An insured has policies for multiple rental dwellings using ISO CP 00 10 10-12 and CF 20 01 03-19. One of the locations has experienced extensive damage by the tenant. The landlord found the damage after the tenant was evicted for not paying the rent. The damage includes water damage to the cabinetry.

Q: The insured filed a claim but the carrier wants to apply multiple deductibles. Is there a legal definition for “occurrence?" And is vandalism over a period of time one occurrence or several as it relates to the deductible?

Response 1: An occurrence can be fixed at a certain time at a certain place, a certain cause over different locations, or a repetitive cause at a single location. Vandalism over a period of time at a specific location should be one occurrence, both for coverage limit and deductible.

Here's what it says in the ISO commercial property form:

D. Deductible

In any one occurrence of loss or damage (hereinafter referred to as loss), we will first reduce the amount of loss if required by the Coinsurance Condition or the Agreed Value Optional Coverage. If the adjusted amount of loss is less than or equal to the Deductible, we will not pay for that loss. If the adjusted amount of loss exceeds the Deductible, we will then subtract the Deductible from the adjusted amount of loss and will pay the resulting amount or the Limit of Insurance, whichever is less. When the occurrence involves loss to more than one item of Covered Property and separate Limits of Insurance apply, the losses will not be combined in determining application of the Deductible. But the Deductible will be applied only once per occurrence.

You can litigate the definition of occurrence. It is not defined in the policy and has been litigated before. Admittedly, an occurrence can be more than one loss and could be described as a plurality of losses. However, property insurance policies do not define occurrence.

Did the tenants vandalize the house on multiple occasions over a prolonged period of time? Yes. Is the insurer entitled to multiple deductibles? Also, yes. The insured can litigate and then the only opinion that matters is that of the court.

Response 2: The application of the deductible seems pretty clear: It applies to each occurrence of loss. If the tenants punched holes in the walls and hosed down the cabinets in a day-long rampage, it would clearly be a single occurrence and a single deductible would be appropriate. If the vandals took a day off between the walls and the cabinets, it seems equally clear that you'd have two occurrences with two deductibles. 

But what if they only took a short coffee break between the walls and the cabinets? It would depend upon how long the break lasted, and the courts would probably need to be called in. 

There have probably been cases involving this question but you'd need to consult an attorney. You would also need detailed information for the lawyer to consider, especially anything that could potentially set the timeline for the various kinds of damage. 

Response 3: Since there is probably no way to know when each element of the damage was done, it is likely that the carrier is correct. It also seems unlikely that the water damage to the cabinets is covered at all.

Response 4: Claims like this have been debated in the industry for years. In my non-adjuster view, if the tenant has caused damage multiple times over a period of months or years, each damage is a separate claim and thus a separate deductible. The adjuster makes the final decision.

This question was originally submitted by an agent through the Big “I" Virtual University's (VU) Ask an Expert service, with responses curated from multiple VU faculty members. Answers to other coverage questions are available on the VU website. If you need help accessing the website, request login information.

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