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THE EXCLUSIONARY PROVISIONS IN THIS FIRE INSURANCE POLICY WERE AMBIGUOUS AND MUST THEREFORE BE CONSTRUED AGAINST THE INSURER; PLAINTIFF IS ENTITLED TO COVERAGE FOR THE FIRE DAMAGE DESPITE THE UNAUTHORIZED OCCUPANTS (SECOND DEPT).

The Second Department, reversing Supreme Court, determined the exclusionary provisions of the fire insurance policy were ambiguous and therefore must be construed in favor of the insured. At the time of the fire unauthorized occupants were living in the building and the insurer disclaimed coverage on that ground:

Here, the disputed exclusionary provisions read as follows:

“C. We do not cover loss resulting directly or indirectly:

Vacancy or Occupancy

1. While a described building, whether intended for occupancy . . . is vacant or unoccupied beyond a period of sixty (60) consecutive days.

Increase in Hazard

2. While the hazard is increased by any means within the control or knowledge of the insured.”

​Construed in the context of the contract as a whole, the plain and ordinary meaning of these exclusionary provisions is not apparent. The exclusionary provisions at issue are listed in the supplemental special provisions that modified the original dwelling insurance policy. The contract provides for certain general exclusions in parts A and B, and thereafter included the above referenced supplemental general exclusions as part C. Part A provides that, “[w]e do not insure for loss caused directly or indirectly by any of the following” … , and lists conditions or events that could damage the insured premises, including, for example, earth movement, water damage, and power failure. Part C, as referenced above, does not contain any language after “directly or indirectly.” Thus, it is not clear whether the “vacancy or occupancy” or “increase in hazard” must cause the loss or whether the condition must simply exist at the time of the loss. Because the exclusionary provisions are ambiguous, and any ambiguity is construed against the insurer in favor of the insured, the plaintiff has established her prima facie entitlement to coverage … . Eubanks v New York Prop. Ins. Underwriting Assn., 2025 NY Slip Op 04460, Second Dept 7-30-25

Practice Point: At the time of the fire the building was inhabited by “unauthorized occupants” and coverage was disclaimed. However, the exclusionary provisions of the policy were ambiguous. The ambiguity must be construed in favor of the insured. Therefore the disclaimer constituted a breach of contract.

 

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