WA Case Update: Unambiguous Policy Avoids Large Payout

From the Desk of Kyle D. Riley: When an insurance company denies coverage, often the resolution of the case will turn on the plain language of the policy and any applicable endorsements.  In the following case, an insurer’s unambiguously drafted policy and endorsements carried the day, thus avoiding an expensive payout that was excluded by the terms of the endorsement.

Claims Pointer: In this case arising out of a coverage dispute over water damage to a vacant building, the Washington Supreme Court reversed a trial court’s granting of summary judgment to the insureds because the plain language of the insurance policy, as modified by the endorsement, unambiguously excluded water damage if the insured building was vacant.  An unambiguous exclusion will be enforced.

Lui v. Essex Insurance Co., No. 91777-9, Washington Supreme Court (June 9, 2016).

Kut Suen Lui and May Far Lui (the Luis) owned a building containing tenant space.  The building’s last tenant, the Agape Foundation, Inc., (Agape) left the first week of December 2010 after the Luis evicted it for failure to pay rent.  Around January 1, 2011, less than 60 days after Agape moved out of the building, a frozen pipe burst, causing substantial water damage.  The Luis, upon discovering the damage, filed a claim with their insurance company, Essex Insurance Co. (Essex).  Essex began investigating the claim and paid nearly $300,000 for property damage during the course of its investigation.

After payment was tendered, Essex discovered the property was vacant at the time of the water damage.  Essex denied the Luis’ claim and refused to pay any more money.   Essex sent a letter to the Luis’ attorney explaining that the endorsement in the policy excluded coverage of the water damage because it occurred while the building was vacant.  The letter also stated that Essex would refrain from seeking reimbursement for money already paid to the Luis on the condition that the Luis not pursue their claim...

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