Haas v. Audubon Indem. Co.

• Decision Date: 21 October 1998
• Docket Number: No. 98-565.,98-565.
• Citation: 722 So.2d 1022
• Parties: Joseph M. HAAS, et al., Plaintiffs—Appellees, v. AUDUBON INDEMNITY COMPANY, Defendant—Appellant.
• Court: Court of Appeal of Louisiana — District of US

722 So.2d 1022

Joseph M. HAAS, et al., Plaintiffs—Appellees, v. AUDUBON INDEMNITY COMPANY, Defendant—Appellant.

No. 98-565.

Court of Appeal of Louisiana, Third Circuit.

October 21, 1998.

Jimmy Roy Faircloth, Jr., Alexandria, for Joseph M. Haas, et al.

Mark Alan Watson, Alexandria, for Audubon Indemnity Company.

Before THIBODEAUX, COOKS and WOODARD, JJ.

WOODARD, J.

This is an insurance coverage dispute. Joseph M. Haas and his family (Haas) are onehalf owners of a large building in Alexandria, Louisiana. Audubon Indemnity Company (Audubon) insured their interest in the building. Unknown persons broke into the building and caused massive damage to its interior. Haas made demands for coverage under the policy for the losses. Audubon paid $149,101.00 but denied further payment, citing exclusions for theft and other provisions of the policy. Haas filed suit, recovering $174,448.00, less $3,784.00 for the salvage value of the stolen materials, plus penalties of ten percent of the claim and attorney's fees in the amount of $24,850.52. Audubon appeals. We affirm the judgment, increasing the attorney's fees award by $5,000.00 for this appeal and awarding $5,000.00 in penalties.

FACTS

On March 15, 1994, unknown persons broke into the Old Sears Building in Alexandria, Louisiana. It had been vacant since 1990. The intruders removed pipes and wires presumably for their salvage value. The next day, surrounding residents called the City of Alexandria, complaining that they had no water. City workers discovered that the main water valve had been shut-off. The water main was turned on and two days later, residents reported that water was pouring out of the Old Sears Building. An investigation revealed the theft and massive damage to the interior of the building. The intruders removed the pipes while the water valve was shut-off, and when the water was turned back on, it flooded the building. The intruders did major damage to the walls, flooring, fixtures, and duct system of the building. After the flood, the floor had to be removed and replaced. The flooring contained asbestos which had been contained and was completely safe prior to the flooding. After the tiles were loosened by the water, they had to be treated as asbestos containing materials (ACM). This required techniques to be used which were considerably more expensive than techniques for removal of non-ACM materials.

Haas insured his one-half interest in the building with Audubon under a Building and Personal Property Coverage Form and paid Haas $149,101.00 for water damage but refused to pay other damages amounting to over $340,000.00. Haas demanded that Audubon pay for his one-half of the loss. Audubon refused to pay based on a clause in Haas' insurance policy which covered vandalism, but excluded theft. Audubon claimed that all the damage, except the water damage, was excluded from coverage by this theft exclusion. Further, Audubon refused to pay for the removal of the asbestos containing flooring based on an asbestos exclusion in Haas' Commercial General Liability Coverage Form.

Haas filed suit against Audubon, claiming that the building's damage should be covered as vandalism. Haas was willing to concede that the theft exception was applicable to his claim but only for the salvage value of the raw materials actually removed from the building, not the damage to the building itself. Audubon rejected that view, claiming that the only covered loss, other than water damage, was damage to a door, presumably used by the thieves to enter and exit the building. However, since the damage to the door amounted to less than $400.00, this damage fell under Haas' $1,000.00 deductible and was not covered. The most contested issue of this trial was whether the damage to the building was the result of vandalism or theft.

Audubon was willing to pay for the cost of removing non-ACM flooring but contended that any additional cost was excluded under the asbestos exclusion of Haas' Commercial General Liability policy. Audubon's own witness admitted that, despite his initial decision to deny coverage based on the asbestos exclusion, he had later informed the lawyers that the asbestos exclusion did not apply to this case. Audubon's incorrect interpretation of the policy was part of the reason for the trial court's award of penalties and attorney's fees to Haas.

