Goldberger v. State Farm Fire & Cas. Co.

• Decision Date: 13 August 2019
• Docket Number: No. 1 CA-CV 18-0112,1 CA-CV 18-0112
• Citation: 448 P.3d 302,247 Ariz. 261
• Parties: Joel GOLDBERGER, et al., Plaintiffs/Appellants, v. STATE FARM FIRE AND CASUALTY COMPANY, Defendant/Appellee.
• Court: Arizona Court of Appeals

247 Ariz. 261
448 P.3d 302

Joel GOLDBERGER, et al., Plaintiffs/Appellants,
v.
STATE FARM FIRE AND CASUALTY COMPANY, Defendant/Appellee.

No. 1 CA-CV 18-0112

Court of Appeals of Arizona, Division 1.

FILED August 13, 2019

Hunter Humphrey & Yavitz PLC, Phoenix, By Randall S. Yavitz, Isabel M. Humphrey, Counsel for Plaintiffs/Appellants

Broening Oberg Woods & Wilson PC, Phoenix, By Robert T. Sullivan, John C. Quinn, Alicyn M. Freeman, Counsel for Defendant/Appellee

Judge Michael J. Brown delivered the opinion of the Court, in which Presiding Judge Diane M. Johnsen and Judge Jennifer M. Perkins joined.

BROWN, Judge:

¶1 In this opinion we address whether the superior court properly dismissed an insurance claim for property damage caused by feral cats based on a domestic-animal exclusion in the insurance policy at issue. Because the feral cats that caused the damage are not domestic animals under all reasonable interpretations of the facts alleged in the complaint, the court erred in granting the insurer’s motion to dismiss. We therefore reverse and remand for further proceedings.

BACKGROUND

¶2 Joel and Kim Goldberger ("the Goldbergers") own residential rental property in Flagstaff, insured by State Farm Fire and Casualty Company ("State Farm") under a rental dwelling policy ("Policy"). The Goldbergers filed a claim asserting their tenant "allowed" feral cats "to access" the property and the cats then caused approximately $75,000 of "accidental damage." State Farm denied the claim, asserting "feral cats are domestic animals and therefore the damage was not covered under the Policy."

¶3 The Goldbergers then filed this lawsuit, alleging breach of contract and insurance bad faith. State Farm moved to dismiss the complaint for failure to state a claim, arguing the Policy’s plain language precluded coverage. State Farm based its denial of coverage on subsection 1.N of the Policy ("Exclusion"), which provides that accidental losses caused by "birds, vermin, rodents, insects or domestic animals" are not covered. The superior court granted the motion, reasoning in part: (1) a cat, feral or not, is a domestic animal; (2) these feral cats were acting as if they were domesticated; and (3) a reasonably intelligent consumer would understand the Exclusion to unambiguously apply to damage caused by feral cats. This timely appeal followed.

DISCUSSION

¶4 A party may move to dismiss a claim for "failure to state a claim upon which relief can be granted." Ariz. R. Civ. P. 12(b)(6). In evaluating a claim’s sufficiency, we take as true "all well-pleaded factual allegations and indulge all reasonable inferences from those facts," but need not accept conclusory statements. Coleman v. City of Mesa , 230 Ariz. 352, 356, ¶ 9, 284 P.3d 863, 867 (2012). A court should dismiss a claim only if, under any interpretation of the well-pleaded facts, the plaintiff would not be entitled to relief. Id. at ¶ 8. Our review is de novo. Id. at 355, ¶ 7, 284 P.3d at 866.

¶5 Several of State Farm’s arguments rely on the assumption that these cats were peaceably living in the home with the tenant. The superior court, at least in part, appeared to follow State Farm’s lead. A court deciding a Rule 12(b)(6) motion, however, must "look only to the pleading itself," Cullen v. Auto-Owners Ins. Co. , 218 Ariz. 417, 419, ¶ 7, 189 P.3d 344, 346 (2008), including documents that "are central to the complaint,"

448 P.3d 304

Strategic Dev. & Constr., Inc. v. 7th & Roosevelt Partners, LLC , 224 Ariz. 60, 64, ¶ 14, 226 P.3d 1046, 1050 (App. 2010), such as the Policy. Because we limit our review to the complaint and the Policy, we proceed without characterizing the feral cats’ behavior or any care the tenant may have afforded them beyond what the complaint alleges—that the tenant "allowed [the cats] to access the property." To the extent State Farm’s arguments on appeal depend on facts not alleged in the complaint, they necessarily fail.

