Weinberg Realty Co. v. Harford Mutual Insurance

Wilner, J., delivered the opinion of the Court. ⁵⁶¹ Appellant seeks to recover under a fire insurance policy for fire damage done to one of its rental properties on Christmas Day, 1976. The case involves the interplay between two "conditions” stated in the policy. The basic facts are not in dispute. The property, a rowhouse in Baltimore City, had been owned by appellant since 1962 and, except for a one-month period in March, 1974, had been continuously occupied by tenants.

During the 1974 vacancy, there were two fires in the property — one on March 20, 1974, the other ten days later; but neither caused substantial damage. In both cases, the City Fire Investigation Bureau concluded that the fire was caused by mischievous children who had managed to get into the house. With respect to the March 20 fire, the Bureau’s report stated: "Investigation disclosed that building was in a condition open to trespassers” and that the fire erupted from the burning of trash in the first floor rear. The second fire also started from the burning of trash, in the second floor front.

On November 15,1976, appellant evicted the then-current tenant for nonpayment of rent. At that time, the property was in a deteriorated condition and had 54 outstanding housing violations charged against it, including, among many other things, broken windows and doors. The violation notice was issued by the City on November 4, 1976. Appellant’s president, Raymond Weinberg, said that he did not receive the notice until after November 15, but that at some point toward the end of November, he went to the house "to make sure it was locked up and it was clean.” When leaving the house, he locked the front door but did not check the rear basement door except to drive around the back and see from his car that it was closed.

He said that the building was clean — "[i]t was cleaned of everything. Nothing was there.” Appellant had a repairman — one Edward Cooley — who, for 12 years, had done its repair work. Mr. Weinberg said that he intended to have Mr. Cooley fix the place, correct the violations, after "the first part of the year.” Aside from see ⁵⁶² ing that the front door was locked (and believing that the back door also was locked), nothing was done to secure the property during the expected vacancy period — i.e., until Mr. Cooley would commence the repairs. The property was not boarded up, nor was it regularly inspected.

Mr. Weinberg did not return to the property after his November visit and did not ask Cooley or anyone else to secure or watch it. The fire that triggered this lawsuit — on December 25, 1976 — was a substantial one. The Fire Investigation Bureau concluded that it was probably the result of "malicious burning by vagrants.” The Bureau’s report states, in part: "Fire apparently originated in 1st floor, front room and was probably initiated by vagrants using house for shelter who had built a fire for heat. Building has had two (2) previous fires, no repairs made, and lies open to public and elements.” 1 At the time of the Christmas fire, the property was insured by appellee on behalf of the Maryland Joint Insurance Association (see Md. Ann. Code art. 48A, § 478C), under what is referred to as the "standard 165-line New York fire insurance contract,” to which were appended four endorsements.

The face amount of the coverage was shown as $14,000 (having been raised from $10,000 in May, 1973). In the opening clause of the policy, appellee agreed to insure the property against direct loss by fire (and other perils) "to an amount not exceeding the amount(s) above specified [i.e., $14,000] ... to the extent of the actual cash value of the property at the time of loss, but not exceeding the amount which it would cost to repair or replace the property with material of like kind and quality....” On page two, in lines 28-37, the policy set forth certain ⁵⁶³ "conditions suspending or restricting insurance.” These were stated as follows: "Unless otherwise provided in writing added hereto this Company shall not be liable for loss occurring (a) while the hazard is increased by any means within the control or knowledge of the insured; or (b) while a described building, whether intended for occupancy by owner or tenant, is vacant or unoccupied beyond a period of sixty consecutive days; or (c) as a result of explosion or riot, unless fire ensues, and in that event for loss by fire only.” One of the endorsements attached to the policy was denoted as Form 8011, entitled "DWELLING BUILDING(S) AND CONTENTS FORM.” It stated, in relevant part, "THE FOLLOWING CONDITIONS OF VACANCY OR UNOCCUPANCY APPLY IN ACCORDANCE WITH PROTECTION CLASSIFICATION SHOWN ON THE FIRST PAGE OF THIS POLICY PROTECTED RISKS — Permission granted to be vacant or unoccupied without limit of time.” A second endorsement relied upon by appellant was that applicable to vandalism, and malicious mischief (Form No. 2551). Subject to the conditions in the endorsement, it extended the basic policy coverage to "direct loss by Vandalism and Malicious Mischief’ and, as to that coverage only, stated, in part: "This company shall not be liable for loss if the described building(s) had been vacant or unoccupied beyond a period of thirty (30) consecutive days immediately preceding the loss, whether or not such period commenced prior to the inception date of this endorsement... .” In due course, after the fire, appellant made a claim for ⁵⁶⁴ payment of the entire $14,000 face coverage, contending that both the cost of repairs ($36,747) and the actual cash value of the property ($23,246) exceeded that amount. When appellee rejected the claim, appellant sued on the policy in the Circuit Court for Harford County, and, being unsuccessful there, appeals.

Two issues are presented: (1) whether the court erred in accepting appellee’s "coverage” defense, and (2) if so, whether its analysis of the amount that would be due under the policy was correct. Because we do not believe that the court erred in its handling of the first issue, it becomes unnecessary for us to address the second. Appellee rejected appellant’s claim, and defends this lawsuit, upon the assertion that, by permitting the property, in its deteriorated condition, to remain unsecured during the 40-day period of vacancy (from November 15 — December 25), given the history of what occurred during the March, 1974, vacancy, appellant has caused or suffered the hazard to the property to be increased by a means within its control or knowledge. It is thus relying on condition (a), appearing on lines 28-32 of the policy.

Appellant contends, in response, that, as a matter of law, a defense based on vacancy must be governed by condition (b) — lines 33-35 — as supplemented by the language or "permission” in the Form 8011 endorsement; i.e., that under the basic policy, coverage is not suspended or restricted until the 61st day of vacancy, and under the endorsement, would not be suspended however long the property remained vacant. The initial question, then, is whether a vacancy which would not otherwise trigger a suspension or restriction of coverage may, when coupled with a failure to secure the property against intruders during that period of vacancy, nevertheless have that effect as constituting an increase in hazard to the property. In a few early cases, involving rural or isolated properties, some courts more or less assumed that a prolonged vacancy alone might have that effect. See, for example, Lancy v. Home Ins.

Co., 20 Atl. 79 (Me. 1890); Frozine v. St. Paul Fire & Marine Ins. Co., 218 N.W. 845, 847 (Wis. 1928): "It is a matter of common knowledge that a building so vacated is ⁵⁶⁵ subject to increased hazards of fire”; 2 Home Ins. Co. v. Hardin, 139 So. 603 (Miss. 1932): "It is a matter of common knowledge that the hazard of fire is much greater when dwelling houses are vacant and unoccupied, especially when situated in the country____” The Wisconsin and Mississippi cases, it should be noted, involved a clause suspending coverage because of a vacancy beyond a specified period, not a clause dealing directly with an increase in hazard. The courts’ comments in those cases were in the context of sustaining the validity of the "vacancy” clause.

Later cases have refrained from such "common knowledge” approaches, and have looked instead to the particular fact situation underlying the controversy. In Knoff v. United States Fidelity and Guaranty Co., 447