New York Appellate Court Reinstates Theft Claim Against Insurer Over Warehouse Usage Dispute

In a recent development, the New York Appellate Division, Third Department, has revived a theft claim filed by a warehouse owner against its insurer. The court's decision was based on unresolved factual issues surrounding the property's usage and occupancy, which prevented the dismissal of the case. This significant ruling, dated April 3, examines the application of vacancy and occupancy exclusions in a commercial multi-peril insurance policy. The plaintiff in the case, Lok-N-Logs, Inc., owns a warehouse in the Village of Sherburne, Chenango County, and had filed an insurance claim following the theft of copper and brass from its facility during a break-in in April 2020. The insurer, Leatherstocking Cooperative Insurance Company, denied the claim citing policy exclusions related to vacancy, prompting the legal challenge.

The principal controversy stems from the definitions of 'vacant' and 'unoccupied' as used in the insurance policy. According to Leatherstocking, the policy excludes vandalism coverage for properties vacant for more than 30 consecutive days and suspends coverage entirely if the property remains vacant or unoccupied for over 60 days. In its defense, Leatherstocking argued that the warehouse had been effectively abandoned after its former occupants—a dog food business and another commercial tenant—left in December 2019. Indications supporting their claim of vacancy included the disconnection of electrical service in February 2020 and the absence of ongoing commercial operations.

However, the insurance policy did not explicitly define the terms 'vacant' or 'unoccupied.' Thus, the court referred to established legal precedents to interpret these terms. Typically, 'vacancy' refers to an unoccupied and empty space, while 'occupancy' relates to regular human presence. Testimony from James Webb, the president of Lok-N-Logs, indicated that although commercial tenants had vacated, the warehouse was still utilized for storage of construction materials. Employees visited the site regularly for maintenance, and occasional garage sales were held over weekends. Webb also made weekly visits, although the site was not manned daily.

At the initial trial, Supreme Court Justice Mark Masler found in favor of the insurer, granting summary judgment and dismissing the complaint. On appeal, however, the Third Department reversed this decision, determining that neither party had successfully proven their case for summary judgment. The appellate court highlighted that a jury could reasonably deduce the warehouse sustained commercial use and was neither vacant nor unoccupied as per policy terms. It underscored the importance of considering vacancy and occupancy definitions in light of the insured property and the relevant contract specifics. By classifying the property as a commercial warehouse, the court noted that regular storage and maintenance activities might suffice to meet occupancy requirements. This ruling keeps Lok-N-Logs’ claim active, forwarding the case to trial for further exploration. It also sheds light on the intricacies of enforcing vacancy exclusions within commercial insurance policies, stressing the necessity for clear policy language and thorough documentation for properties exhibiting intermittent activities. The case, Lok-N-Logs, Inc. v Leatherstocking Cooperative Insurance Company, continues its journey in the Appellate Division, Third Department, under case number CV-23-2412.