U.S. Fidelity & Guaranty Co. v. Bimco Iron & Metal Corp.

• Decision Date: 24 February 1971
• Docket Number: No. B--2310,B--2310
• Citation: 464 S.W.2d 353
• Parties: UNITED STATES FIDELITY AND GUARANTY COMPANY, Petitioner, v. BIMCO IRON AND METAL CORPORATION, Respondent.
• Court: Texas Supreme Court

Page 353

464 S.W.2d 353

UNITED STATES FIDELITY AND GUARANTY COMPANY, Petitioner, v. BIMCO IRON AND METAL CORPORATION, Respondent.

No. B--2310.

Supreme Court of Texas.

Feb. 24, 1971.

Rehearing Denied March 31, 1971.

Fulbright, Crooker, Freeman, Bates & Jaworski, Tom Connally, Houston, for petitioner.

Finger & Burg, Leonard Z. Finger, Houston, for respondent.

McGEE, Justice.

This is a suit to recover 'damge to the building(s) * * * caused by burglars' under the vandalism and malicious mischief endorsement attached to a Texas Standard Policy of fire insurance. The trial court rendered judgment for plaintiff based on the jury verdict. The Court of Civil Appeals held that the cost of repair of the building to replace wiring, boxes and transformers was covered under the policy but reversed and remanded the cause on the issue of waiver of late filing of proof of loss. 455 S.W.2d 828. We affirm the judgment of the Court of Civil Appeals.

There is no dispute with reference to the facts giving rise to the question of policy coverage of this loss. During the weekend of July 10--13, 1966, burglars broke into the plaintiff's warehouse, dismantled the electrical system of the warehouse and removed the high voltage wiring and transformers. The defendant, in response to a request for admissions, has admitted 'that by carrying away the wiring constituting the 440 volt wiring of the building, damage was done to the building by the burglars or vandals.' It has been stipulated that the wiring and electrical apparatus were a part of the building at the time of the occurrence in question. The record also reflects that the burglars cut a lock and damaged a door in gaining entrance. No claim is being made for the loss of some tools, gauges and miscellaneous metals that were also stolen from the warehouse. This event was promptly reported to and investigated by the police.

Bimco paid the first installment of $490.00 on the total premium of $1225.00 for a 'Fire, Lightning and Extended Coverage' (windstorm, hurricane, hail, explosion, riot, civil commotion, etc.) policy of insurance having a three-year term commencing January 3, 1966. Attached to the policy was the vandalism and malicious mischief endorsement. The relevant portions of the vandalism and malicious mischief endorsement provide (emphasis ours):

'1. In consideration of $10.00 (Incl.) premium and subject to the provisions of this policy and this endorsement, the liability of this Company hereunder for loss or damage resulting from the peril of Riot and Civil Commotion is hereby extended to include loss caused by damage to or destruction of the property described by Vandalism and Malicious Mischief, Including damage to the building(s) covered hereunder caused by burglars.

'2. The term 'Vandalism and Malicious Mischief' as used herein is restricted to and includes only willful or malicious physical injury to or destruction of the described property.

'3. When this endorsement is attached to a policy covering direct loss to the described property, This Company shall not be liable under this endorsement for any loss:

'(b) by pilferage, theft, Burglary or larceny.

Plaintiff respondent claims coverage under the last phrase of paragraph 1. Defendant petitioner contends that this loss falls within the exclusion of paragraph 3b.

The construction of this vandalism and malicious mischief endorsement presents a question of first impression in Texas. Standing alone, the loss is unquestionably covered by the insuring clause of the endorsement (paragraph 1). The loss occurred when the burglars dismantled and destroyed the electrical system of the building which was a part of the realty. We know of no other form of policy that covers damage to buildings caused by burglars.

The defendant contends that even if the damage is caused by burglars, then a second question, whether the loss is one by pilferage, theft, burglary or larceny, must be answered in the negative before the loss is covered (paragraph 3b).

We refuse to give this endorsement such a strained construction. It would require this Court to give full effect to the exclusionary clause and to ignore the insuring clause. Paragraph 1 extends coverage to 'damage to the building(s) covered hereunder caused by burglars.' If paragraph 3b takes away this coverage by denying loss 'by burglary,' we then have an ambiguous contract, as found by the Court of Civil Appeals, which will be liberally construed in favor of the insured and strictly against the insurer. Continental Casualty Co. v. Warren, 152 Tex. 164, 254 S.W.2d 762 (1953); Providence Washington Insurance Co. v. Proffitt, 150 Tex. 207, 239 S.W.2d 379 (1951); United Service Automobile Ass'n v. Miles, 139 Tex. 138, 161 S.W.2d 1048 (1942); 32 Tex.Jur.2d Insurance § 59 at 119 (1962).

