Opinion
Civil Action No. 3:98CV-6-S
September 1, 1999
MEMORANDUM OPINION
This matter is before the court on motion of the plaintiff, Liberty Mutual Insurance Company ("Liberty Mutual"), to amend the January 19, 1999 and March 15, 1999 opinions of this court.
A. Factual Background
The court will again briefly restate the facts giving rise to this action for purposes of clarity and continuity in this opinion.
On December 13, 1984, Joseph Blandford, M.D. ("Blandford"), purchased property in Jefferson County, Kentucky located at 2561 Slevin ("the Slevin building"). The Slevin building consisted of commercial rental space on the first floor, two apartments on the second floor, and one apartment on the third floor. Blandford contracted with Liberty Mutual for coverage of the building under a commercial policy.
On January 22, 1995, the building was first cited for violations of the Louisville Building Code, including foundation problems, lack of siding, and interior problems. Over the next two years, it was cited approximately ten times for building code violations . On December 17, 1996, the City of Louisville issued an order to vacate the building. The order stated that the Slevin building had been inspected and found to be "unfit for human habitation." Blandford was required to vacate the premises immediately until he had corrected the violations. By January 23, 1997, the building had been vacated. After an inspection, the building was referred to the demolition department for demolition due to problems with its structural condition and effect on adjacent property. On May 16, 1997, an order of demolition was signed and mailed to Blandford.
On May 18, 1997, Blandford notified Liberty Mutual that a portion of the foundation had collapsed into the basement of the building on that day. Liberty Mutual advised Blandford that the claim was probably not covered. Blandford had an architect inspect the building and he determined that it was structurally sound and could be stabilized with reasonable expense. Blandford then hired a casualty contracting firm to stabilize the foundation, at a cost of $1,947.84.
On May 27, 1997, the Slevin building caught on fire. On May 28, 1997, the Chief of Inspections for the Louisville Fire Department inspected the building and informed the demolition department that the building was an "unsafe structure" and a "hazard to public safety and neighboring structures." On May 28, 1997, Blandford wrote a letter appealing the decision to demolish the building. The building was demolished. Blandford then submitted a claim to Liberty Mutual for fire loss.
On December 31, 1998, Liberty Mutual advised Blandford that his two claims were denied.
B. Procedural Background
On January 3, 1998, Liberty Mutual filed this action seeking a declaratory judgment regarding the question of coverage for Blandford's claims.
On January 19, 1999, the court granted in part and denied in part a motion of Liberty Mutual for summary judgment. That ruling granted summary judgment in favor of Liberty Mutual on the fire loss claim, and denied it summary judgment as to the foundation collapse claim. Blandford moved to alter or amend the judgment with respect to the fire loss claim. In a memorandum opinion and separate order entered March 15, 1999, this court granted the motion to alter or amend, and ordered that summary judgment on the fire loss claim be denied. This matter is presently before the court on a second motion to alter or amend the opinions of the court. The present motion by Liberty Mutual to amend relates to both the January and March opinions.
C. The January 19, 1999 Opinion
In the January 19, 1999 opinion, the court made a number of findings which are presently in question. The court found in the opinion that:
"A reading of the policy as a whole reveals that the "Vacancy Limitation" amendment was intended to replace the `Vacancy Loss Condition' in the original policy. Therefore the `Vacancy Limitation' applies to Blandford's policy."
"However, the `Vacancy Limitation' amendment appears to replace the only [sic] `Vacancy Provision' section. The `Description of Terms' which includes the term `vacancy' remains in effect."
"Because the Slevin building was vacant for more than sixty days before the loss, that loss is not covered. Accordingly, this court will grant summary judgment in favor of Liberty on Blandford's fire loss claim by separate order."
The original policy contained a section covering vacancy loss conditions. An amendment to the original policy, entitled Vacancy Limitation and Increase of Hazard Endorsement, stated, in pertinent part:
This endorsement replaces the Vacancy Loss Condition . . .
VACANCY
We will not pay for any loss or damage if the building where the loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage.
Buildings under construction are not considered vacant . . .
The court referred to the endorsement and to the Description of Terms contained in the Vacancy Loss Condition section of the original policy in which the term "vacant" was defined. The court had concluded that the Terms part of the Vacancy Loss Condition remained in effect after the endorsement. The court concluded that since 70% or more of the square footage of the building was not rented or being used to conduct customary operations for more than sixty days before the loss, the loss was not covered.
D. The March 15, 1999 Opinion
Blandford moved for reconsideration and amendment of the January 19th opinion, arguing for the first time that the building was not vacant under the policy terms because it was under renovation. He stated that during 1997 he replaced deteriorated 2x4s on a side wall, re-supported a section along the gutter board and replaced the gutter board, a fire escape, and prepared the side of the building for replacement siding.
In the March 15, 1999 opinion, the court again referred to the Description of Terms in the original policy. The court found that at E.6.a.2 the policy stated that "Buildings under construction or renovation are not considered vacant." The court held in the March opinion that "Although the Slevin building was unoccupied, it was not considered vacant if it was under renovation." The court concluded that a genuine issue of material fact existed regarding whether the building was under renovation and thereby not vacant under the terms of the policy. Blandford's motion to amend the January 19th opinion was granted, and the ruling was altered to reflect that Liberty Mutual's motion for summary judgment on the fire loss claim was denied.
E. Liberty Mutual's Motion to Amend the January 19, 1999 and March 15, 1999 Opinions
In the present motion, Liberty Mutual has urged that our January 19th opinion was in error insofar as the court found that only a portion of the Vacancy Loss Condition was replaced by the Vacancy Limitation endorsement. Upon reconsideration of the matter, the court concludes that Liberty Mutual's position is well taken and that our January opinion was in error.
