Lakeland Village Owners Association v. Great American Insurance Company et al, No. 2:2010cv00604 - Document 58 (E.D. Cal. 2010)
Court Description: ORDER GRANTING plaintiff's motion for partial summary judgment and denying defendant's cross-motion for summary judgment signed by Judge Garland E. Burrell, Jr on 7/21/2010.(Matson, R)
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Lakeland Village Owners Association v. Great American Insurance Company et al Doc. 58 1 2 3 4 5 IN THE UNITED STATES DISTRICT COURT 6 FOR THE EASTERN DISTRICT OF CALIFORNIA 7 8 LAKELAND VILLAGE HOMEOWNERS ASSOCIATION, 9 Plaintiff, 10 11 12 13 14 v. GREAT AMERICAN INSURANCE GROUP, TRAVELERS PROPERTY CASUALTY COMPANY OF AMERICA, and DOES 1 through 50, Defendants. ________________________________ ) ) ) ) ) ) ) ) ) ) ) ) ) ) 2:10-cv-00604-GEB-GGH ORDER GRANTING PLAINTIFF’S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT’S CROSS-MOTION FOR SUMMARY JUDGMENT 15 Plaintiff moves for partial summary judgment against its 16 17 insurer, 18 (“Defendant”), on its third claim for declaratory relief. Specifically, 19 Plaintiff seeks a declaration that Defendant has a duty to defend a 20 cross-complaint filed against it in a pending state court action. 21 Defendant filed a cross motion for summary judgment, arguing it does not 22 owe Plaintiff a defense, and therefore, is entitled to judgment on 23 Plaintiff’s claims. 24 Defendant Travelers I. Property Casualty Company of America LEGAL STANDARD 25 A party seeking summary judgment bears the initial burden of 26 demonstrating the absence of a genuine issue of material fact for trial. 27 Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). 28 satisfied, “the non-moving party must set forth, by affidavit or as If this burden is 1 Dockets.Justia.com 1 otherwise provided in [Federal] Rule [of Civil Procedure] 56, specific 2 facts showing that there is a genuine issue for trial.” 3 Serv., Inc. v. Pacific Elec. Contractors Ass’n, 809 F.2d 626, 630 (9th 4 Cir. 1987) (quotations and citation omitted) (emphasis omitted). When 5 deciding a summary judgment motion, all reasonable inferences that can 6 be drawn from the evidence “must be drawn in favor of the non-moving 7 party.” 8 Cir. 2010). Bryan v. McPherson, --- F.3d ----, 2010 WL 2431482, at *2 (9th 9 10 11 T.W. Elec. II. UNDISPUTED FACTS A. The Underlying Litigation and Tender of Defense In the underlying state court litigation involved with 12 Plaintiff’s tender of defense, Kellie Warnick and her mother, Ann 13 Michael, filed a complaint against Premier Resorts International, Inc. 14 dba Lakeland Village Beach and Mountain Resort (“PRI”), and Francis 15 Hollow (“Hollow”) that concerns a wedding reception Ms. Warnick hosted 16 at Lakeland Village. (Def.’s Response to Pl.’s Separate Statement of 17 Undisputed Facts (“SUF”) # 1-2.) 18 Hollow, who owns a town home in Lakeland Village, called the 19 police and complained about noise at the reception. (Pl.’s Evid., Ex. 1, 20 ¶16, Ex. 7, ¶ 1.) The police responded and took action that resulted in 21 the termination of the wedding reception. (Id.) 22 Hollow answered the state court action and filed a cross- 23 complaint against Plaintiff and PRI for indemnity, contribution and 24 declaratory relief. (Def.’s Response to Pl.’s Separate Statement of 25 Undisputed Facts (“SUF”) # 3.) 26 Amended Cross-Complaint, which added a nuisance claim. (SUF # 10.) 27 Hollow alleges in the nuisance claim that non-property owners used 28 Lakeland Village’s common areas for weddings, wedding receptions and Hollow subsequently filed a First- 2 1 similar events, wherein loud music was played that interfered with 2 Hollow’s quiet use and enjoyment of his property. (SUF #11.) 3 Plaintiff tendered its defense of Hollow’s First-Amended 4 Cross-Complaint to Defendant in early 2007. (SUF #18.) Defendant denied 5 the tender on April 9, 2007. (SUF #19.) Hollow later filed a Second- 6 Amended Cross-Complaint (“Cross-Complaint”), which deleted his indemnity 7 claim. (SUF #15.) 