Homeowner's" Farmers' insurance policy (the policy). The fire was intentionally caused. The fire department investigation determined there were three distinct fires and points of origin, an odor consistent with fire accelerants in each bedroom, a partially burned towel displaying possible accelerant residue, and three "pour patterns" on the carpet. Laboratory tests confirmed the presence of gasoline on samples of debris from the house. The dwelling was vacant more than thirty days when the fire occurred. Farmers denied coverage based on an exclusion in the policy for damage to the dwelling due to vandalism and malicious mischief occurring when the dwelling had been vacant for more than thirty days prior to the fire (the exclusion). The district court upheld Farmers' denial of coverage. Plaintiff's single point on appeal is that the court erred in not interpreting the exclusion in his favor.

{3} Both parties refer to the policy as a "hybrid policy," that is, a policy providing all-risk insurance coverage on the dwelling, but named-perils insurance coverage on personal property in the dwelling. The coverage applicable to the dwelling insured against all risks except those specifically excluded. The coverage applicable to personal property in the dwelling was limited to specifically named perils.

{4} More specifically, as to the dwelling, the policy insures against direct physical loss, but excludes loss caused by "[v]andalism and malicious mischief if the dwelling has been vacant for more than 30 consecutive days immediately before the loss." Neither the all-risk dwelling coverage nor the exclusion mentions "fire." As to personal property, the policy insures direct physical loss caused by, among many other things, the named perils of "[v]andalism or malicious mischief" and also by "[f]ire or lightning." This personal property named-perils coverage also includes, among other perils, loss caused by explosion, riot or civil commotion, aircraft, vehicles, and volcanic eruption. In addition, the policy contains additional coverages, listing several specific coverages including one for loss to furnishings in rental property caused by specific perils, among which are fire or lightning, explosion, riot or civil commotion, aircraft, vehicles, and vandalism or malicious mischief. None of the coverages mentions "arson."

DISCUSSION

Standard of Review

{5} The issue is purely one of insurance policy language interpretation. Our review is de novo. State Farm Mut. Auto. Ins. Co. v. Baldonado, 2003-NMCA-096, ¶ 10, 134 N.M. 197, 75 P.3d 413.

The Parties' Contentions and Supporting Cases

{6} Plaintiff contends that the exclusion should not be construed to include arson and that the policy, when read as a whole, is ambiguous and the exclusion should be read in his favor. Defendant contends that the dictionary definition of vandalism includes arson and that the policy is not ambiguous, so there is nothing to construe. Both parties rely on cases that are supportive of their contentions.

{7} Plaintiff relies on several cases that may be viewed as supporting his contentions. See United Capital Corp. v. Travelers Indemnity Co., 237 F.Supp.2d 270 (E.D.N.Y.2002); Nationwide Mutual Fire Ins. Co. v. Nationwide Furniture, Inc., 932 F.Supp. 655 (E.D.Pa.1996); MDW Enterprises, Inc. v. CNA Ins. Co., 4 A.D.3d 338, 772 N.Y.S.2d 79 (2004). These cases determined that an ambiguity existed in regard to the use of "vandalism," requiring an interpretation of the policy favorable to the insured.

{8} Farmers relies on several cases that uphold the vacant-dwelling/vandalism exclusion, several of which primarily rely on Webster's Third New International Dictionary (1986) [hereinafter Webster's Third] definition of vandalism as "`willful or malicious destruction or defacement of things of beauty or of public or private property.'" See Am. Mut. Fire Ins. Co. v. Durrence, 872 F.2d 378, 379 (11th Cir.1989); Potomac Ins. Co. v. NCUA, No. 96 C 1044, 1996 WL 396100, **4-5 (N.D.Ill. Jul.12, 1996) (mem. and order); Estes v. St. Paul Fire & Marine Ins. Co., 45 F.Supp.2d 1227, 1229 (D.Kan.1999); Gov't Employees Ins. Co. v. Medley, No. CIV.A. 96-0964-R, 1998 WL 320392, *2 (W.D.Va. Jan.14, 1998) (final order and mem.); Frazier v. State Farm Fire & Cas. Co., 957 F.Supp. 816, 818 (W.D.Va.1997).

