Southern Trust Insurance Company v. Matthew Phillips

IN THE COURT OF APPEALS OF TENNESSEE

AT KNOXVILLE

April 15, 2015 Session

SOUTHERN TRUST INSURANCE COMPANY v. MATTHEW PHILLIPS

Direct Appeal from the Circuit Court for Anderson County

No. B3LA0206 Donald Ray Elledge, Judge

No. E2014-01581-COA-R3-CV-FILED-JUNE 10, 2015

This appeal involves the interpretation of an insurance policy in order to determine

whether the policy provided coverage for damage caused by arson. The insurer and the

insured filed cross-motions for partial summary judgment on this issue. The trial court

found the policy ambiguous and construed it in favor of coverage, holding that arson was

covered under the policy. Accordingly, the trial court granted the motion for partial

summary judgment filed by the insured and denied the motion for partial summary

judgment filed by the insurer. The insurer appeals. We affirm.

Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Circuit Court Affirmed and

Remanded

BRANDON O. GIBSON, J., delivered the opinion of the court, in which D. MICHAEL

SWINEY, J., and THOMAS R. FRIERSON, II, J., joined.

Terrill Lee Adkins and Amy Victoria Peters, Knoxville, Tennessee, for the appellant,

Southern Trust Insurance Company.

James Brandon McWherter, Franklin, Tennessee, and Clinton H. Scott, Jackson,

Tennessee, for the appellee, Matthew Phillips.

OPINION

I. FACTS & PROCEDURAL HISTORY

Matthew Phillips is the owner of residential real property located in Lake City,

Tennessee. The property was insured under a dwelling policy issued by Southern Trust

Insurance Company. On or about February 27, 2013, a fire substantially damaged the

residential structure located on the insured premises. Phillips promptly reported the loss

to Southern Trust and fulfilled all duties imposed on him under the policy. Nevertheless,

Southern Trust denied that the fire was covered under the insurance policy. Southern

Trust determined that the fire was intentionally set. Even though Phillips was not

suspected of setting the fire, Southern Trust denied coverage pursuant to an exclusion in

the policy providing that Southern Trust did not insure loss caused by ―vandalism and

malicious mischief, theft or attempted theft‖ if the dwelling was vacant. For purposes of

this appeal, the parties do not dispute that the dwelling was vacant and that the fire was

caused by arson.

Southern Trust filed a complaint for declaratory judgment in the Circuit Court of

Anderson County, seeking a declaration that the policy did not provide coverage for the

dwelling because, according to Southern Trust, the home ―was damaged by vandalism

and malicious mischief.‖ Phillips filed an answer and counterclaim, asserting that

Southern Trust was obligated to provide coverage for the loss because, according to

Phillips, the home was damaged by fire, not vandalism and malicious mischief. Phillips

asserted that Southern Trust‘s refusal to pay for the loss breached the parties‘ insurance

contract and demonstrated bad faith.

Phillips filed a motion for partial summary judgment on the issue of whether the

exclusion for ―vandalism and malicious mischief‖ applied to his claim. He claimed that

arson did not fall within the meaning of ―vandalism and malicious mischief‖ as those

terms were used in his policy. In the section of the policy entitled ―Perils Insured

Against,‖ the policy described coverage for the dwelling under ―Coverage A,‖ coverage

for other structures under ―Coverage B,‖ and coverage for personal property under

―Coverage C.‖ For Coverage A and Coverage B, the policy provided that it did not cover

loss caused by ―vandalism and malicious mischief, theft or attempted theft if the dwelling

has been vacant for more than 30 consecutive days immediately before the loss.‖ The

policy did not define vandalism or malicious mischief. However, the policy listed

―vandalism and malicious mischief‖ separate and apart from ―fire‖ under Coverage C,

which addressed coverage for personal property. Coverage C specifically provided

coverage for personal property for the perils of:

1. Fire or lightning.

....

8. Vandalism or malicious mischief.

Another section of the policy also differentiated between fire and vandalism or malicious

mischief, stating that the policy covered ―trees, shrubs, plants or lawns, on the Described

Location for loss caused by the following Perils Insured Against: Fire or lightning, . . .

Vandalism or malicious mischief, including damage during a burglary or attempted

2

burglary, but not theft of property.‖ In his motion for partial summary judgment,

Phillips argued that an ordinary business person would generally view arson as distinct

from vandalism. He also emphasized that this particular policy separately listed fire as an

insured peril in two sections of the policy. He argued that the policy, as a whole, ―clearly

ma[d]e a distinction between fire and vandalism‖ and treated losses caused by fire and

losses caused by vandalism or malicious mischief as separate perils. He noted that the

vacancy exclusion for the dwelling only excluded vandalism and malicious mischief,

without mentioning fire or arson. Phillips cited caselaw from around the country holding

that an insurance policy exclusion for ―vandalism and malicious mischief‖ does not

encompass arson. He also provided the court with an opinion from another Tennessee

trial court, reaching that same conclusion. At the very least, Phillips argued, the policy

was ambiguous as to whether coverage would be provided for an intentionally set fire.