8 B. The Applicable Insurance Policy 9 The insurance policy under which the tender was made provides 10 in relevant part: “We will pay those sums that the insured becomes 11 legally obligated to pay as damages because of ‘personal injury’... to 12 which this insurance applies. 13 the insured against any ‘suit’ seeking those damages.” (Pl.’s Evid., Ex. 14 12, at 1.) “Personal injury” is defined to include “injury, other than 15 ‘bodily injury,’ arising out of... the wrongful eviction from, wrongful 16 entry into, or invasion of the right of private occupancy of a room, 17 dwelling or premises that a person occupies by or on behalf of its 18 owner, landlord or lessor.” (Id., at 3.) 19 We will have the right and duty to defend III. DISCUSSION 20 The parties dispute whether or not Defendant owes Plaintiff a 21 defense of Hollow’s Cross-Complaint. Plaintiff seeks a declaration that 22 Defendant has a duty to defend it, arguing Hollow’s nuisance claim is 23 covered by the policy’s coverage for injury arising out of “invasion of 24 the right of private occupancy of a room, dwelling or premises that a 25 person occupies by or on behalf of its owner, landlord or lessor....” 26 (Pl.’s P.&A. in Supp. of Mot. for Partial Summ. J. (“Mot.”) 8:9-19.) 27 Defendant rejoins that it does not owe Plaintiff a defense because 28 “invasion of the right of private occupancy,” requires a physical 3 1 invasion, and “[n]oise simply is not a physical invasion of the right to 2 private occupancy in California.” (Def.’s P.&A. in Opp’n to Pl.’s Mot. 3 for Summ. J. (“Opp’n”) 9:8-10, 10:20-21.) Defendant further counters 4 that it does not owe Plaintiff a defense since the clause “by or on 5 behalf of its owner, landlord or lessor,” modifies the word “invasion,” 6 requiring Plaintiff to own the affected property for there to be 7 coverage, and Plaintiff does not own Hollow’s property. (Opp’n 7:11-15.) 8 9 10 A. An Insurer’s Duty to Defend Under California law, 18 An insurer must defend its insured against claims that create a potential for indemnity under the policy. The duty to defend is broader than the duty to indemnify, and it may apply even in an action where no damages are ultimately awarded. Determination of the duty to defend depends, in the first instance, on a comparison between the allegations of the complaint and the terms of the policy. But the duty also exists where extrinsic facts known to the insurer suggest that the claim may be covered. Moreover, that the precise causes of action pled by the third-party complaint may fall outside policy coverage does not excuse the duty to defend where, under the facts alleged, reasonably inferable, or otherwise known, the complaint could fairly be amended to state a covered liability. 19 Scottsdale Ins. Co. v. MV Transp., 36 Cal.4th 643, 654 (2005) (citation 20 omitted). Further, “[a]ny doubt as to whether the facts give rise to a 21 duty to defend is resolved in the insured’s favor.” Horace Mann Ins. Co. 22 v. Barbara B., 4 Cal.4th 1076, 1081 (1993). 11 12 13 14 15 16 17 23 In a duty to defend case, an insured moving for summary 24 judgment “need only show ‘the existence of a potential for coverage,’ 25 i.e., ‘that the underlying claim may fall within policy coverage.’” 26 Cunningham v. Univ. Underwriters, 98 Cal.App.4th 1141, 1147 (2002) 27 (citing Montrose Chem. Corp. v. Sup. Ct., 6 Cal.4th 287, 300 (1993)). 28 Whereas, an insurer moving for summary judgment “‘must establish the 4 1 absence of any ... potential’ for coverage, i.e., that the underlying 2 complaint ‘can by no conceivable theory raise a single issue which could 3 bring it within the policy coverage.’” Id. (citing Montrose Chem. Corp., 4 at 300 (1993). “Although the insurer's burden in moving for summary 5 judgment is greater than the insured's burden in bringing its own 6 affirmative motion, this disparity merely reflects the substantive law.” 7 Id. (citation omitted). 8 When an insurer owes a duty of defense, “the insurer is 9 obligated to defend against all of the claims involved in the action, 10 both covered and noncovered....” Horace Mann Ins. Co. v. Barbara B., 4 11 Cal.4th 1076, 1081 (1993). “To defend meaningfully, the insurer must 12 defend immediately. To defend immediately, it must defend entirely. It 13 cannot parse the claims, dividing those that are at least potentially 14 covered from those that are not.” Buss v. Sup. Ct., 16 Cal.4th 35, 49 15 (1997). 