The ISO CP 10 30 Causes of Loss—Special Form gets around this by excluding loss or damage caused by or resulting from nesting, infestation, or discharge of waste products or secretions by insects, birds, rodents, or other animals. No mention of vermin!

What constitutes vermin is difficult to say when the term is undefined in a policy. Merriam Webster Online defines "vermin" as "a : small common harmful or objectionable animals (as lice or fleas) that are difficult to control  b: birds and mammals that prey on game c: animals that at a particular time and place compete (as for food) with humans or domestic animals." Technically, a bat could fit in here in that they are small and objectionable—depositing dung on the property is objectionable to most. They could also be considered difficult to control in that they entered the property and deposited waste beyond the insured's control. Another FC&S editor wrote in a column that she does not think bats are vermin because they do not compete with humans or pets for food and are helpful in eating insects.

We have not found any court cases that say one way or another that a bat is vermin. A recent decision, when asked if bats are vermin, held that the term "vermin" is ambiguous, stating, "In short, there is no clear understanding as to what constitutes vermin and what does not; under the clear rules of construction, the insurer cannot benefit from deliberate ambiguity or use equivocal terms. Thus, because the word 'vermin' is capable of more than one reasonable interpretation, it is ambiguous." [Marcelle v. Southern Fidelity Ins. Co., 954 F.Supp.2d 429 (E.D. La. 2013)]

We agree with you that the presence of the bats themselves is not a direct physical loss, and the loss is contained to the damage caused by waste produced by the bats. Because the policy does not define "vermin," and the dictionary definition is vague at best, this is more a question of fact than a question of coverage.

As for the damage being multiple occurrences, how would that be quantified? Generally, courts have held that an occurrence is one proximate, uninterrupted, and continuous cause that results in all of the injuries and damages. Bats repeatedly discharging waste products seems like one continuous cause. If, though, there were several instances where the waste was cleaned up, then property was soiled again, that could show a break in the cause and an argument could be made for multiple occurrences.