More Interesting Exclusions

Mysterious Disappearance

The Mysterious Disappearance Exclusion

The term “mysterious disappearance” first appeared in insurance policies in 1943. Johnson v. General Accident, Fire & Life Assur. Corp., 454 S.W. 2d 837, 838 (Texas California Civil Code. App. 1970). The term has been defined several ways, but all share the sense of an unexplained loss.

It has been held that:

‘mysterious disappearance’ means a disappearance which is ‘unexplainable, unaccountable, or which occurred in an unknown manner.’ Orenstein v. United Services Automobile Association, 32 App. Div. 2d 227, 301 N.Y.S. 2d 208 (1969); Levine v. Accident & Casualty Ins. Co., 203 Misc. 135, 112 N.Y.S. 2d 397 (1952).

In Alabama, after a sail boat disappeared from the seas off Cape Canaveral, Florida, without explanation the court concluded that the mysterious-disappearance exclusion is not ambiguous and the loss of the sail boat was mysterious. Concluding that the policy, when read as a whole, and because there is no genuine issue of material fact concerning the disappearance of the sailboat, the trial court should have entered a summary judgment in St. Paul’s favor. [St. Paul Fire & Marine Ins. Co. v. Britt, 203 So.3d 804 (Ala. 2016)]

In an action to recover damages for conversion, in which the defendants US Art Co., Inc., and U.S. Art International, LTD., commenced an action for a judgment declaring that Certain Underwriters at Lloyd’s, London (“Lloyd’s), had a duty to defend and indemnify them in the main action. The court refused the motion for summary judgment based on a “mysterious disappearance” exclusion. It also sought defense to the action by the owners of the art. The court found:

[U]nderwriters failed to establish as a matter of law that coverage should be barred based on the “mysterious disappearance” exclusion. The explanation for the loss proffered by the US Art employees, if believed by the trier of fact, could reasonably support an inference that the artwork was accidentally thrown away, which would take the loss out of the “mysterious disappearance” exclusion (Citations omitted.)

In the event that it is determined that the “mysterious disappearance” exclusion does not apply; Underwriters will only have the duty to indemnify US Art for its losses. Pursuant to the language of the policy, Underwriters had the option to defend, not the duty to defend, the main action (Citations omitted.)[1]

Although the Underwriters were unable to establish their defense based on the exclusion at summary judgment, they did establish that the policy issued by them did not require a defense but, rather allowed the insurer the option to defend which Lloyd’s properly refused to exercise.

Mysterious disappearance has been defined as:

loss under unknown, puzzling or baffling circumstances which arouse wonder, curiosity, or speculation, or circumstances which are difficult to understand or explain. A mysterious disappearance is a disappearance under circumstances which excite, and at the same time baffle, wonder or curiosity. Davis v. St. Paul Mercury & Indemnity Co., 227 N.C. 80, 40 S.E. 2d 609 (1946).[2]

Mysterious disappearance was early defined in Davis v. St. Paul Mercury & Ind. Co., 227 N.C. 80, 40 S.E.2d 609, 169 A.L.R. 220, 223 (1946), followed in Loop v. United States Fidelity & Guaranty Ins. Co., 63 So.2d 247 (La.App.1953), and Deckler v. Travelers Indemnity Company, 94 So.2d 55 (La.App.1957), as “any disappearance or loss under unknown, puzzling or baffling circumstances which arouse wonder, curiosity, or speculation, or circumstances which are difficult to understand or explain and a disappearance under circumstances which excite, and at the same time baffle, wonder or curiosity. [Midlo v. Indiana Lumbermen’s Mut. Ins. Co., 160 So.2d 314 (La. App. 1964)]

Mysterious Disappearance v. Theft

“Theft” is very different from “mysterious disappearance” despite the fact that a loss of property results from both. Theft has generally been interpreted as any wrongful appropriation of another’s property to the use of the taker. Courts are generally in accord in defining theft as including “a taking by fraudulent conduct under circumstances which evidence an intent to steal.”[3] Evidence that establishes a mysterious disappearance is not sufficient for the insured to carry the burden of proving theft.

Although one can infer theft from a mysterious disappearance not all mysterious disappearances are a result of theft. At most, a mysterious disappearance is circumstantial evidence of theft.

Insurance policies will define terms, like “theft” as “the unlawful taking of property to the deprivation of the Insured.”[4]