16 B. 17 18 19 20 21 22 23 Applicable Principals of Insurance Policy Interpretation The principles of insurance policy interpretation are well- settled under California law: Interpretation of an insurance policy is a question of law. While insurance contracts have special features, they are still contracts to which ordinary rules of contractual interpretation apply. Thus, the mutual intention of the parties at the time the contract is formed governs interpretation. If possible, [courts] infer this intent solely from the written provisions of the insurance policy. If the policy language is clear and explicit, it governs. 24 25 26 27 When interpreting a policy provision, [courts] must give its terms their ordinary and popular sense unless used by the parties in a technical sense or a special meaning is given to them by usage. We must also interpret these terms in context, and give effect to every part of the policy with each clause helping to interpret the other. 28 5 1 Palmer v. Truck Ins. Exchange, 21 Cal. 4th 1109, 1115 (1999) (quotations 2 and citations omitted). 3 “A policy provision will be considered ambiguous when it is 4 capable of two or more constructions, both of which are reasonable. But 5 language in a contract must be interpreted as a whole, and in the 6 circumstances of the case, and cannot be found to be ambiguous in the 7 abstract.” Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1, 18 (1995). 8 “There cannot be an ambiguity per se, i.e. an ambiguity unrelated to an 9 application.” Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. 10 Co., 5 Cal.4th 854, 867 (1993) (quotation and citation omitted). 11 If a policy provision has been judicially construed, “it is 12 not ambiguous and the judicial construction of the term should be read 13 into the policy unless the parties express a contrary intent.” Lockeed 14 Corp v. Continental Ins. Co., 134 Cal.App.4th 187, 197 (2005) (quotation 15 and citation omitted). In applying this rule, however, the policy 16 provision at issue must be used in a context analogous to the context in 17 which 18 conflicting judicial interpretations of a policy provision may support 19 a finding that a policy provision is ambiguous. Fire Ins. Exchange v. 20 Sup. Ct., 116 Cal.App.4th 446, 465 (2004). it was judicially construed. Id. Further, the existence of 21 Rules of grammar and punctuation can also be used in deciding 22 the meaning of words and phrases. See Oak Park Calabasas Condominium 23 Assn. v. State Farm Fire and Cas. Co., 137 Cal.App.4th 557, 564 (using 24 the grammatical use of a comma to determine the meaning of an insurance 25 policy provision); and State Farm General Ins. Co. v. JT’s Frames, Inc., 26 181 27 antecedent” to determine the scope of a policy provision). Cal.App.4th 429, 446 (2010) (applying 28 6 the “rule of the last 1 C. “Invasion of the Right of Private Occupancy” 2 Here, the insurance policy covers claims for “personal 3 injury,” which is defined to include injury arising out of “invasion of 4 the right of private occupancy of a room, dwelling or premises that a 5 person occupies by or on behalf of its owner, landlord or lessor.” 6 (Pl.’s Evid., Ex. 12, at 3.) Plaintiff contends Hollow’s nuisance claim 7 “fall[s] directly within this definition of ‘personal injury’” since 8 “invasion 9 “tangible interference” with the property. (Mot. 8:18-19, 8:24-26.) of the right of private occupancy” does not require a 10 Plaintiff 11 Holdings Syndicate, Inc. v. City of Keene, N.H., 898 F.2d 265 (1st Cir. 12 1990), as support for its argument. In Titan Holdings, the First Circuit 13 considered New Hampshire law stating, that law “does not require an 14 allegation of physical invasion before a claim comes within coverage for 15 liability 16 occupancy.’” Id., at 272 (emphasis in original). 