Audubon argued, in the alternative, that if the asbestos exclusion did not apply to the policy, the cost of the asbestos abatement should be limited to $10,000.00. It based this argument on a Pollutant clean-up and removal clause. At trial, it relied on the pollution exclusion to limit coverage to $10,000.00. Haas claimed that the "pollution exclusion" did not apply to the loss for two reasons. First, the asbestos was completely contained prior to the break-in and flood; therefore, the asbestos was not a pollutant. Second, asbestos abatement was required of the building not of "land or water." If either of these were correct, the "pollution exclusion" would not apply.

Before trial in June of 1997, the parties entered into an extensive stipulation. This agreement resolved all issues except Haas' allegation that Audubon acted in bad faith when it denied coverage for the damages and: (1) Whether or not Audubon could exclude coverage for the asbestos abatement based on either the asbestos exclusion or the pollution exclusion; (2) Whether or not Audubon was responsible for the damage to the building as a result of theft; and (3) Whether or not Audubon was responsible for the architectural engineering design fee.

A bench trial was held on July 15, 1997 in Alexandria, Louisiana. At the trial, both sides made arguments concerning the definitions of theft and vandalism. The trial court considered the stipulation which stated, "While removing the materials the unknown persons caused property damage to the building's walls, systems and fixtures." This does not mean that all the damage was done for the purpose of removing the materials, only that the removal and the damage happened at the same time. The trial court commented that there was no way to determine what damage had occurred in furtherance of the theft and what damage had been the result of pure vandalism. Based on the extensive destruction of fixtures and the spreading of debris throughout the building, the trial court believed that at least some damage must have been the result of vandalism. Vandalism does not by definition exclude the taking of property, but it does require more than the taking of property. The policy definition of vandalism requires the "willful and malicious destruction of property." The trial court saw this as an ambiguity in the policy which must be construed against the insurer. Accordingly, Audubon was ordered to pay $174,448.00, the cost of one-half the damage to the building less $3,784.00 for the salvage value of the stolen materials.

The trial court refused to apply the asbestos exclusion to the asbestos abatement because the asbestos was not a "pollutant" that must be extracted from the land or water. It was wholly contained in the building. Therefore, Audubon could not claim the limitation of $10,000.00 under the "pollution exclusion." The exclusion also applied to the "enforcement of any ordinance or law: (1) regulating the construction, use or repair of any property; or (2) requiring the tearing down or repair of any property including the cost of removing debris." Audubon was willing to pay for the removal of the debris but not the disposal of it. The disposal costs were considerable because the debris consisted of asbestos containing materials.

Although Haas argued that since he voluntarily complied with asbestos disposal regulations, there was never any "enforcement," the trial court said this was irrelevant. Even assuming that enforcement includes compliance, Audubon must pay for the removal and the disposal of the debris because the debris was a result of vandalism. Since the debris was the result of vandalism, not the result of construction and repair, this exclusion provision was not applicable to this claim.

Also, Haas claimed coverage for an architectural engineering fee in the amount of $74,000.00. This was a detailed set of plans for the repairs to the building. Haas claimed the plans were vital for an accurate bid on the needed repairs. Audubon denied this expense, arguing that all repair bids had been submitted prior to the architectural engineering design. Haas did not introduce any evidence to prove that this fee was part of the loss. The trial court refused to order Audubon to pay for it.

Audubon appealed the trial court's order that it pay Haas the $174,448.00, less $3,784.00 for the salvage value of the stolen materials, for damage to the Old Sears Building, as well as the award of penalties of ten percent of the claim and attorney's fees of $24,850.52. Haas answers the appeal, seeking penalties under La.R.S. 22:1220 and an increase in attorney's fees for the work in this appeal.

ASSIGNMENTS OF ERROR

Audubon alleges that the trial court erred in:

1. Its interpretation of the insurance policy, which resulted in a failure to apply a policy exclusion for damages which were "caused by or resulting from theft, except for building damage caused by the breaking in or exiting of burglars."

2. Holding that the defendant failed to prove that all of the damages at issue were the result of theft and that some theft-related damages could still be covered under the vandalism provision.

3. Holding that the cost of the removal of asbestos is covered where a coverage exclusion specifically provides that the removal of debris or tearing down of property will not be covered when done pursuant to the enforcement of any ordinance or law.

4. Holding that the plaintiff was entitled to penalties and attorney's fees where Audubon's interpretation of its policy was, if not correct, reasonable.

5. Taxing as costs of court expenses

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