For all these reasons, he asked the trial court to find, as a matter of law, that arson did not

fall within the ―vandalism and malicious mischief‖ exclusion in the policy.

Southern Trust filed a response, along with its own motion for partial summary

judgment. Southern Trust asked the court to find, as a matter of law, that arson clearly

and unambiguously fell within the policy‘s exclusion for vandalism and malicious

mischief. Southern Trust cited definitions from Tennessee‘s criminal statutes defining

vandalism and malicious mischief, in addition to definitions from Black’s Law

Dictionary, which, Southern Trust claimed, generally defined the terms broadly to

include any intentional destruction of property. Thus, Southern Trust asked the court to

consider the dictionary definitions of the relevant terms, without regard to how the terms

were treated in other sections of the insurance policy addressing other types of coverage.

Southern Trust also cited several cases from other jurisdictions in which courts have held

that vandalism or malicious mischief includes a fire set by an unknown arsonist.

Following a hearing, the trial court entered an order granting the motion for partial

summary judgment filed by Phillips and denying the motion filed by Southern Trust. The

court concluded that it was required to construe the insurance policy as a whole. In

considering the meaning of the relevant terms, the trial court noted that arson and

vandalism are treated as separate and distinct offenses under Tennessee‘s criminal code.

The court found that the policy itself also distinguished between the perils of fire and

vandalism and/or malicious mischief, differentiating between the two in two different

sections of the policy. The trial court found the policy ambiguous as to whether arson

would fall within the exclusion for vandalism and malicious mischief, in light of the

policy‘s clear differentiation between those terms and fire. The court noted that Southern

Trust could have easily defined vandalism and malicious mischief or expressed a clear

intent to include arson within the exclusion, but it failed to do so. The court concluded,

3

Because the terms ‗vandalism‘ and ‗fire‘ are undefined, and are listed as

two distinct perils in at least two separate sections of the policy, it is

ambiguous as to which peril, ‗vandalism‘ or ‗fire,‘ covers arson. Giving

operative effect to every provision and construing all ambiguities in favor

of Mr. Phillips, the Court finds that, under the policy at issue, fire by arson

is a separate and distinct peril from vandalism/malicious mischief.

The court further stated, ―When an insurance company treats ‗fire‘ and ‗vandalism and

malicious mischief‘ as two distinct causes of loss and the terms are undefined in the

policy, a reasonable person would conclude that arson falls within the category of fire

rather than under vandalism and malicious mischief.‖ Accordingly, the trial court ruled

that arson does not fall within the policy‘s exclusion for vandalism and malicious

mischief.

After the trial court‘s ruling, the parties agreed to a consent judgment as to the

amount of damages owed to Phillips. Thereafter, Southern Trust timely filed a notice of

appeal to this Court.

II. ISSUES PRESENTED

Southern Trust presents the following issues, as we perceive them, for review on

appeal:

1. Whether the trial court erred in finding the insurance policy

ambiguous;

2. Whether the trial court erred in considering the section of the policy

providing coverage for personal property when determining whether

coverage existed under the portion of the policy providing coverage for the

dwelling.

For the following reasons, we affirm the decision of the circuit court and remand for

further proceedings.

III. DISCUSSION

The precise arguments before us have not been considered by Tennessee appellate

courts. However, this same type of policy exclusion was at issue in Lorentz v. Phillips,

No. 01-A-01-9509-CH00417, 1996 WL 140527 (Tenn. Ct. App. Mar. 29, 1996). In

Lorentz, an insurer denied coverage after a fire loss on the basis of a policy exclusion for

vandalism and malicious mischief. Id. at *1. The trial court and the court of appeals

4

concluded that the insurer failed to prove that the vandalism and malicious mischief

exclusion applied to the damage sustained by the insured. Id. at *2. The court of appeals

explained that in order to prove either vandalism or malicious mischief, the insurer was

required to demonstrate ―malice, intention, or at the very least, knowledge.‖ Id. at *3.

Despite their investigation, however, the insurer‘s experts ―could produce no evidence of

intent or even of human agency in the genesis of the fire.‖ Id. Therefore, the court found

that the insurer failed to prove that the fire was not accidental in nature. Id. at *4. The

court of appeals affirmed the trial court‘s order requiring the insurer to pay the policy

proceeds to the insured. Id. at *1.

