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WVSCA Upholds Limitation in Fire Portion of Policy and Analyzes Pollutant Removal Coverage

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The Supreme Court of Appeals of West Virginia (“WVSCA”) recently answered two certified questions regarding coverage issues in a declaratory judgment action.  First, the WVSCA held that a vacancy provision permitting the insurer to reduce the stated amount of coverage payable for a total fire loss does not conflict with West Virginia’s valued policy statute or the Standard Fire Policy adopted by West Virginia.  Second, the WVSCA held that a Pollutant Cleanup and Removal provision in a fire insurance policy, which covers the expense of extracting pollutants from “land or water,” does not apply to the testing and removal of asbestos located within the fire-damaged structure.

Mohammed Ashraf, M.D. v. State Auto Property and Casualty Insurance Company, No 16-1042 (W. Va. April 26, 2017) arose out of a dispute following a fire that rendered a building that had been vacant for almost six years a total loss.  The building was insured under a commercial fire insurance policy issued by State Auto.  The named insured on the policy was Mohammed Ashraf, M.D. 

Dr. Ashraf reported the fire loss to State Auto and was informed that if the building had been vacant for more than sixty consecutive days, the amount of coverage payable for the loss would be reduced by 15% pursuant to the policy’s vacancy provision, which provided that “[i]f the building where the loss or damage occurs has been vacant for more than 60 consecutive days before that loss or damage occurs” the “amount we would otherwise pay for the loss or damage” would be reduced by 15%.  Dr. Ashraf contended that the policy limit for the building coverage should not have been subject to the 15% reduction because the policy was a “valued policy,” which required that the face value of the policy be paid in the event of a total fire loss.  The WVSCA noted that the vacancy provision allowing the 15% reduction is more favorable to the insured in comparison to the Standard Fire Policy adopted by West Virginia, which authorizes a complete denial of liability for a fire loss of a building vacant for more than sixty days, and is, therefore, permissible.  The WVSCA held that the 15% reduction is an anticipatory limitation regarding the risk to a structure from extended vacancy, which does not conflict with the valued policy statute, as it does not subject the parties to a factual dispute over valuation.

Additionally, Dr. Ashraf sought coverage for demolition and removal of the fire-destroyed building under both debris removal and pollutant removal provisions of the State Auto policy.  State Auto issued payment for debris removal; however, no coverage was extended under the pollutant removal provision of the policy, which provided coverage for expenses “to extract ‘pollutants’ from land or water if the discharge, dispersal, seepage, migration, release or escape of the 'pollutants' is caused by or results from a Covered Cause of Loss that occurs during the policy period.”  The Pollutant Cleanup and Removal provision was found in the section of the policy entitled “Building and Personal Property Coverage Form,” which states that covered property does not include: “Land (including land on which the property is located), water, growing crops, or lawns.”  As such, the plain language of the policy distinguished “land” and “water” for which coverage is not extended, unless they have been affected by a pollutant, as defined in the policy.  The WVSCA noted that nothing in the record indicated that land or water was affected by the asbestos found in certain materials within the damaged building.  Accordingly, the WVSCA held that “a Pollutant Cleanup and Removal provision in a fire insurance policy, which covers the expense of extracting pollutants from ‘land or water’ at the insured premises, does not apply to asbestos testing and removal, where the asbestos removed is located within the fire-damaged structure.”