Vehicle Leaks Oil On Insureds Driveway – Claims Magazine
ISSUE
The insured has a concrete driveway, which abuts the concrete slab of his attached garage. The driveway was marred by an oil stain after the visit of a solicitor with a leaky car. The insured files a claim under his HO 00 03 04 91. Is there coverage for this loss?
ANALYSIS
Some claimspeople question whether pavement is covered property. The policy covers "structures attached to the dwelling" under Coverage A and "other structures" under Coverage B. A "structure" is "something (as a building) that is constructed." Webster's New Collegiate Dictionary 1146 (1980). Whenever an insured assembles materials at the residence premises and fashions something out of those materials, he creates a structure.
Further, the policy excludes loss caused by "freezing, thawing, pressure or weight of water or ice . . . to a: . . . pavement, patio." It also excludes loss caused by "settling, shrinking, bulging or expansion, including resultant cracking, of pavements, patios." If pavement and patios were not otherwise covered property, there would be no need to specifically exclude these items in combination with certain perils.
Given that the driveway is covered property, was it damaged by a covered peril? The open peril policy excludes loss caused by "[d]ischarge . . . of pollutants unless the discharge . . . is itself caused by a Peril Insured Against under Coverage C of this policy." The only peril that might apply is "Vehicles." In State Farm Fire & Cas. Ins. Co. v. Aulick, 781 S.W.2d 531 (Ky. App. 1989), a truck delivered heating oil to the insured's home.
An unknown amount of the oil escaped from the hose nozzle, spilled on the ground, and seeped into the basement of the home. The issue was whether the vehicles peril of the policy covered the resultant loss to personal property. The insurer argued that, at the time of loss, the vehicle was not being used as a vehicle. The court observed that vehicles are frequently used to load and unload and deliver all sorts of materials. At the time of loss, stated the court, the truck was being used exactly as it was designed and constructed to be used.
Applying the logic of Aulick, one might reason that the vehicle in our hypothetical was being used as a vehicle is normally used: it was parked in the driveway when the gas started leaking. Although Aulick extended the vehicles peril further than we had previously imagined possible, we were inclined to accept its reasoning in light of the fact that "[v]ehicles" is undefined in the policy and coverage language must be broadly construed.
Would the exclusions for "[w]ear and tear, marring, deterioration" preclude coverage for this loss? Historically, these exclusions have been regarded by the industry as embodying the concept that open perils insurance covers risks, but not costs. But where does one draw the line between a risk and a cost? Had the insured's own vehicle been leaking for some time, that would be a cost to the insured, rather than a risk. Where a stranger's vehicle unexpectedly leaves a stain, we tend to believe that a fortuitous loss occurred. Of course, it might also be argued that occasional stains are to be expected on a concrete driveway sooner or later unless the insured personally screens the entrants to the driveway.
Let's assume for the sake of argument that the oil stain is to be considered a cost and thus within the scope of the marring exclusion. The majority of states will not give effect to the exclusion anyway because the proximate cause of the loss was an unexcluded release of oil by a vehicle.
Given that the driveway is a covered structure and assuming that the loss was caused by a covered peril, should coverage be provided under Coverage A or B? Coverage A applies to "the dwelling . . . including structures attached to the dwelling." Coverage B applies to "other structures . . . set apart from the dwelling by clear space." Since the concrete driveway abuts the concrete slab of the attached garage, it is reasonable to cover the driveway under Coverage A. However, some claimspeople would consider the seam between the garage floor and the driveway to be clear space and cover it under Coverage B.
Should the driveway be covered at actual cash value or replacement cost? The loss settlement paragraph states that "structures that are not buildings" are valued at actual cash value and that "buildings under Coverage A or B" are valued at replacement cost. The driveway should be valued at actual cash value because it is a non-building structure. Some claimspeople argue that the driveway should be valued at replacement cost if it is being covered under Coverage A. They reason that if the driveway is considered "attached" to the dwelling, then it is part of the dwelling and, accordingly, it is a building structure entitled to replacement cost coverage.
There is logic to this reasoning but it has flaws. Is there any underwriting reason to value a driveway in light of its location on a property? Should a fence attached by one link to a hook on the side of a dwelling be valued on a different basis than is an unattached fence? Coverage A applies to "the dwelling . . . including structures attached to the dwelling." If all attached structures were part of the dwelling itself, the policy could simply state that Coverage A applies to "the dwelling'; the phrase "including structures attached to the dwelling" would be redundant.
