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Below v. State Auto Property and Casualty Insurance Co.

Supreme Court of West Virginia

April 26, 2017

MOHAMMED ASHRAF, M.D., Plaintiff Below, Petitioner
v.
STATE AUTO PROPERTY AND CASUALTY INSURANCE COMPANY, and WELLS FARGO INSURANCE SERVICESOF WEST VIRGINIA, INC., Defendants Below, Respondents

          Submitted: April 18, 2017

         Certified Questions from the Circuit Court of Marion County Civil Action No. 14-C-253 The Honorable Patrick N. Wilson, Judge

          Chad C. Groome, Esq. David A. Jividen, Esq. Jividen Law Offices, PLLC Wheeling, West Virginia John R. Angotti, Esq. Angotti & Straface, LC Morgantown, West Virginia Counsel for the Petitioner

          Trevor K. Taylor, Esq. Taylor Law Office Morgantown, West Virginia Counsel for Respondent State Auto Property and Casualty Insurance Company

          David P. Cook, Jr., Esq. MacCorkle Lavender, PLLC Charleston, West Virginia Counsel for Respondent Wells Fargo Insurance Services of West Virginia, Inc.

         SYLLABUS BY THE COURT

         1. A vacancy provision in a fire insurance policy which provides that the insurer is allowed to reduce by 15% the stated amount of coverage payable for the total loss of a building destroyed by fire is enforceable, where the building has been vacant for more than 60 consecutive days prior to the loss. The provision does not conflict with this State's valued policy statute, W.Va. Code, 33-17-9 [2005], or this State's Standard Fire Policy adopted pursuant to W.Va. Code, 33-17-2 [1957].

         2. A Pollutant Cleanup and Removal provision in a fire insurance policy, which covers the expense of extracting pollutants from "land or water" at the insured premises, does not apply to asbestos testing and removal, where the asbestos removed is located within the fire-damaged structure.

          Ketchum Justice

         The Circuit Court of Marion County has certified two questions regarding a commercial fire insurance policy issued to the petitioner, Mohammed Ashraf, M.D., ("Dr. Ashraf"), by the respondent, State Auto Property and Casualty Insurance Company ("State Auto"). Respondent Wells Fargo Insurance Services of West Virginia, Inc. ("Wells Fargo"), the named insurance agent on the policy, handled the sale of the policy issued to Dr. Ashraf.

         The insured building, owned by Dr. Ashraf and his wife, was rendered a total loss by fire. Dr. Ashraf raised two coverage issues in a declaratory judgment action which resulted in the certified questions now before us. First, Dr. Ashraf challenged the reduction of the covered building loss by 15% pursuant to the vacancy provision included in the State Auto policy. Second, although Dr. Ashraf was afforded coverage for asbestos removed under the policy's debris removal coverage, he challenged State Auto's denial of coverage for asbestos removal under the policy's separate coverage for pollutant removal.

         The certified questions and the circuit court's answers are as follows:

Where there is a covered total loss by fire under a fire insurance policy, may an insurer reduce the policy's limit of coverage for the insured premises by fifteen percent (15%) pursuant to a "vacancy" provision in the policy? The circuit court's answer: Yes.
Does a fire insurance policy that includes a "pollutant clean up and removal" provision that provides that the insurer will pay the insured's expense to extract pollutants from land or water, provide coverage in excess of the "debris removal" coverage afforded by the policy for the removal of asbestos contained in a fire-damaged or destroyed structure? The circuit court's answer: No.[1]

         For the reasons stated, this Court concludes that the circuit court answered the certified questions correctly.

         I. Factual Background

         The facts pertaining to the certified questions are not in dispute and are largely set forth in the circuit court's certification order.

         In 1997, Dr. Ashraf and his wife purchased a building on Locust Avenue in the City of Fairmont, Marion County. The purchase took place at a sheriff's tax sale, and the amount paid was $91, 000.00. After renovations were completed, Dr. Ashraf and his wife opened the building as an assisted living facility. The facility closed in 2006, and the building was vacant thereafter. Almost six years later, on October 29, 2012, a fire rendered the building a total loss.