17 upon this principle when construing the clause before it in favor of the 18 insured and held that the insurer owed the insured a defense of a 19 complaint, which alleged odor, noise and bright light from the insured’s 20 sewage 21 plaintiffs’] quiet enjoyment of [their home].” Id., at 267, 272-273. 22 Plaintiff argues in the alternative, the phrase “invasion of the right 23 of private occupancy” is ambiguous, and thus, must be interpreted in its 24 favor. (Mot. 9:7-8.) relies arising plant 25 primarily from upon ‘other “unreasonably a First invasion and Circuit of substantially the opinion right in of Titan private Titan Holdings relied interfered with [the Defendant rejoins this policy language is not ambiguous, and 26 requires 27 Defendant 28 Complaint does not fall within the policy’s “personal injury” coverage. a “physical argues since entry noise upon is real not 7 property.” “physical,” (Opp’n 9:9-10.) Hollow’s Cross- 1 (Opp’n 10:20-22.) Defendant relies solely upon Sterling Builders, Inc. 2 v. United National Insurance Co., 79 Cal.App.4th 105 (2000), as support 3 for its position. In Sterling Builders, an insured filed a declaratory 4 relief action against its insurer, after the insurer refused to defend 5 the insured in a third party action, which alleged the fraudulent 6 procurement of an easement. 7 policy, which defined “personal injury” to include “wrongful entry or 8 eviction or other invasion of the right of private occupancy,” “afforded 9 at least the possibility of coverage of the [third party] action, and The insured argued the clause in its 10 hence gave rise to a duty to defend.” Id., at 108. 11 Builders 12 nonphysical invasion of a right of private occupancy. ‘Occupancy’ 13 requires a physical entry upon real property.” Id., at 109. 14 Builders addressed the notion of obtaining an easement interest in real 15 property 16 transaction, not a trespass." Id., at 112. 17 Court disagreed, through fraud, holding and “there found is “[t]hese no The Sterling such facts thing as a Sterling constitute a Sterling Builders is distinguishable from the facts involved 18 in 19 “misrepresentation” or “transaction.” 20 the “invasion of the right of private occupancy” provision applies to 21 Hollow’s allegations that he heard loud amplified music emanating from 22 Non-Owner events, which interfered with the quiet use and enjoyment of 23 his property. (Pl.’s Evid., Ex. 4, ¶¶ 26-27.) this case since Hollow’s Cross-Complaint does not involve a Therefore, the issue is whether 24 A California Court of Appeal stated in Martin Marietta Corp v. 25 Ins. Co. of North America, 40 Cal.App.4th 1113, 1134 (1995) that 26 “[i]nvasion of the right of private occupancy, resembles the definition 27 of nuisance, an interference with the interest in the private use and 28 enjoyment of the land.” (Quotations and citations omitted). 8 Further, 1 the Martin Marietta Corp court stated: it need “not determine the entire 2 scope of coverage under the term” since the clause before it, “‘other 3 invasion of the right of private occupancy’” is susceptible to numerous 4 interpretations, 5 interpretation, it must be construed in favor of the insured.” 6 also Hirschberg v. Lumbermens Mutual Casualty, 798 F.Supp. 600, 604 7 (N.D. Cal. 1992) (applying California law and holding that the clause 8 “other invasion of the right of private occupancy,” is ambiguous). 9 stated in Martin Marietta Corp, the clause “invasion of the right of and under California's rules of contract Id.; See As 10 private 11 interpretation. Therefore, the clause is ambiguous and must be construed 12 in favor of the insured. 13 D. occupancy” is subject to more than one reasonable “By or on behalf of Its Owner, Landlord or Lessor” 14 The parties also dispute the effect of the clause “by or on 15 behalf of its owner, landlord or lessor,” in the policy’s definition of 16 “personal injury” for “invasion of the right of private occupancy.” 17 Defendant argues the clause “by or on behalf of its owner, landlord or 18 lessor,” modifies the word “invasion,” and therefore requires Plaintiff 19 to own the affected property for there to be coverage. Defendant argues 20 since Plaintiff does not own Hollow’s property, Defendant does not have 21 a duty to defend Hollow’s Cross-Complaint, notwithstanding how the 22 phrase “invasion of the right of private occupancy” is interpreted. 