Certain Underwriters at Lloyds, London v. Law

In Certain Underwriters at Lloyds, London v. Law, 570 F.3d 574 (5th Cir. 2009), the Fifth Circuit considered a situation in which thieves stole copper tubing from inside seventeen commercial air conditioning units affixed to the roof of a vacant office building. 570 F.3d at 575. In order to extract the tubing, the thieves "tore off" panels in the exterior housing of the units, "then broke into the units themselves." Id. The court recognized that the question of coverage turned "on whether the damage to the . . . air conditioners was: (1) vandalism; (2) damage caused by or resulting from theft, or (3) building damage caused by the breaking in or exiting of burglars." Id. at 576. Utilizing Texas insurance policy construction law, the majority of the court determined that the policy was not ambiguous but instead expressed the parties' clear intent not to cover the type of damage claimed. Id. at 578. "Vandalism," the majority explained, is broad enough in common parlance to cover damage caused by burglars, but the contract provided a more precise definition: "willful and malicious damage." Based on this definition, the majority concluded that coverage turned on the purpose for which particular damage was done: (1) Damage done for no purpose other than to destroy property for destruction's sake is "vandalism;" (2) incidental damage done in furtherance of thievery falls within the narrower category of damage resulting from theft; (3) damage to the insured building done by burglars entering or leaving the building that they attempt to burglarize falls into the even narrower ingress/egress exception. Id. at 578-79. Because the damage at issue in Law appeared to have been done solely to gain access to the copper tubing, the majority held that the damage was excluded under the theft exclusion. Id. at 579. The majority further rejected the notion that the thieves' entry into the air conditioning units constituted "breaking in" to the building under the policy exception. Id. at 580. Instead, the majority interpreted the breaking-in exception, pursuant to the "common understanding," as contemplating "nothing more expansive than an attempt to enter bodily into the interior space of the building as bounded by the walls, floors, and ceilings." Id. at 580-81. Referring specifically to the policy, the majority stated that coverage existed under the "breaking in" exception only "where thieves bodily enter or exit the building, as by breaking a door or window." Id. at 581. The majority further indicated that the "or exiting" language in the exception also suggested that a bodily intrusion was required for "breaking in." Id. Ultimately, the majority concluded that the damage caused by the burglars to the air conditioning units was not covered under the policy as either vandalism or as damage caused by the breaking in or exiting of burglars from the building. Id. at 583. In her dissent in Law, Justice Sandra Day O'Connor, sitting by assignment, first agreed with the majority that the damage to the air conditioning units was not covered as vandalism under the policy, but she then disagreed with the majority as to whether the damage was caused by the "breaking in . . . of burglars." Law, 570 F.3d at 583 (O'Connor, S.C.J., dissenting). Deeming the policy language ambiguous, Justice O'Connor adopted a construction that she considered reasonable favoring the insured. Id. at 583-84. She explained that the air conditioning units were part of the building and thus the burglars' penetration of those units constituted "breaking in" to the building. Id. at 584-85.