Recently an alert FC&S reader inquired about a 2010 court case involving copper pipes being removed from a building by a third party.
In Nautilus Ins. Co. v. Steinberg, 316 S.W.3d 752, a Texas appeals court ruled that once pipes were removed from the building's air conditioning units, they became personal property that could be stolen.
The insureds in the case owned a building covered by a commercial property policy. Someone climbed on the roof of the building, opened the air conditioning units, and removed copper pipes and wiring. Police arrived and arrested him before he could make off with any of the materials he ripped from the units.
The insureds submitted a claim for damage under their vandalism coverage, but Nautilus denied the claim because the policy did not cover theft.
The court said that the act of removing copper satisfied the requirement that a third party must exercise control over personal property for purposes of theft. Once the property was separated from the building, it was then personal property that could be stolen.
We reported on this case in October 2010, focusing on the intent angle and stating:
"This is a curious decision in that the appeals court seemed to be heading toward an outright ruling that a theft had occurred according to its interpretation of Texas law. But then, the key point became the issue of intent. The criminal in this case had control over personal property, and that brought things close to a 'theft' according to state law, but the intent of the criminal was not proven by the insurer, and this had to happen in order for a theft to occur and the exclusion to apply.
"This case is presented to not only describe the elements of a theft (albeit under Texas law), but also to make the point that, if an insurance policy does not define its important terms, a court will do it. This is especially true when exclusions are involved."
A reader felt that the court was setting bad precedent in ruling that what was once part of the building and covered accordingly—copper piping—could become business personal property simply by ripping it out. The reader said, "It is not likely the owner ever intended them [the pipes] to be contents."
Ultimately, she wanted to know if insureds would now need business personal property coverage in the event parts of their buildings were ripped out and then considered personal property and not building property. We say that may be a safe bet, at least in the jurisdiction covered by this decision.
Do you agree with the court's opinion? How would you advise insureds in this jurisdiction?
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