In the case at bar, Southern Trust concedes that the Lorentz court ―did not offer

any in depth analysis‖ regarding the enforceability of the exclusion. Both parties suggest

that the issue of whether arson falls within the exclusion for vandalism and malicious

mischief in this particular policy is a matter of first impression in Tennessee. We agree.1

The arguments presented in this case regarding the applicability of the vandalism and

malicious mischief exclusion were not discussed in Lorentz, and the Lorentz court found

the exclusion inapplicable to the facts before it for other reasons. We decline to speculate

about what the court would have held if other facts had been presented. Lorentz simply

does not resolve the issue of whether arson qualifies as vandalism and malicious mischief

under the insurance policy issued to Phillips.

―The courts in Tennessee have long recognized that a vacancy clause in a fire

policy is reasonable, valid and binding.‖ Carroll v. Tennessee Farmers Mut. Ins. Co.,

592 S.W.2d 894, 895 (Tenn. Ct. App. 1979). The parties do not question the

enforceability of the vacancy clause, and the facts relevant to the issue on appeal are

undisputed. The crux of this appeal is whether, as a matter of insurance and contract law,

arson constitutes ―vandalism and malicious mischief‖ under the policy. This issue is

purely one of insurance policy interpretation.

―Tennessee law is clear that questions regarding the extent of insurance coverage

present issues of law involving the interpretation of contractual language.‖ Garrison v.

1

Tennessee courts have considered whether other types of acts constitute vandalism or malicious mischief

within the meaning of an insurance policy. See, e.g., Beef N' Bird of America, Inc. for Use and Benefit of

Galbreath v. Continental Cas. Co., 803 S.W.2d 234, 236 (Tenn. Ct. App. 1990) (concluding that the

removal of shrubs from the insured premises fell within an exclusion for vandalism and malicious

mischief); McKinney v. Educator & Executive Insurers, Inc., 569 S.W.2d 829, 833 (Tenn. Ct. App. 1977)

(holding that unauthorized drag racing of the insured‘s car during a test drive did not constitute malicious

mischief within the meaning of his policy). However, the analysis in these cases does not provide any

guidance with respect to the issues before us.

5

Bickford, 377 S.W.3d 659, 663 (Tenn. 2012) (citing Clark v. Sputniks, LLC, 368 S.W.3d

431, 436 (Tenn. 2012); Maggart v. Almany Realtors, Inc., 259 S.W.3d 700, 703 (Tenn.

2008)). Therefore, our standard of review is de novo with no presumption of correctness

afforded to the trial court‘s conclusion. Id. (citing U.S. Bank, N.A. v. Tenn. Farmers Mut.

Ins. Co., 277 S.W.3d 381, 386 (Tenn. 2009).

―[I]nsurance policies are, at their core, contracts.‖ Allstate Ins. Co. v.

Tarrant, 363 S.W.3d 508, 527 (Tenn. 2012) (Koch, J., dissenting). As such,

courts interpret insurance policies using the same tenets that guide the

construction of any other contract. Am. Justice Ins. Reciprocal v.

Hutchison, 15 S.W.3d 811, 814 (Tenn. 2000). Thus, the terms of an

insurance policy ―‗should be given their plain and ordinary meaning, for the

primary rule of contract interpretation is to ascertain and give effect to the

intent of the parties.‘‖ Clark, 368 S.W.3d at 441 (quoting U.S. Bank, 277

S.W.3d at 386-87). The policy should be construed ―as a whole in a

reasonable and logical manner,‖ Standard Fire Ins. Co. v. Chester–

O’Donley & Assocs., 972 S.W.2d 1, 7(Tenn. Ct. App. 1998), and the

language in dispute should be examined in the context of the entire

agreement, Cocke Cty Bd. of Highway Comm’rs v. Newport Utils. Bd., 690

S.W.2d 231, 237 (Tenn. 1985).

In addition, contracts of insurance are strictly construed in favor of

the insured, and if the disputed provision is susceptible to more than one

plausible meaning, the meaning favorable to the insured controls. Tata v.

Nichols, 848 S.W.2d 649, 650 (Tenn. 1993); VanBebber v. Roach, 252

S.W.3d 279, 284 (Tenn. Ct. App. 2007). However, a ―strained construction

may not be placed on the language used to find ambiguity where none

exists.‖ Farmers–Peoples Bank v. Clemmer, 519 S.W.2d 801, 805 (Tenn.

1975).

Id. at 663-64.