{9} Plaintiff and Farmers both rely on Costabile v. Metropolitan Property and Casualty Insurance Co., 193 F.Supp.2d 465 (D.Conn.2002), to support their respective positions. In analyzing a hybrid policy similar to that at issue in the present case, the court in Costabile discussed cases on which Plaintiff and Farmers rely and concluded:

[t]he parties ... have pointed to no authority — and the Court is aware of none — that addresses the question whether arson is appropriately considered an act of vandalism where ... the policy at issue is a hybrid that contains both all-risk and named perils coverage in separate and distinct coverage sections insuring separate and distinct property.

Id. at 475. Like the Farmers' policy in the present case, the policy in Costabile contained a vacant-dwelling/vandalism exclusion, and the named-perils personal property coverage covered loss from fire and also covered loss from vandalism or malicious mischief. Id. at 474. However, unlike the Farmers' policy, the Costabile policy's named-perils coverage did not apply if the dwelling was vacant. Id. The court turned to the Webster's Third definition of vandalism and held that the weight of authority required the conclusion that an incendiary fire was included with the plain and ordinary meaning of vandalism in the vacant-dwelling/vandalism exclusion under all-risk dwelling coverage. Costabile, 193 F.Supp.2d at 477-78. However, at the same time, the court determined as to the named-perils personal property coverage that "[b]ecause fire and vandalism are listed ... as separate causes of loss, ... it is ambiguous whether the word `vandalism' is ambiguous as used [in] that ... coverage." Id. at 476. The court construed this ambiguity against the insurer, concluding that the vacant-dwelling/vandalism exclusion did not apply to the personal property coverage because it was "ambiguous in that section whether vandalism includes an incendiary fire." Id.

{10} We have reviewed all of the cases on which the parties rely and we are not persuaded that any of them point to a clear and compelling result one way or the other in this case. Instead, it is our sense that the word "vandalism" suggests more what Plaintiff believes it suggests to a reasonable insured. Our sense is supported by established New Mexico case law and a less superficial delving into the dictionary definitions than the case law has yet to undertake. We therefore turn to what we believe is the proper interpretation.

Interpretation of Insurance Policy Words

{11} In interpreting insurance policy wording, we are guided by several rules. "[W]hen a word is not defined in the insurance policy, it must be interpreted in its usual, ordinary and popular sense." Estate of Galloway v. Guaranty Income Life Ins. Co., 104 N.M. 627, 628, 725 P.2d 827, 828 (1986); Grisham, 1999-NMCA-153, ¶ 8, 128 N.M. 340, 992 P.2d 891 ("Undefined words in an insurance policy are given their plain and ordinary meaning if that can reasonably be ascertained."). Thus, an insurance policy is not rendered ambiguous merely because a term is not defined; rather, the term must be interpreted in its usual, ordinary, and popular sense. Vihstadt, 103 N.M. at 466, 709 P.2d at 188. We interpret the words and terms of an insurance contract in their usual and ordinary sense, unless a different meaning is required. See Atlas Assur. Co. v. Gen. Builders, Inc., 93 N.M. 398, 400, 600 P.2d 850, 852 (Ct.App.1979).

{12} The general rule is that exclusionary clauses in insurance contracts are to be construed narrowly. See Knowles v. United Servs. Auto. Ass'n, 113 N.M. 703, 705, 832 P.2d 394, 396 (1992). "It is the obligation of the insurer to draft an exclusion that clearly and unambiguously excludes coverage." Computer Corner, Inc. v. Fireman's Fund Ins. Co., 2002-NMCA-054, ¶ 7, 132 N.M. 264, 46 P.3d 1264. However, the general rule "cannot be utilized to override the clear and unambiguous terms of an exclusion." Grisham, 1999-NMCA-153, ¶ 13, 128 N.M. 340, 992 P.2d 891. "[E]xclusionary definitions in an insurance contract are to be enforced so long as their meanings are clear and they do not conflict with the statutory law." Safeco Ins. Co. v. McKenna, 90 N.M. 516, 518, 565 P.2d 1033, 1035 (1977). "In construing standardized policy language, our focus must be upon the objective expectations the language of the policy would create in the mind of a hypothetical reasonable insured, who, we assume, will have limited knowledge of insurance law." Computer Corner, 2002-NMCA-054, ¶ 7, 132 N.M. 264, 46 P.3d 1264. "If we are alerted to...