Intentionally Harvesting Timber Without Right Not a Peril Insured Against

Relying on Instruction to Cut Timber from Putative Owner is Expensive

Jul 02, 2021

UNDISPUTED FACTS

Overview of the Parties and Insurance Policy

Bee Forest Products, Inc., is a Wisconsin corporation, with its principal place of business in Nelson, Wisconsin. Defendant Western National Mutual Insurance Company is a Minnesota corporation, with its principal place of business in Edina, Minnesota. Western National insured Bee Forest under the terms of a Commercial General Liability policy.

The Policy contains the following exclusions applicable to the timber cutting claim at issue here:

Damage to Property
“Property damage” to:
. . .
(5) That particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damages” arises out of those operations; or
(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.

The Policy also contains a timber and logging expansion endorsement. The endorsement adds coverage under Coverage A for “cross over cutting,” which is defined as “property damage for which you are legally obligated to pay due to a bona fide mistake in cutting of timber by you or for you that it outside of your designated or authorized boundaries.”

Underlying Event

On February 19, 2019, Bee Forest entered into a Timber Sale Contract with LeRoy Bechly, via his wife Betty Bechly, who held a power of attorney for her husband. The Contract provided for Bee Forest to cut timber on property in Lincoln Township, Buffalo County, Wisconsin. The Contract identified LeRoy Bechly as the owner of the property and called for Bee Forest to “cut, remove, and pay for . . . merchantable timber” within certain boundaries. Bee Forest checked on-line property records, which also listed Leroy Bechly as the fee simple owner of the property. Bee Forest also attempted to file a cutting notice, but the local courthouse was closed.

In March 2019, Bee Forest began cutting timber on the property, all of which occurred within the boundaries set forth in the contract. Shortly after cutting began, however, Bee Forest received notice from Bechly’s daughters, via a letter from their attorney, that they were the true owners of the property and their father only held a life estate. In the letter, Bechly’s daughters demanded that Bee Forest immediately stop all cutting on the property, which it did.

Bee Forest reported the dispute to its insurer Western National, that denied coverage under the Policy. After ultimately settling the timber cutting dispute, Bee Forest then sued seeking $86,079.45 in damages from Western National, together with attorneys’ fees, costs and disbursements.

OPINION

Court are required to interpret an insurance policy’s terms as a reasonable person in the position of the insured would understand the language. Moreover, if the language of a policy is ambiguous, susceptible of more than one reasonable interpretation, the court will construe it narrowly, against the insurer, and in favor of coverage. At the same time, the court is not to interpret insurance policies to provide coverage for risks the insurer did not contemplate or underwrite and for which it has not received a premium.

Western National sought summary judgment in its favor as to Bee Forest’s coverage claim on three independent grounds:

cutting of timber was not an “occurrence” as that term is defined by the Policy;
any harm or damage was expected or intended or was to property on which Bee Forest was working and, therefore, excluded from coverage; and
the lumbering and logging endorsement does not apply because there was no cross over cutting, as that term is defined in the endorsement.

Occurrence Requirement

The Policy provides coverage for “property damage” only if such damage was caused by an “occurrence,” and further defines “occurrence” to mean an “accident.” Volitional acts that produce a desired event are not “accidents,” even if they produce unexpected and unforeseen results and even if they are precipitated by one or more negligent acts.

Here, there is no dispute that Bee Forest intentionally acted by cutting timber on the property at issue. Because the act that caused the harm was not an accident, there was no occurrence to trigger coverage. Based on the language in the Policy, the definition of “occurrence” under Wisconsin law, and case law from other jurisdictions involving similar claims, therefore, the court concluded that the Policy does not cover plaintiff’s intentional harvesting of timber, even if done with a good faith belief that its act was authorized.

Timber and Logging Expansion Endorsement

The endorsement extends coverage to “cross over cutting,” which is defined as damage to property caused by “cutting of timber by you or for you that is outside of your designated or authorized boundaries.” (emphasis by the court)

The court agreed with defendant that the endorsement covers harvesting of timber outside of a property boundary, something the parties agree did not occur, so the Endorsement was of no assistant to the plaintiff. Since the cutting occurred within the boundaries of the designated property the court agreed with defendant insurer that the Policy provided no coverage of Bee Forest’s claim. As such, the court granted the defendant’s motion for summary judgment.

ZALMA OPINION

The USDC did what every person insured should do before presenting a claim: read the policy. When an intentional act caused damage to property of another – even though it was done with a good faith belief that the Plaintiff had the right to cut the timber – there is no way the action could be considered an accident. A liability policy requires that, for coverage to apply, that the damage was due to an occurrence, an accidental happening, not an intentional act.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 53 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/ Read posts from Barry Zalma at https://parler.com/profile/Zalma/posts; and the last two issues of ZIFL at https://zalma.com/zalmas-insurance-fraud-letter-2/ podcast now available at https://podcasts.apple.com/us/podcast/zalma-on-insurance/id1509583809?uo=4