Although the issue of whether arson falls within an exclusion for vandalism or

malicious mischief is an issue of first impression in Tennessee, there has been no

shortage of litigation in other jurisdictions with respect to this very issue. Many courts

have held that an exclusion for vandalism and/or malicious mischief clearly does not

encompass arson, particularly where the policy at issue distinguishes between fire and

vandalism and/or malicious mischief. See, e.g., R & J Dev. Co. v. Travelers Property

6

Cas. Co. of Am., No. 11-47-ART, 2012 WL 1598088, at *2 (E.D. Ky. May 7, 2012) (―the

term ‗vandalism‘ unambiguously excludes arson‖); Bates v. Hartford Ins. Co. of

Midwest, 787 F.Supp.2d 657, 663 (E.D. Mich. 2011) (―the policy, when considered as a

whole, is not ambiguous: Arson is not included within the vandalism and malicious

mischief class of perils‖); Johnson v. State Farm Fire & Cas. Co., No. 278267, 2008 WL

4724322, at *4 (Mich. Ct. App. Oct. 28, 2008) (―Viewing the policy as a whole, we

conclude that it is not ambiguous, and that fire and vandalism are considered to be two

different perils.‖); Tillman v. S. State Ins. Co., 325 S.E.2d 585, 585 (S.C. Ct. App. 1985)

(applying the plain and ordinary meaning of the terms to conclude that a deliberately set

fire was not excluded as vandalism or malicious mischief); Am. States Ins. Co. v. Rancho

San Marcos Props., LLC, 97 P.3d 775, 779 (Wash. Ct. App. 2004) (―the question (at least

in Washington) is whether the average person purchasing insurance would believe that he

or she assumed the risk of an arson fire under an all-risk policy where the policy excluded

coverage for vandalism. . . . The answer to that question is ‗no.‘‖) (citation omitted);

Dixon v. Safeco Ins. Co. of Am., No. 27763-8-II, 2002 WL 31002848, at *3 (Wash. Ct.

App. 2002) (―Where a homeowner‘s insurance policy treats ‗fire‘ and ‗vandalism and

malicious mischief‘ as two distinct causes of loss and the terms are not defined, an

average person would conclude that arson falls under the category of fire rather than

vandalism and malicious mischief.‖). Trial courts in Shelby County and Scott County

have reached the same conclusion.

Other courts have found ambiguity in the terms ―vandalism‖ and ―malicious

mischief‖ and construed the language in favor of coverage, holding that arson does not

fall within the exclusion. See, e.g., Bales v. Allstate Ins. Co., No. 10-CV-2605-H (CAB),

2011 WL 9133647, at *4 (S.D. Cal. 2011) (―the vandalism or malicious mischief

exclusion in the Policy does not exclude coverage for arson fire in clear and conspicuous

language‖); Bellington Realty v. Philadelphia Ins. Co., No. 10 C 7224, 2013 WL

2403620, at *4 (N.D. Ill. May 31, 2013) (finding the policy ambiguous as to which peril

covers arson – fire or vandalism – and concluding that arson should fall under the

umbrella of fire as opposed to vandalism in order to provide coverage); United Capital

Corp. v. Travelers Indem. Co. of Illinois, 237 F.Supp.2d 270, 274 (E.D. N.Y. 2002)

(―under the specific wording and format of the Policy, the Court finds that the Policy is at

least ambiguous as to whether ‗Vandalism‘ in the Vacancy Exclusion includes arson‖);

Leander Land & Livestock, Inc. v. Am. Economy Ins. Co., No. 6:11-cv-06426-AA, 2013

WL 1786348, at *9 (D. Or. Apr. 21, 2013) (finding the terms ambiguous and ultimately

concluding that the term vandalism, as it was used in the policy, did not equate to an

intentionally ignited fire); Nationwide Mut. Fire Ins. Co. v. Nationwide Furniture, Inc.,

932 F. Supp. 655, 657 (E.D. Pa. 1996) (―Because fire and vandalism are listed in the

policy as separate causes of loss, we conclude that at best the word vandalism is

ambiguous. It must be construed against the insurer so as not to encompass damage

7

involving a fire.‖); Fort Lane Village, L.L.C. v. Travelers Indem. Co. of Am., 805

F.Supp.2d 1236, 1240-1241 (D. Utah 2011) (finding the term vandalism ambiguous as to

whether it would encompass arson where the policy separately listed fire and vandalism

as specific covered losses); Cipriano v. Patrons Mut. Ins. Co. of Connecticut, No.

4100708, 2005 WL 3665306, at *6 (Conn. Super. Ct. 2005) (―Construing the insurance

policy as a whole, as the court must, it is apparent that ambiguity arises as to whether the

term ‗vandalism‘ includes the act of intentionally setting a fire for incendiary purposes.‖);

Mutual Fire Ins. Co. of Calvert County v. Ackerman, 872 A.2d 110, 117 (Md. Ct. Spec.