23 (Opp’n 7:11-15.) 24 Plaintiff counters that Defendant’s argument violates the 25 “fundamental grammatical ‘Rule of the Last Antecedent’ which requires 26 that qualifying words or phrases be applied to the words immediately 27 preceding them.” (Pl.’s Reply Brief in Support of Mot. For Partial Summ. 28 J. (“Reply”) 1:25-26.) Further, Plaintiff argues “by or on behalf of its 9 1 owner, landlord or lessor” must modify the word “occupies,” requiring 2 only that Hollow rightfully occupied his town home to trigger coverage. 3 (Reply 5:15-21.) 4 of its owner...” is ambiguous and must be interpreted in its favor. 5 (Reply 6:20-21.) Plaintiff argues in the alternative, “by or on behalf 6 The parties have not provided any binding authority, which is 7 dispositive of this issue. Defendant cited Mirpad, LLC v. Cal. Ins. 8 Guarantee Assoc., 132 Cal.App.4th 1058 (2005), which contains dicta 9 concerning the clause “by or on behalf of its owner...” since the 10 parties did not dispute its construction. Mirpad, LLC, 132 Cal.App.4th 11 at 1064 n.3. 12 Further, the out-of-state authority cited by the parties is 13 conflicting. A Maine District Court held “by or on behalf of its owner,” 14 “clearly refers to the person committing the wrongful entry and not the 15 person who occupies the room, dwelling, or premises.” U.S. Fidelity and 16 Guar. Co. v. Goodwin 950 F.Supp. 24, 26 (D.Me. 1995). The court 17 explained, 18 19 20 21 22 The key to determining the meaning of this provision lies in the word “its.” The Court is persuaded that the word “its” modifies the words “room, dwelling or premises.” The word “its” does not modify the word “person.” Unlike a room, dwelling, or premises, a person obviously cannot have an owner. Accordingly, the provision unambiguously requires that the wrongful entry be committed by the owner, landlord, or lessor of the room, dwelling, or premises. 23 24 Id., at 27. 25 In contrast, the Third and Eighth Circuits have held “by or on 26 behalf of its owner” is ambiguous. New Castle County, Delaware v. 27 National Union Fire Ins. Co. of Pittsburgh, PA, 174 F.3d 338, 344-351 28 (3rd Cir. 1999); Royal Ins. Co. of America v. Kirksville College of 10 1 Osteopathic Medicine, 191 F.3d 959, 963 (8th Cir. 1999). In New Castle 2 County, the Court criticized the Goodwin Court’s analysis and held the 3 grammatical “Rule of the Last Antecedent” rendered the clause subject to 4 more than one reasonable interpretation. New Castle County, Delaware, 5 174 F.3d at 344-351. 6 The Goodwin court found that the word “its” modifies “room, dwelling or premises,” and not “person.” Yet, replacing “its” with any of the words the court found “its” to modify does not foreclose either [the insurer] or [the insured’s] reading of the provision. For example, consider the following: “The wrongful eviction from a room that a person occupies by or on behalf of the room's owner, landlord or lessor.” Or, consider this: “The invasion of the right of private occupancy of a premises that a person occupies by or on behalf of the premises' owner, landlord or lessor.” Both examples illustrate the flaw in the Goodwin court's reasoning; that is, neither clarifies whether “by or on behalf of” requires the offense to be committed by the owner, landlord, or lessor, or whether it defines the possessory interest of the claimant. Thus, determining what “its” modifies neither strengthens nor undermines either of the competing interpretations of [the clause].... 7 8 9 10 11 12 13 14 15 16 17 Id., at 345 (citation omitted). 18 Since the clause “by or on behalf of its owner, landlord or 19 lessor,” is reasonably susceptible to more than one interpretation, it 20 is ambiguous and must be construed in Plaintiff’s favor. Therefore, 21 Plaintiff’s 22 Defendant’s cross motion for summary judgment is denied. 23 Dated: partial motion for summary judgment is July 21, 2010 24 25 26 GARLAND E. BURRELL, JR. United States District Judge 27 28 11 granted and
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