A. Interpretation of the Exclusion

¶6 We review de novo the interpretation of an insurance policy. Teufel v. Am. Family Mut. Ins. Co. , 244 Ariz. 383, 385, ¶ 10, 419 P.3d 546, 548 (2018). A policy term is ambiguous if it is susceptible to two or more reasonable interpretations that conflict. Id. We examine policy language "from the viewpoint of one not trained in law or in the insurance business." Sparks v. Republic Nat’l Life Ins. Co. , 132 Ariz. 529, 534, 647 P.2d 1127, 1132 (1982). But "even if a policy is apparently ambiguous, a decision to require coverage follows [only] after consideration of ‘legislative goals, social policy, and examination of the transaction as a whole.’ " Emp’rs Mut. Cas. Co. v. DGG & CAR, Inc. , 218 Ariz. 262, 264, ¶ 9, 183 P.3d 513, 515 (2008) (citation omitted); see also Teufel , 244 Ariz. at 386, ¶ 17, 419 P.3d at 549 (noting a court may consider common meanings and an insured’s reasonable expectations when resolving an apparent ambiguity). At the end of our inquiry, we must construe any remaining ambiguity against the insurer, "particularly when the ambiguity involves an exclusionary clause." Teufel , 244 Ariz. at 385, ¶ 10, 419 P.3d at 548.

¶7 The Goldbergers argue the superior court erred in dismissing their complaint because the phrase "domestic animals" is reasonably susceptible to differing interpretations and therefore must be construed against State Farm. According to State Farm, the Exclusion is susceptible to only one reasonable interpretation; alternatively, it contends that any ambiguity remaining after considering the Policy’s overall purpose must be resolved in its favor.

¶8 Although the Policy does not define "domestic animals," the parties offer multiple definitions. The Goldbergers contend the term could reasonably refer to either (1) animals belonging to a broader class of animals that have been domesticated at some point in history (the "species-based definition") or (2) animals that are, in fact, kept by a person for any of various purposes, including as pets (the "individualized definition"). State Farm argued for the species-based definition in the superior court, which appeared to agree with that definition. In its appellate briefing, State Farm supplied a third definition, asserting the phrase can only reasonably refer to "dogs [and] cats, as well as a broader class of animals reasonably expected to be found in or around a dwelling." And at oral argument, State Farm asserted that regardless of the outer limits of what "domestic animals" means, it includes all dogs and cats.

¶9 State Farm first points to a federal case interpreting the same policy language in the context of property damage allegedly caused by "feral" cats. Bjugan v. State Farm Fire & Cas. Co. , 969 F. Supp. 2d 1283 (D. Or. 2013), aff’d sub nom. Bjugan v. State Farm Fire & Cas. Ins. Co. , 644 Fed. Appx. 789 (9th Cir. 2016). Despite a surface-level similarity, the case is distinguishable. Bjugan was decided on summary judgment, and "involve[d] a renter who maintained ... ninety-five cats and two dogs in a rental house and the manner in which the animals were maintained resulted in physical damage to the house." 969 F. Supp. 2d at 1284–85 (emphasis added). The fact that the cats were being "maintained" by the renter, who actually "acknowledge[d] she knew there were cats doing damage" and "tried to prevent that whenever she was aware of it occurring," id. at 1288, means the cats were so obviously domestic animals that the court’s additional plain-meaning analysis is of limited utility. Put differently, the cats in Bjugan would be domestic animals under both the individualized and species-based definitions proposed here.¹

448 P.3d 305

¶10 Instead, at least initially, we conclude "domestic animals" as used in the Exclusion is ambiguous because it has at least two conflicting interpretations, both reasonable. Under the species-based definition, the animal’s species is dispositive, meaning its current habitat and whether a human cares for it are irrelevant. Under the individualized definition, the opposite is true. We resolve this ambiguity by examining the "transaction as a whole," including the Policy’s language and purpose, public policy considerations, the parties’ intent, and the insured’s reasonable expectations.² Teufel , 244 Ariz. at 386, ¶ 17, 419 P.3d at 549 ; State Farm Mut. Auto. Ins. Co. v. Wilson , 162 Ariz. 251, 257–58, 782 P.2d 727, 733-34 (1989).

¶11 "We start with the policy’s language." Teufel , 244 Ariz. at 387, ¶ 18, 419 P.3d at 550 (assigning common meaning after finding the policy language ambiguous). Broadly stated, an "animal" is "any living creature (besides plants) other than a human being." See, e.g. , Animal , Black’s Law Dictionary (10th ed. 2014). And the adjective "domestic" means "[o]f, relating to, or involving the family or the household." See, e.g. , Domestic , Black’s Law Dictionary (10th ed. 2014). Used together, the two words presumably refer to animals that relate to or involve the family or the household—pets and other animals kept in or around a household—as some dictionaries confirm. See, e.g. , Domestic Animal , Cambridge Advanced Learner’s Dictionary (4th ed. 2013) ("[A]n animal that is not wild and is kept as a pet or to produce food."); Domestic , New Oxford American...