Arizona Court of Appeals Division One holds that property damage caused by feral cats does not fall within the domestic-animal exclusion in an insurance policy.

The owners of a residential rental property discovered their tenant had allowed feral cats to access the property causing substantial damage. The owners filed a claim with their insurers for the damage, and the insurer denied the claim under an exclusion for damage caused by “birds, vermin, rodents, insects, or domestic animals.”  The owners sued for breach of contract and insurance bad faith. On the insurer’s motion that the damage fell within the policy exclusion, the superior court dismissed the complaint. The owners appealed.

The Court of Appeals reversed.  The domestic animal exclusion is susceptible to at least two reasonable interpretations, one that turns on whether a species as a whole has been domesticated, and one that turns on whether the individual animal is in fact kept by a person for some purpose. Courts resolve this type of ambiguity by looking at the transaction as a whole—the policy’s language, purpose, public policy, the parties’ intent, and the insured’s reasonable expectations. Here, the individualized interpretation is supported by each of these factors. Dictionary definitions lean towards the individualized definition. Insurance contracts have the purpose of protecting the insured against accidents they cannot control—an exotic animal the insured keep would be covered by the species definition, whereas feral animals would be excluded, frustrating this purpose. Further, the indeterminate nature of the question of whether a species is domestic means public policy supports an individualized definition—it’s not instantly clear whether a species is domestic or not. A common-sense approach resolves the apparent ambiguity— animals living and breeding in the wild are not “domestic animals” and exotic pets are.

Judge Brown delivered the unanimous opinion of the court. Presiding Judge Johnsen and Judge Perkins joined.