CONVERSION AND EMBEZZLEMENT EXCLUSION HELD NOT APPLICABLE TO THEFT BY ROOMMATE

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CONVERSION AND EMBEZZLEMENT EXCLUSION HELD NOT APPLICABLE TO THEFT BY ROOMMATE

Two people cosigned a lease on a house and occupied it for a period of time as roommates. One, who apparently provided the furnishings and owned most of the other personal property, carried a renters policy. When the other (hereafter identified as "former roommate") left and did not return, it was discovered that personal property of the remaining occupant, valued in excess of $20,000, had been taken.

The insured made claim under the theft peril of her policy for her loss. The insurer denied coverage by virtue of a qualification pertinent to the theft peril that "....the term 'theft' shall not include....wrongful conversion or embezzlement...." The insured sued the insurer to recover her loss, whereupon the insurer moved for summary judgment on the basis of the quoted exclusionary language.

The insurer argued that the exclusion was clearly applicable in the circumstances and that it was entitled to judgment. The district court cited a former Idaho statute in which embezzlement was defined as "the fraudulent appropriation of property by a person to whom it has been entrusted (sic)." The court also cited precedent where it was held that the conversion to one's own use of property lawfully possessed was "wrongful conversion and embezzlement." The insurer's motion for summary judgment was granted.

On appeal, the insured acknowledged that the former roommate was entitled to use of the personal property in the house, but was adamant that there was no permission to take it outside.

On the issue of "....whether the issue of theft in this case constitutes 'wrongful conversion or embezzlement,"' the appeal court made no distinction between wrongful conversion and theft. It concluded that the taking of the property was theft, not embezzlement. Accordingly, the judgment of the district court was reversed in favor of the insured and against the insurer. (PERRY, Plaintiff/Appellant v. FARM BUREAU MUTUAL INSURANCE COMPANY OF IDAHO, Defendant/Respondent. Idaho Court of Appeal. No. 34. March 26, 1997. CCH 1997 Fire and Casualty Cases, Paragraph 6080.)