When vandals triggered a sprinkler system in a vacant constructing, flooding it with over a million gallons of water, the outcome was not simply property harm. As an alternative, it was a lawsuit that put the scope of all-risk business property insurance coverage underneath scrutiny. The case of Epperson v. Lexington Insurance coverage Firm, 1 just lately determined by an Ohio federal decide making use of Tennessee regulation, concerned a dispute over whether or not an act of vandalism, which led to intensive water and mould harm, ought to be coated underneath a business insurance coverage coverage that purports to insure towards “all dangers of direct bodily loss.”
The plaintiff, Scottie Epperson, co-executor of the property of Fred Langley, owned the insured constructing in Cincinnati, Ohio. After buying it via foreclosures, the constructing remained vacant. Vandals broke in, smashed sprinkler heads, and left behind intensive water and mould harm.
Epperson filed a declare with Lexington Insurance coverage underneath an all-risk property coverage, which by design covers all bodily loss until particularly excluded. Lexington denied the declare, citing two exclusions: vandalism and sprinkler leakage. Lexington argued that each perils had been excluded underneath the phrases of a Emptiness Allow Endorsement.
The policyholder superior a well-supported argument for protection. First, the property famous that whereas vandalism itself was excluded, the coverage contained a resulting-loss provision stating that if vandalism ends in a coated explanation for loss, the coverage can pay for the ensuing harm. On this case, the property contended that the water harm attributable to the activated sprinklers was a brand new and distinct peril, not vandalism itself, and subsequently doubtlessly coated.
The property additionally identified that the endorsement type Lexington relied upon to exclude sprinkler leakage and vandalism didn’t really mark these causes of loss with an “X” as the shape contemplated. Below customary guidelines of coverage interpretation, this ambiguity ought to have been resolved in favor of the insured. The policyholder additional argued that from the standpoint of the insured, the sprinkler discharge was unintentional and fortuitous, which is exactly the sort of occasion an all-risk coverage is designed to cowl.
Lexington countered that the vandalism exclusion utilized to your complete chain of occasions. It maintained that the water discharge was not a separate trigger however merely an anticipated and foreseeable results of the vandalism. It argued that the Emptiness Allow excluded each vandalism and sprinkler leakage, decoding the shape’s format, particularly the phrase “all” showing subsequent to the loss varieties, as a sound substitute for checking the exclusion bins. Lexington additionally leaned on different coverage exclusions, corresponding to steady water leakage for greater than fourteen days and mould, claiming that even when the water harm had been handled as distinct, it will nonetheless not be coated underneath these further provisions.
In a really prolonged opinion absolutely explaining its causes, the court docket in the end sided with Lexington. Whereas acknowledging that the policyholder raised believable factors, the court docket discovered that the vandalism exclusion utilized and that the ensuing water harm was not attributable to a separate, coated peril. The decide accepted Lexington’s interpretation of the Emptiness Allow regardless of the absence of the customary markings to exclude the causes of loss, concluding that the endorsement excluded each sprinkler leakage and vandalism. The court docket additionally rejected the appliance of the resulting-loss exception, reasoning that the water harm didn’t qualify as “unintentional” as a result of it flowed immediately from the intentional act of vandalism.
This conclusion, nonetheless, rests on a flawed interpretation of each the coverage language and long-standing rules of insurance coverage regulation. First, it misconstrues the that means of “unintentional.” In insurance coverage regulation, the query just isn’t whether or not the triggering act was intentional from the standpoint of a 3rd celebration, however whether or not the loss was sudden and fortuitous from the angle of the insured. On this case, Epperson and the Langley property had no involvement in or expectation of the vandalism. From their vantage level, the sprinkler discharge was totally “unintentional,” and the ensuing water harm ought to have been thought of a fortuitous loss underneath the all-risk protection.
Second, resulting-loss provisions exist for a purpose. They make sure that even when a coverage excludes sure perils, corresponding to defective workmanship, earth motion, or vandalism, if that peril results in a brand new, in any other case coated explanation for loss, the coverage nonetheless responds. Courts decoding comparable language have held that water harm ensuing from an excluded act may be coated, notably when the harm flows from a separate trigger like a ruptured pipe or, as on this case, a sprinkler discharge. The court docket in Epperson disregarded this interpretive framework and handled your complete chain of occasions as a single excluded peril.
Lastly, the court docket interpreted the Emptiness Allow towards the insured regardless of clear ambiguity within the doc. The shape required particular “X” markings to point which perils would stay excluded throughout emptiness. None had been marked. The court docket selected to miss that omission and relied on the phrase “all” in a distinct column to assist Lexington’s place. This method immediately contradicts the rule that exclusions should be said clearly and utilized narrowly.
This case issues as a result of it reveals a creeping erosion of protection in all-risk insurance coverage, the place courts too readily collapse separate causes of loss into one excluded class. If any harm flowing from vandalism is deemed a part of that preliminary act, then resulting-loss clauses develop into meaningless. And if the time period “unintentional” is interpreted to exclude any intentional act by a 3rd celebration, then insurance coverage ceases to guard towards the very forms of sudden occasions policyholders buy it to cowl.
The Langley property made a powerful, legally grounded case. The court docket’s ruling favored exclusion over protection and, in doing so, undermined basic guidelines of coverage interpretation that require grants of protection to be learn broadly and exclusions narrowly. This determination ought to immediate additional scrutiny and maybe appellate assessment.
The clauses battled upon are complicated, as famous in Ensuing Loss Clauses Are Usually Complicated. The idea of fortuity was famous in The Idea of Fortuity and The Put on and Tear Exclusion.
Thought For The Day
“It wasn’t raining when Noah constructed the ark.”
—Howard Ruff
1 Epperson v. Lexington Ins. Co., No 1:23-cv-50 (S.D. Ohio Could 29, 2025).