App. 2005) (―a reasonably prudent layperson could consider arson to be separate from,

and not included in, the term vandalism‖) (quotation omitted); MDW Enterps., Inc. v.

CNA Ins. Co., 772 N.Y.S.2d 79, 82 (N.Y. App. Div. 2004) (―Reading the subject policy

as a whole, we conclude that the term ‗vandalism‘ in this policy is ambiguous, and thus,

must be construed in favor of the insured.‖). See also Brinker v. Guiffrida, 629 F.Supp.

130, 136 (E.D. Pa. 1985) (concluding that a federal crime insurance policy expressly

providing coverage for vandalism and malicious mischief would also provide coverage

for arson, noting that an ambiguous policy should be construed in favor of coverage).

Still other courts have found that arson does fall within the plain and ordinary

meaning of an exclusion for vandalism and/or malicious mischief. See, e.g., Am. Mut.

Fire Ins. Co. v. Durrence, 872 F.2d 378, 379 (11th Cir. (Ga.) 1989) (―a common sense

interpretation of the insurance contract‘s ‗Vandalism or Malicious Mischief‘ provision . .

. suggests that it would apply to a fire set in a vacant house by an unknown arsonist or

vandal‖); Estes v. St. Paul Fire and Marine Ins. Co., 45 F.Supp.2d 1227, 1229 (D. Kan.

1999) (―Arson of a private dwelling clearly is within the plain and ordinary meaning of

vandalism.‖); Potomac Ins. Co. of Illinois v. NCUA a/k/a Nat. Credit Union Ass’n, No.

96 C 1044, 1996 WL 396100, at *4 (N.D. Ill. July 12, 1996) (considering dictionary

definitions to conclude that ―arson does indeed fall within the definition of vandalism‖);

Botee v. S. Fidelity Ins. Co., No. 5D13-3235, 2015 WL 477836, at *4 (Fla. Dist. Ct. App.

Feb. 6, 2015) (―the plain and ordinary meanings of ‗vandalism‘ and ‗malicious mischief‘

include ‗arson‘‖); Battishill v. Farmers Alliance Ins. Co., 127 P.3d 1111, 1114 (N.M.

2006) (relying solely on dictionary definitions to conclude that arson is a form of

―vandalism and malicious mischief‖); Bear River Mut. Ins. Co. v. Williams, 153 P.3d

798, 800 (Utah Ct. App. 2006) (―arson is a type of vandalism or malicious mischief, and

[] the policy unambiguously excludes coverage for arson losses‖); see also Costabile v.

Metro. Prop. and Cas. Ins. Co., 193 F.Supp.2d 465, 476-78 (D. Conn. 2002) (concluding

that the vandalism and malicious mischief exclusion under Coverage A is clear and

unambiguous and does encompass arson, but separately analyzing Coverage C and

finding it ambiguous as to whether vandalism would include incendiary fire for purposes

of that section of the policy). A trial court in Knox County has also concluded that the

ordinary meaning of vandalism would include arson.

8

In Tennessee, ―[i]t is well settled that exceptions, exclusions and limitations in

insurance policies must be construed against the insurance company and in favor of the

insured.‖ Allstate Ins. Co. v. Watts, 811 S.W.2d 883, 886 (Tenn. 1991) (citing Travelers

Ins. Co. v. Aetna Cas. & Sur. Co., 491 S.W.2d 363, 367 (Tenn. 1973)). We interpret an

insurance contract ―according to its plain terms as written, and the language used is taken

in its ‗plain, ordinary, and popular sense.‘‖ Maggart v. Almany Realtors, Inc., 259

S.W.3d 700, 704 (Tenn. 2008) (quoting Bob Pearsall Motors, Inc. v. Regal Chrysler-

Plymouth, 521 S.W.2d 578, 580 (Tenn. 1975); Planters Gin Co. v. Fed. Compress &

Warehouse Co., 78 S.W.3d 885, 890 (Tenn. 2002)). The ―ordinary meaning‖ envisioned

is ―‗the meaning which the average policy holder and insurer would attach to the policy

language.‘‖ Artist Bldg. Partners v. Auto-Owners Mut. Ins. Co., 435 S.W.3d 202, 216

(Tenn. Ct. App. 2013) (quoting Swindler v. St. Paul Fire & Marine Ins. Co., 223 Tenn.