We interpret paragraph 3b to exclude personal property from coverage, i.e., the lot of tools, gauges, and miscellaneous metals that were stolen from the warehouse. This gives effect to paragraph 3b. This Court recognizes no ambiguity at all. We said the following in Continental Casualty Co. v. Warren, supra:

'But for the fact that insurance policies are governed by the special rule of construction, which is a familiar part of our jurisprudence, we might, indeed, hold either that the interpretation against liability of the insurer should prevail or that, the policy being ambiguous, there is a fact issue as to what was intended. Yet the rule, of course, applies, and under it the insurer may not escape liability merely because his or its interpretation should appear to us a more likely reflection of the intent of the parties than the interpretation urged by the insured. The latter has to be no more than one which is not itself unreasonable. Lloyds Casualty Insurer v. McCrary, 149 Tex. 172, 179, 229 S.W.2d 605, 609.'

In 5 Appleman, Insurance Law & Practice, § 3182.25 at 591 (1970), we find the following statement: '* * * under a policy insuring against vandalism and malicious mischief but generally excluding theft losses, recovery may be had for such vandalism even though some of the property was stolen.' The case cited by Appleman for the latter statement is State Automobile Mutual Insurance Company v. Trautwein, 414 S.W.2d 587 (Ky.1967). In that case, air conditioning units permanently mounted in wall openings in some apartments had been removed after the vandals or thieves had jimmied the doors to the apartments to gain entrance. It was agreed that the replacement value of the air conditioners was $648.00 and that other damage to the apartments amounted to $194.50. The trial court rendered judgment for plaintiff for the total amount. This judgment was affirmed on appeal. The sole question decided by the court was whether or not all or any of claimant's loss was covered by the vandalism and malicious mischief endorsement of his insurance policy. The language of the endorsement is quite similar to that involved in our case. Paragraph 1 does not contain the 'damage to the building(s) * * * caused by burglars' phrase, but recites coverage is extended '* * * to include direct loss to the described property by Vandalism and Malicious Mischief.' Added to the exception clause ('* * * this Company shall not be liable under this endorsement for any loss * * * (b) by pilferage, theft, burglary or larceny. * * *') are the words 'except loss by willful and malicious physical injury to or destruction of a building described and insured hereunder.' The court observed that the latter provision must have been inserted for some purpose and concluded that the purpose was to recognize that injury to the building was covered, although occurring in connection with a burglary. See Annot., 23 A.L.R.3d 1259 (1969).

We find a similar holding in a per curiam opinion in Allstate Insurance Company v. Coin-O-Mat, Inc., 202 So.2d 598 (Fla.App.1967). The plaintiff recovered for a loss when one or more persons broke into its laundry and damaged twelve washing machines which required the laundry owner to expend substantial sums for repairs. Defendant claimed that the loss was not covered by the policy because of the exception clause to the effect that the policy does not cover loss by theft or burglary. The court said (at page 599): 'The evidence before the court was sufficient to establish without conflicting inferences that the plaintiff suffered a direct loss to its insured property through vandalism or malicious mischief, which loss is not excluded from coverage even though it may have occurred in the course of an actual or attempted theft or burglary.'

We hold that by reason of the endorsement the policy covers all of the loss sustained by the insured as the result of willful 'damage to the building(s) * * * caused by burglars,' including all costs of material and labor necessary to repair the building.

Defendant also relies on the fact that plaintiff failed to timely file a proof of loss. Absent proof of the insurance company's waiver of the necessity for filing a proof of loss, the plaintiff could not recover. The trial court refused to admit certain testimony relating to waiver on the ground that it related to facts occurring after a non-waiver agreement had been executed. The Court of Civil Appeals held that the testimony admitted into evidence did not raise a fact issue as to whether the defendant waived the plaintiff's failure to file a proof, but remanded for a new trial on the ground that testimony developed on a bill of exception raised the issue. The non-waiver agreement provided in part 'that any action taken by the Company * * * in investigating said accident shall not operate in any way as a waiver, or invalidate any of the conditions of said policy. * * *'

The plaintiff's bill of exceptions would have shown: that after the time for filing proofs had expired and the...