Harry Graff’s had a residence that he owned and held as rental property. The residence was insured by Allstate Insurance Company. The two parties disagreed over whether a loss involving illegal activity was covered. In 1999, Graff rented the home to a person who used it as a Meth Lab. The police discovered the activity and, armed with a search warrant, forcefully entered the dwelling. Though the criminal had moved out of the residence, there was ample evidence of the criminal use.

Because of dangerous residue from the chemical drug manufacturing, civil authorities told Graff that the home was uninhabitable and would have to be decontaminated. Graff hired persons to repair the physical damage caused by the police entry and had experts deal with the chemical residue. After the owner’s efforts, the property inspected and the city told Graff that the home was habitable.

Graff, who had paid for all repairs and clean-up expenses, turned a claim in to Allstate, requesting reimbursement. The insurer denied the claim, stating that contamination losses were excluded from coverage. Graff sued the carrier for breach of contract and a trial court ruled in Graff’s favor. Allstate appealed the ruling.

The appeals court, after deciding that the situation was eligible for their review, examined the issue anew. The court weighed the parties’ arguments that the loss was contamination and excluded (Allstate) v. the loss was the result of vandalism and covered (Graff [and lower court]).

The court spent much of its review on a preceding case that also involved property damage caused by a tenant’s illegal activity. While the insurer argued that the damage was caused by a contaminating substance, the court held a different view. In the court’s view, the loss originated from the actions of Graff’s tenant. The activity indicated a complete disregard of the property owner’s rights; therefore qualifying as vandalism. The lower court decision in favor of the insured was affirmed.

Harry Graff, Respondent, v. Allstate Insurance Company, Appellant – Washington Court of Appeals, Division Two. No. 28176-7II. Filed October 4, 2002 2002 Wash. App. Lexis 2430. Affirmed. CCH 6876