Insurer limits pay-out from vandalism claim related to plumbing removal

Acorn Investment Company [AIC] owned a single-family rental home in Detroit that was insured with Michigan Basic.  After the tenants moved out, vandals removed copper piping and other fixtures, resulting in substantial water damage to the home. Michigan Basic relied on several exclusions in the policy to deny payment to AIC, which then filed suit.  The lower court granted judgment in favor of the insurer, relying on language in the policy related to both vandalism and earth movement, and AIC appealed.

The Court of Appeals rejected Michigan Basic's claim that removing or destroying fixtures, including piping and the water meter, was not "vandalism" covered under the policy.  The Court noted that such destruction fell well within the commonly understood definition of vandalism, and the fact that some of the items were stolen did not obviate coverage, as the owner was not seeking replacement of the stolen items.  The policy covered "direct physical loss" due to vandalism, and the water damage resulting from removal and destruction of plumbing fixtures was covered.

Nevertheless, AIC's claim for damage to basement walls caused by water-saturated soil was rejected by the Court, under a separate exclusion in the policy.  Even though the walls were damaged as a result of the same vandalism, the policy excluded coverage for any form of earth "movement," whether it was natural or artificial or caused by a covered event.  On this basis, the case was returned to the trial court to distinguish between covered damage to the structure and non-covered damage to the basement and foundation resulting from the movement of saturated earth.