304, 307, 444 S.W.2d 147, 148 (Tenn. 1969)); see also Harrell v. Minnesota Mut. Life

Ins. Co., 937 S.W.2d 809, 814 (Tenn. 1996) (noting that ―an insured should not have to

consult a long line of case law or law review articles and treatises to determine the

coverage he or she is purchasing under an insurance policy,‖ and considering what ―the

average insured would understand‖). The language of an insurance contract ―must be

read as a layman‖ would read it. Paul v. Ins. Co. of N. Am., 675 S.W.2d 481, 484 (Tenn.

Ct. App. 1984) (citing Harkavy v. Phoenix Ins. Co., 220 Tenn. 327, 337, 417 S.W.2d 542,

546 (1967)).

Applying these principles to the policy as a whole, it becomes clear that the

vacancy exclusion for ―vandalism and malicious mischief, theft or attempted theft‖ does

not encompass arson. In the section of the policy entitled ―Perils Insured Against,‖ the

policy clearly makes a distinction between ―fire‖ and ―vandalism or malicious mischief,‖

listing these as separate perils. The average policy holder or layman would conclude that

arson falls within the class of ―fire.‖ Thus, when the policy lists an exclusion for

―vandalism and malicious mischief, theft or attempted theft‖ at a vacant dwelling, the

average policy holder or layman would conclude that the policy provides coverage for

fire and arson at a vacant dwelling. To equate arson with vandalism or malicious

mischief would be contrary to the understanding of the average person purchasing a

policy of insurance when the terms are undefined in the policy and listed as separate

perils.

On appeal, Southern Trust asks us to consider and apply the dictionary definitions

of vandalism and malicious mischief in order to determine whether arson qualifies as

either. Southern Trust cites Black’s Law Dictionary, which defines vandalism as:

9

1. Willful or ignorant destruction of public or private property, esp. of

artistic, architectural, or literary treasures. 2. The actions or attitudes of one

who maliciously or ignorantly destroys or disfigures public or private

property; active hostility to anything that is venerable or beautiful.

Black’s Law Dictionary (10th ed. 2014). It defines malicious mischief as: ―The

common-law misdemeanor of intentionally destroying or damaging another‘s property.‖

Id. The terms vandalism and malicious mischief are broadly defined in Merriam-

Webster‘s Collegiate Dictionary. The full definition of ―vandalism‖ is the ―willful or

malicious destruction or defacement of public or private property.‖ 1 June 2015.

<http://www.merriam-webster.com/dictionary/vandalism>, (based on the print version of

Merriam-Webster’s Collegiate Dictionary, Eleventh Edition). The definition of

―malicious mischief‖ is ―willful, wanton, or reckless damage to or destruction of

another‘s property.‖ 1 June 2015. <http://www.merriam-webster.com/dictionary/

maliciousmischief>. Southern Trust claims that these dictionary definitions broadly

define vandalism and malicious mischief as encompassing any type of intentional

destruction of property, and, therefore, arson would meet these definitions.2

If we were reading these dictionary definitions of the terms vandalism, malicious

mischief, and arson independently and in isolation, we could read them to mean that

arson is one type of vandalism and malicious mischief. However, ―we cannot read

portions of a contract in isolation -- they must be read together to give meaning to the

document as a whole.‖ Maggart, 259 S.W.3d at 705 (citing Davidson v. Davidson, 916

S.W.2d 918, 922-23 (Tenn. Ct. App. 1995). ―For readers attempting to discover the

meaning of words syntactically strung together into phrases and sentences, ‗[e]verything

hangs on context and purpose.‘‖ Burress v. Sanders, 31 S.W.3d 259, 265 (Tenn. Ct. App.

2000) (quoting Bryan A. Garner, The Elements of Legal Style 7 (1991)). Our task is not

simply to compare definitions from external sources and determine the meaning of these

terms in the abstract.3 ―The entire written agreement must be considered.‖ Maggart, 259

2

Black’s Law Dictionary (10th ed. 2014) defines ―arson‖ as, ―[a]t common law, the malicious burning of

someone else‘s dwelling house or outhouse[.]‖ Merriam-Webster’s defines ―arson‖ as ―the willful or

malicious burning of property (as a building) especially with criminal or fraudulent intent.‖ 1 June 2015.

<http://www.merriam-webster.com/dictionary/arson>.

3

Other courts have looked beyond dictionary definitions as well. In MDW Enterprises, Inc., 772

N.Y.S.2d at 83, the New York appellate court concluded that the lower court erred in relying solely on

dictionary definitions of vandalism and arson, stating that such an analysis ―was overly narrow and

ignored the policy as whole‖ while also overlooking the meaning of the terms to an ordinary business

person. The Maryland Court of Appeals likewise concluded that ―the search for meaning‖ of these terms

should not end with the very broad definition of vandalism afforded by dictionaries. Ackerman, 872 A.2d

at 116 (quotation omitted). The Washington Court of Appeals observed that dictionary definitions were

simply ―not helpful here.‖ American States Ins. Co., 123 Wash. App. at 211. In R & J Development Co.,

10

S.W.3d at 704 (citing D. & E. Const. Co. v. Robert J. Denley Co., 38 S.W.3d 513, 518-19

(Tenn. 2001)).

