The California Court of Appeal considered whether the insured building owner could recover for lost rent, even though it did not have a tenant, after its building was vandalized. Ventura Kester, LLC v. Folksamerica Reinsurance Co., 2013 Ca. Ct. App. LEXIS 723 (Cal. Ct. App. Sept. 11, 2013)

   Ventura owned a commercial building. Its tenant vacated the property in 2006. A lease proposal was presented to Ventura, but was rejected because of another arrangement being negotiated with Office Max. Ventura and OfficeMax executed a letter of intent to enter into a lease. But in May 2007, the building was vandalized, causing extensive damage. The cost of repair was estimated at $1 million. 

   In August 2007, OfficeMax declined to lease the property. Another potential tenant showed interest, but did not provide a sufficient letter of credit.

   The insurer paid $414,460 for repairs to the building. A construction company estimated that it would take up to a  year to repair the damage. The insurer denied the loss of rent claim because there was no signed lease at the time of the loss.

   The policy provided that the insurer would insure for financial loss resulting from "rents including accrued rents which become uncollectible . . . because of damage to or destruction of" the building. Elsewhere, the policy promised to pay "your net loss of rental income." 

   Ventura sued, alleging it was entitled to lost rent from May 2007 through July 2010, at a monthly rent of $100,000, for a total loss of rent of $3.8 million. The trial court found that the plain language of the policy did not provide coverage for lost rents when there was no tenant in the building. Summary judgment was granted to the insurer. 

   The Court of Appeal determined the lost rent provision was ambiguous, and the policy holder would have a reasonable expectation of coverage for rents that were actually lost as a result of property damage.

   The insurer argued that the provision for loss of rents should be interpreted narrowly to mean only rent from an existing tenant which is uncollectible as a result of damage to the covered property. The plain language of the policy did not limit recovery or calculate lost rents in this manner. The provisions provided coverage for the loss of rents the owner would have collected but for the property damage.

   A triable issue of fact existed, however, as to whether Ventura actually lost rents. There was insufficient evidence to establish as a matter of law that Ventura would not have rented the property during the time it took to adjust the claim and repair the damage.

   Therefore the judgment and order granting the insurer's motion for summary judgment were reversed.