The Vacancy Limitation and Increase of Hazard Endorsement states clearly that "[t]his endorsement replaces the Vacancy Loss Condition . . ." of the original policy [emphasis ours]. The Vacancy Loss Condition of the original policy is found at Section E — Loss Conditions; Subsection 6 — Vacancy. Subsection 6 — Vacancy was divided into two parts: (a) Description of Terms and (b) Vacancy Provisions. The Vacancy Loss Condition of the policy to which the endorsement referred consisted of both parts (a) and (b) of the Vacancy subsection. There was nothing in the endorsement to suggest that only a portion of the Vacancy Loss Condition was replaced. Therefore, the Vacancy Loss Condition, consisting of both Terms and Provisions, was replaced in its entirety. When an endorsement modifies or restricts the terms of the original policy, the endorsement controls. As noted by the United States Court of Appeals for the Sixth Circuit in Valassis Communications, Inc. v. Aetna Casualty Surety Company, 97 F.3d 870, 873(6th Cir. 1996),
Insurance contract law also dictates that when an endorsement deletes language from a policy, a court must not consider the deleted language in its interpretation of the remaining agreement. 43 Am.Jur.2d Insurance § 275 (1982) . . . To determine if an agreement, as modified, is ambiguous, the court examines the language and assigns the "plain and unambiguous . . . meaning" to its remaining words. [citation omitted].
We must give the statement "This endorsement replaces the Vacancy Loss Condition" its clear and plain meaning, and conclude that the Vacancy Loss Condition as a whole was replaced by the endorsement.
We would, however, reach the same result in this opinion regardless of our position concerning replacement of the entire Vacancy Loss Condition section of the policy.
The original policy stated at E.6.a.2 "Buildings under construction or renovation are not considered vacant." Our March 15, 1999 opinion failed to recognize that part E.6.a.2 providing a vacancy exception for buildings under construction and renovation was, in fact, rewritten in the endorsement. Under VACANCY, the endorsement states "Buildings under construction are not considered vacant." The drafters of the endorsement chose to eliminate the exception for buildings under renovation which appeared in the original policy. The traditional rules of construction also require that we conclude that the policy, as amended by the endorsement, does not provide an exception for buildings under renovation. The maxim expressio unius est exclusio alterius, that the enumeration of particular things excludes others not specifically mentioned, would apply in this instance. The soundness of this maxim of construction has long been recognized by Kentucky courts. Department of Alcoholic Beverage Control v. Liquor Outlet, Inc., 734 S.W.2d 816 (Ky.App. 1987); Louisville Water Company v. Wells, 664 S.W.2d 525 (Ky.App. 1984); Smith V. Wedding, 303 S.W.2d 322 (Ky. 1957); Wade v. Commonwealth, 303 S.W.2d 905 (Ky. 1957); Steinfeld v. Jefferson County Fiscal Court, 229 S.W.2d 319 (Ky. 1950); Messick v. Toyota Motor Manufacturing, Kentucky, Inc., 45 F. Supp.2d 578 (E.D.Ky. 1999) (applying the maxim as enunciated in Kentucky law). This particular rule of construction has been applied to the interpretation of the provisions of insurance policies. See, ie., A Theory of Insurance Policy Interpretation, 95 Mich.L.Rev. 531, 539 fn. 18 (1996). Rather than omitting the Description of Terms altogether, the drafters of the endorsement chose to specifically enumerate one vacancy exception for buildings under construction. The enumeration of the one exception must be presumed to have been intended to exclude buildings under renovation from coverage.
Therefore, even if we were to maintain, as a general proposition, that the Description of Terms part of the Vacancy Loss Condition was not replaced by the endorsement, clearly the rewritten vacancy exception in the endorsement controls with respect to that term.
The court was in error, in any event, in concluding in the March opinion that a genuine issue of fact existed on the question of vacancy due to the purported renovations done in the building. Under either analysis, there is no vacancy exception in this policy for buildings under renovation.
Having determined that the endorsement replaced the Vacancy Loss Condition of the original policy, there is no longer a definition of the term "vacant" within the text of the policy. We must therefore determine whether the Slevin building was "vacant," employing the common law definition of the term.
Under Kentucky law, it has been stated that "vacant" is not synonymous with the term "unoccupied," but the terms may be, and often are, treated as synonymous. Continental Insurance Company of New York v. Dunning, 60 S.W.2d 577, 579 (Ky. 1933). In the Dunning case, the court stated that
A dwelling house means a place of abode — a habitation — a house occupied, or intended to be occupied, as a residence. "Occupation of a dwelling house primarily implies a living in it; and consequently a fair and reasonable interpretation of the words `vacant and unoccupied,' when used to describe a dwelling house, would seem to be that the house is without an occupant, — without some person living in it. An actual use of the house as a place of abode or habitation is what the insurer contemplates and what the policy designs to secure. It is the very situation against the hazards of which the company clearly undertook to guard itself, by an express stipulation and condition inserted in the very contract upon which the suit is founded.Dunning, 60 S.W.2d at 579. Further, "A building may be vacant within the meaning of the term "vacant," though "far from being empty of everything but air." Id.
While there were items of equipment and fixtures remaining within the building, the presence of these items in the structure does not preclude a finding of vacancy. The City of Louisville had ordered the building vacated, and this had been done more than sixty days prior to the fire. The apartments were without occupants, and no business was being nor could be conducted within the structure. The court concludes that the building had been vacant for more than sixty consecutive days prior to the loss. Thus coverage for Blandford's fire loss is precluded under the terms of the policy.
The court will modify its January 19, 1999 memorandum opinion and vacate its March 15, 1999 memorandum opinion and order in accordance with the decision hereinabove.