A review of the structure and language of the insurance policy in this case leads us

to conclude that the parties did not have such a broad understanding with respect to the

meaning of vandalism and malicious mischief. First of all, we recognize that in common

speech, vandalism and arson are separate and distinct activities. Ackerman, 872 A.2d

116-17 (Md. Ct. App. 2005) (―Quite apart from the dictionary, there exists a sense that

the common and ordinary meaning of vandalism is something different than that of

arson.‖) (quotation omitted); Johnson, 2008 WL 4724322, at *3 (Mich. Ct. App. Oct. 28,

2008) (―in common speech vandalism and arson are separate, distinct activities‖)

(quotation omitted); MDW Enterprises, Inc., 772 N.Y.S.2d at 83 (N.Y. App. Div. 2004)

(―ordinary business people generally view ‗vandalism‘ and ‗arson‘ as distinct perils‖);

see also Cipriano, 2005 WL 3665306, at *6 (Conn. Super. Ct. Dec. 23, 2005) (same).

Policy language should be given ―the natural and ordinary meaning commonly ascribed

to it in everyday use unless by some known usage the terms employed have acquired a

meaning different from their popular sense.‖ Monroe County Motor Co. v. Tennessee

Odin Ins. Co., 231 S.W.2d 386, 395 (Tenn. Ct. App. 1950). As the trial court noted,

Tennessee‘s criminal statutes also distinguish between vandalism and arson, defining

each as a separate and distinct offense. See Tenn. Code Ann. § 39-14-408 (defining the

offense of vandalism); § 39-14-301 (defining the offense of arson).4

Perhaps more importantly, however, the insurance policy itself consistently makes

a distinction between fire, on the one hand, and vandalism and malicious mischief, on the

other. See Leander Land & Livestock, Inc., 2013 WL 1786348, at *9 (D. Or. 2013)

(―regardless of the breadth of definitions found elsewhere, the structure and language of

the Policy indicates that the terms ‗fire,‘ ‗vandalism,‘ and ‗arson‘ have independent

meanings‖). As explained above, the policy lists fire and vandalism and/or malicious

mischief as separate ―Perils Insured Against.‖ The vacancy exclusion only excludes

LLC, 2012 WL 1598088, at *4, the United States District Court for the Eastern District of Kentucky

provided the following comparison when explaining its decision to look beyond the definitions found in

dictionaries:

If the language and structure of a contract indicates that the term ―color‖ does not include

black (technically the absence of all color), then the Court could not override the parties‘

agreement with an external definition that includes black as a color.

4

Southern Trust argues in its reply brief that the trial court erred in considering the definitions found in

Tennessee‘s criminal statutes. However, Southern Trust relied on the criminal statutes in its

memorandum in support of its motion for summary judgment, and it continues to cite the criminal statutes

in its brief on appeal. The trial court did not err in considering these statutes.

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―vandalism or malicious mischief, theft or attempted theft.‖ Therefore, the average

policy holder would conclude that fire (and arson) is covered, while vandalism of a

vacant dwelling is not.

Another aspect of this policy also leads us to conclude that the parties were using a

narrower definition of vandalism and malicious mischief than the dictionary definitions

quoted above. The vacancy exclusion provided that Southern Trust did not cover loss

caused by ―vandalism and malicious mischief, theft or attempted theft.‖ If vandalism and

malicious mischief were intended to be read broadly to encompass all property damage

resulting from a deliberate act, the additional exclusion for damage caused by ―theft or

attempted theft‖ would be superfluous. ―If ‗vandalism‘ means ‗any intentional property

damage‘ and the medium of destruction is irrelevant, then there is no need to include

damage to ‗theft‘ or ‗attempted theft‘ in the vacancy exclusion.‖ R & J Dev. Co., 2012

WL 1598088, at *4. The R & J court provided the following illustration:

