When Vandals Trigger the Sprinklers: The Battle Over Resulting Losses

When vandals triggered a sprinkler system in a vacant building, flooding it with over one million gallons of water, the result was not just property damage. Instead, it was a lawsuit that put the scope of all-risk commercial property insurance under scrutiny. The case of Epperson v. Lexington Insurance Company, ¹ recently decided by an Ohio federal judge applying Tennessee law, involved a dispute over whether an act of vandalism, which led to extensive water and mold damage, should be covered under a commercial insurance policy that purports to insure against “all risks of direct physical loss.”

The plaintiff, Scottie Epperson, co-executor of the estate of Fred Langley, owned the insured building in Cincinnati, Ohio. After acquiring it through foreclosure, the building remained vacant. Vandals broke in, smashed sprinkler heads, and left behind extensive water and mold damage.

Epperson filed a claim with Lexington Insurance under an all-risk property policy, which by design covers all physical loss unless specifically excluded. Lexington denied the claim, citing two exclusions: vandalism and sprinkler leakage. Lexington argued that both perils were excluded under the terms of a Vacancy Permit Endorsement.

The policyholder advanced a well-supported argument for coverage. First, the estate noted that while vandalism itself was excluded, the policy contained a resulting-loss provision stating that if vandalism results in a covered cause of loss, the policy will pay for the resulting damage. In this case, the estate contended that the water damage caused by the activated sprinklers was a new and distinct peril, not vandalism itself, and therefore potentially covered.

The estate also pointed out that the endorsement form Lexington relied upon to exclude sprinkler leakage and vandalism did not actually mark those causes of loss with an “X” as the form contemplated. Under standard rules of policy interpretation, this ambiguity should have been resolved in favor of the insured. The policyholder further argued that from the standpoint of the insured, the sprinkler discharge was accidental and fortuitous, which is precisely the kind of event an all-risk policy is designed to cover.

Lexington countered that the vandalism exclusion applied to the entire chain of events. It maintained that the water discharge was not a separate cause but simply an expected and foreseeable result of the vandalism. It argued that the Vacancy Permit excluded both vandalism and sprinkler leakage, interpreting the form’s layout, specifically the word “all” appearing next to the loss types, as a valid substitute for checking the exclusion boxes. Lexington also leaned on other policy exclusions, such as continuous water leakage for more than fourteen days and mold, claiming that even if the water damage were treated as distinct, it would still not be covered under those additional provisions.

In a very lengthy opinion fully explaining its reasons, the court ultimately sided with Lexington. While acknowledging that the policyholder raised plausible points, the court found that the vandalism exclusion applied and that the resulting water damage was not caused by a separate, covered peril. The judge accepted Lexington’s interpretation of the Vacancy Permit despite the absence of the customary markings to exclude the causes of loss, concluding that the endorsement excluded both sprinkler leakage and vandalism. The court also rejected the application of the resulting-loss exception, reasoning that the water damage did not qualify as “accidental” because it flowed directly from the intentional act of vandalism.

This conclusion, however, rests on a flawed interpretation of both the policy language and long-standing principles of insurance law. First, it misconstrues the meaning of “accidental.” In insurance law, the question is not whether the triggering act was intentional from the standpoint of a third party, but whether the loss was unexpected and fortuitous from the perspective of the insured. In this case, Epperson and the Langley estate had no involvement in or expectation of the vandalism. From their vantage point, the sprinkler discharge was entirely “accidental,” and the resulting water damage should have been considered a fortuitous loss under the all-risk coverage.

Second, resulting-loss provisions exist for a reason. They ensure that even when a policy excludes certain perils, such as faulty workmanship, earth movement, or vandalism, if that peril leads to a new, otherwise covered cause of loss, the policy still responds. Courts interpreting similar language have held that water damage resulting from an excluded act can be covered, particularly when the damage flows from a separate cause like a ruptured pipe or, as in this case, a sprinkler discharge. The court in Epperson disregarded this interpretive framework and treated the entire chain of events as a single excluded peril.

Finally, the court interpreted the Vacancy Permit against the insured despite clear ambiguity in the document. The form required specific “X” markings to indicate which perils would remain excluded during vacancy. None were marked. The court chose to overlook that omission and relied on the word “all” in a different column to support Lexington’s position. This approach directly contradicts the rule that exclusions must be stated clearly and applied narrowly.

This case matters because it reveals a creeping erosion of coverage in all-risk insurance, where courts too readily collapse separate causes of loss into one excluded category. If any damage flowing from vandalism is deemed part of that initial act, then resulting-loss clauses become meaningless. And if the term “accidental” is interpreted to exclude any intentional act by a third party, then insurance ceases to protect against the very types of unexpected events policyholders purchase it to cover.

The Langley estate made a strong, legally grounded case. The court’s ruling favored exclusion over coverage and, in doing so, undermined fundamental rules of policy interpretation that require grants of coverage to be read broadly and exclusions narrowly. This decision should prompt further scrutiny and perhaps appellate review.

The clauses battled upon are complex, as noted in Ensuing Loss Clauses Are Often Confusing. The concept of fortuity was noted in The Concept of Fortuity and The Wear and Tear Exclusion.

Thought For The Day 

“It wasn’t raining when Noah built the ark.”
—Howard Ruff

¹ Epperson v. Lexington Ins. Co., No 1:23-cv-50 (S.D. Ohio May 29, 2025).