In Winking Group LLC v. Aspen American Ins. Co., the court held that according to its plain and ordinary meaning, the Entrustment Exclusion in a policy precluded coverage for damage to property caused by a former tenant, even after the tenant had been evicted and was thus, no longer “entrusted” with the property.

The Plaintiff-insured had leased property to East Market, Inc., a restaurant, from 2009 through 2014.  At some point in 2014 collection proceedings were initiated against East Market, resulting in a settlement agreement that provided the tenant would fully vacate the premises by January 10, 2015.  On January 10, 2015, East Market was evicted, and a notice of eviction was posted outside the premises.  Plaintiff did not change the locks until January 23, 2015.  At some point between January 10 and January 23, East Market employees vandalized the property, causing significant damage.

Aspen Insurance disclaimed coverage for the losses pursuant to an Entrustment Exclusion in the policy which provided that “we will not pay for loss or damage caused by or resulting from… a dishonest or criminal act by you…or anyone to whom you entrust the property for any purpose.”  Plaintiff argued that the exclusion was inapplicable because the damage was wrought after Plaintiff’s entrustment had been revoked.  The Court disagreed.

The Court, applying a common-sense, plain meaning interpretation to the words and intent of the exclusion, held that where the evicted tenant retains possession of keys, and the locks are not changed, the evicted tenant is still considered by the Court to be entrusted with the property because “it is sufficient that the vandalism was causally related to Plaintiff’s initial entrustment of the premises.”

Thus, Winking Group provides that a formal eviction is not sufficient to sever a lessor’s entrustment for purposes of the policy exclusion.  New York lessors are now on notice that they must retrieve all keys and change locks concurrent with an eviction or risk a finding of no coverage for any similar damage by a disgruntled tenant.

Thanks to Vivian Turetsky for her contribution to this post.