For instance, suppose that an individual breaks into a vacant

property and steals a refrigerator. The process of dragging the refrigerator

out to his waiting getaway truck rips the kitchen linoleum apart. Applying

[the insurer‘s] approach here, the medium—theft—is irrelevant because the

end result is the same—the intentional destruction of property, or

―vandalism.‖ Yet Kentucky courts have not adopted this approach in the

context of interpreting ―theft.‖ See Reynolds v. Travelers Indem. Co. of

Am., 233 S.W.3d 197, 201 (Ky. App. 2007) (―While the home had been

vacant for more than 30 consecutive days, the loss was clearly not caused

by vandalism or malicious mischief as those terms are commonly

understood. Instead, the [insureds‘] loss in this case was plainly caused by

the theft of the refrigerator.‖); see also SR Int’l Bus. Ins. Co., [v. World

Trade Ctr. Props., LLC, 467 F.3d 107, 139 (2nd Cir. (N.Y.) 2006)]

(refusing to interpret ―vandalism and malicious mischief‖ to include

terrorism even though terrorism involves intentional property damage).

Id. We find this reasoning persuasive and equally applicable under Tennessee law. In

Smith v. Shelby Ins. Co. of Shelby Ins. Group, 936 S.W.2d 261, 265 (Tenn. Ct. App.

1996), this Court was asked to decide whether an insured‘s loss caused by thieves

removing copper wire resulted from vandalism, a covered event, or damage caused by

theft, which was an excluded loss. Considering the fact that the two terms were listed

separately in the policy, the court concluded that theft was not included ―within the

general concept of vandalism.‖ Id. The court further noted that the concept of vandalism

is ―entirely different‖ than the concept of theft, as those terms are ordinarily understood.

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Id. The policy issued to Phillips excludes ―vandalism and malicious mischief, theft or

attempted theft‖ at a vacant dwelling, suggesting that vandalism and malicious mischief

should not be read as broadly as Southern Trust now contends. Our ―interpretation

should be one that gives reasonable meaning to all of the provisions of the agreement,

without rendering portions of it neutralized or without effect.‖ Maggart, 259 S.W.3d at

704.

We also reject Southern Trust‘s argument that we should limit our consideration to

the section of the policy addressing dwelling coverage under Coverage A and ignore the

sections, on the very same page, addressing other types of coverage. We recognize that

other courts have found this type of isolated interpretation appropriate. See, e.g., Botee,

2015 WL 477836, at *4 (D. Fla. Ct. App. 2015) (―As the loss in the instant case was only

to the structure and not to any personal property, it is only necessary to read Coverage A

and the general conditions and definitions applicable to the entire Policy[.]‖); Battishill,

139 N.M. at 28 (finding it unnecessary to read the coverages together because the court

concluded that the exclusion read alone was clear and unambiguous); see also Costabile,

193 F.Supp.2d at 467-478 (D. Conn. 2002) (reaching separate conclusions for each

section, finding Coverages A and B unambiguous but Coverage C ambiguous).

However, in Tennessee, courts must consider ―[t]he entire written agreement.‖ Maggart,

259 S.W.3d at 704.

―In construing a contract, the entire contract should be considered in

determining the meaning of any or all of its parts. It is the universal rule

that a contract must be viewed from beginning to end and all its terms must

pass in review, for one clause may modify, limit or illuminate another.‖

Id. (quoting Cocke County Bd. of Highway Comm’rs v. Newport Utils. Bd., 690 S.W.2d

231, 237 (Tenn. 1985)). ―When interpreting a contract of insurance, the terms of the

policy are read in the context of the whole policy.‖ Charles Hampton’s A-1 Signs, Inc. v.

Am. States Ins. Co., 225 S.W.3d 482, 487 (Tenn. Ct. App. 2006)(citations omitted). We

decline to read the vacancy exclusion in Coverage A in isolation. See, e.g., Holt v. Pyles,

Nos. M2005-02092-COA-R3-CV, M2005-02094-COA-R3-CV, 2007 WL 1217264, at *5

(Tenn. Ct. App. Apr. 24, 2007) (―the insured cannot simply focus on the

declarations/summary portion of a contract in isolation; the policy must be read as a

whole‖).

In summary, we hold that the policy issued to Phillips unambiguously provides

coverage for fire and/or arson but does not cover vandalism or malicious mischief at a

13

vacant dwelling. If Southern Trust desired the result to be otherwise, as the drafter of the

policy, it could have clearly distinguished between damage from accidental fires and

damage from intentionally set fires. Alternatively, it could have included a specific

definition of vandalism and malicious mischief or expressly added fire or arson to the

vacancy exclusion alongside vandalism, malicious mischief, theft, or attempted theft.

IV. CONCLUSION

For the aforementioned reasons, the decision of the circuit court is hereby affirmed

and remanded for further proceedings. Costs of this appeal are taxed to the appellant,

Southern Trust Insurance Company, and its surety, for which execution may issue if

necessary.

_________________________________

BRANDON O. GIBSON, JUDGE

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