Unpublished Disposition, 912 F.2d 469 (9th Cir. 1990)

MEMORANDUM^* 

The district court in this diversity action determined that a policy issued by appellee The Home Indemnity Company ("Home") to appellant landlords Milton and Ann Avol did not provide coverage for attorneys' fees incurred by the Avols in defending against actions by the Avols' tenants for injunctive relief against the Avols. We affirm.

Jurisdiction

Although we would ordinarily be precluded from considering an appeal from an order that does not adjudicate all the claims in an action, see Fed. R. Civ. P. 54(b), we have held that we may consider such appeals if the district court has subsequently disposed of the remaining claims. Anderson v. Allstate Ins. Co., 630 F.2d 677, 680-81 (9th Cir. 1980). Since the district court has dismissed the Avols' remaining claims, we may hear this appeal.

Standard of Review

We review a grant of summary judgment de novo. Kruso v. International Tel. & Tel. Corp., 872 F.2d 1416, 1421 (9th Cir. 1989), cert. denied, 110 S. Ct. 3217 (1990). Viewing the evidence in a light most favorable to the nonmoving party, we must determine whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Fu-Kong Tzung v. State Farm Fire and Casualty Co., 873 F.2d 1338, 1339-40 (9th Cir. 1989).

Coverage for Injunctive Relief

The district court found that " [w]here an underlying action is for equitable relief, an insuring agreement like the Home's does not give rise to an obligation by the insurer either to defend or to indemnify."

The policy at issue provides:

The company will pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of

bodily injury or property damage

to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the Insured seeking damages on account of such bodily injury or property damage....

"Bodily injury" is defined as "bodily injury, sickness or disease sustained by any person which occurs during the policy period...." "Property damage" is defined as:

(1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period....

"Occurrence" is defined as "an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the Insured."

The tenants obtained four injunctions, which had a significant effect upon the way in which the Avols operated their properties. The first injunction restrained the Avols from interfering with the tenants' mail and unlawfully entering their apartments, and from retaliating against tenants for participating in the lawsuit. The first injunction also ordered the Avols to establish an interest-bearing trust account for rent deposits, with the monies to be used for repairing and securing the properties. In the second injunction, the court ordered the Avols to install security doors, to hire a full time security guard or install a door buzzer release system, and to repair the fire escapes.

The third injunction required the Avols to retain a professional property manager to assume full responsibility for the management of the properties, with the goal of "bringing the buildings into full code compliance, ... making them fully habitable and tenantable, and ... resolving any and all disputes between the parties with regard to what modifications are necessary or appropriate to the accomplishment of those objectives." This order contained a list of contemplated modifications containing broadly stated objectives and specific items in need of repair, including walls, ceilings, floors, bathroom and kitchen tiles, screens, electrical wiring, and numerous other parts of the buildings. In the fourth injunction, the court appointed a receiver and property repairs coordinator to take possession of the property, collect rents, and generally assume responsibility for the management of the properties. This order also restrained the Avols and the tenants from committing specified actions.

We agree with the district court that the language of the policy, interpreted under California law, does not cover the attorneys' fees incurred by the tenants in their efforts to secure the type of relief mentioned above.

In Nationwide Insurance Co. v. King, 673 F. Supp. 384 (S.D. Cal. 1987), the court, applying California law, determined that a policy similar to the one at issue did not cover the costs of defending insureds against a suit for injunctive relief. The Nationwide court relied upon Jaffe v. Cranford Ins. Co., 168 Cal. App. 3d 930, 214 Cal. Rptr. 567 (1985), in which the policy at issue covered damages stemming from medical malpractice. The Jaffe court held that the insurer had no duty to defend the insured in a fraud-related criminal action because "the outcome of [the insured's] criminal case could not result in damages payable under the policy." 168 Cal. App. 3d at 934. The court subsequently stated: " 'Damages' describes a payment made to compensate a party for injuries suffered." Id. at 935.

The California Court of Appeal repeated the Jaffe rationale in Hackenthal v. National Casualty Co., 189 Cal. App. 3d 1102; 234 Cal. Rptr. 853 (1987). In Hackenthal, the court found that where a policy would assume the insured's cost of attending the trial of a civil suit for damages against the insured, the insured's attendance at an administrative hearing, at which no damages were sought, did not fall within the policy.

The Avols try to minimize the effect of these cases by analogizing this case to a pollution clean-up case, Intel Corp. v. Hartford Accident and Indemnity Co., 629 F. Supp. 1171 (N.D. Cal. 1988). We note, however, that two subsequent California Court of Appeals pollution clean-up cases indicate that preventive costs might not fall within the definition of "damages" as used in general liability policies. See AIU Ins. Co. v. Superior Court, 213 Cal. App. 3d 1219, 262 Cal. Rptr. 182 (1989), review granted, 782 P.2d 595, 264 Cal. Rptr. 354 (1989); Aerojet-General Corp. v. Superior Court, 211 Cal. App. 3d 216, 258 Cal. Rptr. 684 (1989). We need not enter the acrimonious debate over insurance coverage for hazardous waste clean-up, however, for we find the type of relief sought here, as discussed above, sufficiently distinguishable from that sought in the pollution cases.

In sum, we find that the attorneys' fees requested from the Avols do not constitute "damages because of bodily injury or property damage" for purposes of the Avols' insurance policy.

Supplementary Payments

The "Supplementary Payments" provision in the policy provides that "The company will pay, in addition to the applicable limit of liability ... all costs taxed against the Insured in any suit defended by the company...." We agree with the district court that for this provision to come into play, there must be underlying coverage under the policy. Since we find no such underlying coverage, we reject the Avols' claim. See Board of County Comm'rs v. Guarantee Ins. Co., 90 F.R.D. 405, 407-08 (D. Colo. 1981).¹ 

Sanctions

Home asks us to impose sanctions upon the Avols for including the Plaintiffs' Mandatory Settlement Conference Statement in its excerpts of record. Under Circuit Rule 30-2, " [t]he court in appropriate cases will award sanctions against any attorney who vexatiously and unreasonably increases the cost of litigation by inclusion of unnecessary material in the excerpts of record." 9th Cir.R. 30-2. Home argues that the Avols' attorney's "duplicative conduct" should be sanctioned. However, Home has not met the threshold requirement of showing that the inclusion of these materials has "vexatiously and unreasonably increase [d] the cost of litigation." See Kirshner v. Uniden Corp., 842 F.2d 1074, 1083 (9th Cir. 1988). Home's request is accordingly denied.

AFFIRMED.²