Home Page The Publication The Editor Contact Information Insurance Key issues Book Subscribe

Vol. 6, Iss. 7
September 13, 2017

Court Holds That Stolen Property Is “Property Damage” Under A CGL Policy

It’s an interesting issue but one that doesn’t arise too often. And when it does it is easy to see why insurers and policyholders do not agree on it (even more than the usual disagreements). Indeed, in Westfield Ins. Co. v. Eagle Electric, Inc., No. 16-1639 (M.D. Fla. July 28, 2017), the judge didn’t even agree with his own decision.

At issue in Eagle Electric was whether stolen property qualified as “property damage” under a commercial general liability policy.

Eagle Electric, and others, were contracted by Port Consolidated to construct a fuel storage and dispensing system in Tampa. Eagle Electric was to wire the system. The dispensing system’s pumps were wired incorrectly. This enabled users to steal diesel fuel as it could be pumped without being detected by the meter. Port Consolidated alleged negligence and breach of contract and sought monetary damages for the lost fuel and the costs to repair the defective work.

At issue was the potential for coverage under Westfield’s commercial general liability policy issued to Eagle. The parties agreed that the cost of replacing the wiring was not covered. So the focus turned to the stolen fuel. At issue: was it “property damage?” The policy, as most CGL policies do, defined “property damage” to include: “[p]hysical injury to tangible property, including all resulting loss of use of that property,” and “[l]oss of use of tangible property that is not physically injured.”

While Westfield argued that stolen property did not constitute property damage, the court dismissed the cases cited by the insurer because they were from other jurisdictions and non-binding. The cases that mattered – the ones from Florida -- did not support Westfield’s argument.

The court concluded that, based on Florida law, “[b]ecause the theft of property diminishes its market value to the person who lawfully possessed it, that theft must be considered property damage unless the insurance policy clearly expresses a contrary intent. Eagle Electric’s policy does not—it does not expressly exclude coverage for theft, nor does it define ‘property damage’ narrowly enough to exclude this coverage. Consequently, the Court must find that the lost fuel constitutes property damage.”

In making this pronouncement the court noted that it “[did] not necessarily agree” with the reasoning of the Florida cases, but its hands were tied and had to follow them. In particular, the court was constrained by U.S. Fidelity & Guaranty Co. v. Mayors Jewelers of Pompano, 384 So. 2d 256 (Fla. Dist. Ct. App. 1980). There a contractor improperly installed riot glass in the window of a jewelry store. This allowed a thief to break in and steal valuable jewelry. At issue was coverage under a general liability policy that defined “property damage” as “injury to or destruction of tangible property.” The Florida appeals court held that “property damage” includes damage due to “loss, disappearance, or theft.” “We are persuaded,” the Mayors Jewelers court explained, “that property is damaged to the extent that its market value is diminished. . . . When property is stolen, its market value to the one who lawfully possessed it is totally diminished. We therefore hold that theft of personal property is ‘property damage’ unless a contrary intent is clearly expressed.”

Website by Balderrama Design Copyright Randy Maniloff All Rights Reserved