         The building was insured under a commercial fire insurance policy issued by State Auto. The named insured on the policy was Dr. Ashraf.

         A. The State Auto Policy

         The amount of insurance coverage on the building stated in the State Auto policy was $410, 555.00. The policy provided adjustments for inflation, raising the stated total policy coverage limit to $420, 228.35 on the building. In addition, the business personal property was covered under the State Auto policy in the amount of $21, 632.00, which, according to Dr. Ashraf, provided, with adjustments, personal property coverage of $22, 141.69. In addition to the building and personal property coverage, the State Auto policy provided separate coverages for debris removal and pollutant removal.

         B. Insurance Proceeds Paid by State Auto

         Dr. Ashraf reported the fire loss to State Auto. In response, State Auto told Dr. Ashraf that, if the building had been vacant for more than sixty consecutive days, the amount of coverage payable for the loss would be reduced by 15% pursuant to the policy's vacancy provision.

         In the meantime, the City of Fairmont issued notices to Dr. Ashraf asserting the need to demolish the fire-destroyed building and that it would file a lien for debris removal if the City demolished and removed the building. See W.Va. Code, 38-10E-1 [2010] (providing a lien in favor of a municipality against fire insurance proceeds for debris removal). Subsequently, Dr. Ashraf demolished and removed the fire-destroyed building, and no lien was filed.

         In September 2013, State Auto sent Dr. Ashraf a check in the amount of $25, 000.00. In an accompanying letter, State Auto informed Dr. Ashraf that the check was an advance, pending completion of the investigation of the claim. Thereafter, by letter dated January 28, 2014, State Auto sent Dr. Ashraf two checks: $332, 194.10, representing coverage for the building loss, and $22, 141.69, representing coverage for the business personal property loss.

         The January 28, 2014, letter stated that the initial adjusted policy limit for the building of $420, 228.35 was reduced by $63, 034.25, a 15% reduction under the policy's vacancy provision. That reduction, with the previous $25, 000.00 advance, resulted in $332, 194.10 in coverage for the building. State Auto explained:

In Dr. Ashraf's case, the building satisfies the definition to be considered vacant. In fact, this building appears to have been vacant for almost six years before the loss occurred. The loss at issue was a fire and that qualifies as a covered cause of loss. Because the building was vacant at the time of the loss and because this was a covered cause of loss, then State Auto is permitted, by the terms of the policy, to reduce the amount they would "otherwise pay" by 15%.

         Finally, on March 3, 2014, State Auto, having verified the absence of a municipal lien, sent Dr. Ashraf a $10, 000.00 check for debris removal. No coverage was extended for pollutant removal. Dr. Ashraf asserted that he incurred approximately $30, 000.00 in demolition and debris removal costs as a result of the fire. He further asserted that he incurred an additional $4, 925.00 in pollutant removal costs for the removal and testing of asbestos.

         II. Procedural Background

         On August 28, 2014, Dr. Ashraf filed a declaratory judgment action in the Circuit Court of Marion County. The complaint consisted of five counts, the first two of which resulted in the certified questions. In count I, designated "Stated Value of Policy, " Dr. Ashraf alleged entitlement to the full policy limit for building coverage in the amount of $420, 228.35. Dr. Ashraf alleged that State Auto improperly reduced that amount by 15% under the policy's vacancy provision. In count II, designated "Coverage for Pollutant Removal, " Dr. Ashraf alleged entitlement to the costs he incurred for the removal and testing of asbestos under the policy's Pollutant Cleanup and Removal coverage. Dr. Ashraf alleged that asbestos is a pollutant and, therefore, a subject of coverage under the State Auto policy in addition to coverage for debris removal.[2]

         In January 2015, Dr. Ashraf and State Auto filed motions for summary judgment. Regarding count I, Dr. Ashraf asserted that the policy limit for the building coverage should not have been reduced by 15% because the State Auto policy was a "valued policy" under W.Va. Code, 33-17-9 [2005], which requires that the face value of the policy be paid in the event of a total loss by fire. W.Va. Code, 33-17-9 [2005], provides in relevant part: "All insurers providing fire insurance on real property in West Virginia shall be liable, in case of total loss by ...


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