Lakeland Vill. Homeowners Ass'n v. Great Am. Ins. Group

• Decision Date: 10 September 2010
• Docket Number: No. 2:10-cv-00604-GEB-GGH,2:10-cv-00604-GEB-GGH
• Citation: 727 F.Supp.2d 887
• Court: U.S. District Court — Eastern District of California
• Parties: LAKELAND VILLAGE HOMEOWNERS ASSOCIATION, Plaintiff, v. GREAT AMERICAN INSURANCE GROUP, Travelers Property Casualty Company of America, and Does 1 through 50, Defendants.

727 F.Supp.2d 887

LAKELAND VILLAGE HOMEOWNERS ASSOCIATION, Plaintiff,

v.GREAT AMERICAN INSURANCE GROUP, Travelers Property Casualty Company of America, and Does 1 through 50, Defendants.

No. 2:10-cv-00604-GEB-GGH.

United States District Court,

E.D. California.

July 22, 2010.

Opinion Granting Certification of Appeal and Granting Stay Sept. 10, 2010.

Clifford E. Hirsch, Hirsch, Closson, McMillan & Schroeder, Walnut Creek, CA, for Plaintiff.

Peter J. Whalen, Clyde & Co U.S. LLP, San Francisco, CA. Douglas L. Smith, Smith and Associates, Inc., Fair Oaks, CA, for Travelers Property Casualty Company of America.

ORDER GRANTING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND DENYING DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT

GARLAND E. BURRELL, JR., District Judge.

Plaintiff moves for partial summary judgment against its insurer, Defendant Travelers Property Casualty Company of America ("Defendant"), on its third claim for declaratory relief. Specifically, Plaintiff seeks a declaration that Defendant has a duty to defend a cross-complaint filed against it in a pending state court action. Defendant filed a cross motion for summary judgment, arguing it does not owe Plaintiff a defense, and therefore, is entitled to judgment on Plaintiff's claims.

I. LEGAL STANDARD

A party seeking summary judgment bears the initial burden of demonstrating the absence of a genuine issue of material fact for trial. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If this burden is satisfied, "the non-moving party must set forth, by affidavit or as otherwise provided in [Federal] Rule [of Civil Procedure] 56, specific facts showing that there is a genuine issue for trial." T.W. Elec. Serv., Inc. v. Pacific Elec. Contractors Ass'n, 809 F.2d 626, 630 (9th Cir.1987) (quotations and citation omitted) (emphasis omitted). When deciding a summary judgment motion, all reasonable inferences that can be drawn from the evidence "must be drawn in favor of the non-moving party." Bryan v. MacPherson, 608 F.3d 614, 619 (9th Cir.2010).

II. UNDISPUTED FACTS

A. The Underlying Litigation and Tender of Defense

In the underlying state court litigation involved with Plaintiff's tender of defense, Kellie Warnick and her mother, Ann Michael, filed a complaint against Premier Resorts International, Inc. dba Lakeland Village Beach and Mountain Resort ("PRI"), and Francis Hollow ("Hollow") that concerns a wedding reception Ms. Warnick hosted at Lakeland Village. (Def.'s Response to Pl.'s Separate Statement of Undisputed Facts ("SUF") # 1-2.)

Hollow, who owns a town home in Lakeland Village, called the police and complained about noise at the reception. (Pl.'s Evid., Ex. 1, ¶ 16, Ex. 7, ¶ 1.) The police responded and took action that resulted in the termination of the wedding reception. ( Id.)

Hollow answered the state court action and filed a cross-complaint against Plaintiff and PRI for indemnity, contribution and declaratory relief. (Def.'s Response to Pl.'s Separate Statement of Undisputed Facts ("SUF") # 3.) Hollow subsequently filed a First-Amended Cross-Complaint, which added a nuisance claim. (SUF # 10.) Hollow alleges in the nuisance claim that non-property owners used Lakeland Village's common areas for weddings, wedding receptions and similar events, wherein loud music was played that interfered with Hollow's quiet use and enjoyment of his property. (SUF # 11.)

Plaintiff tendered its defense of Hollow's First-Amended Cross-Complaint to Defendant in early 2007. (SUF # 18.) Defendant denied the tender on April 9, 2007. (SUF # 19.) Hollow later filed a Second-Amended Cross-Complaint ("Cross-Complaint"), which deleted his indemnity claim. (SUF # 15.)

B. The Applicable Insurance Policy

The insurance policy under which the tender was made provides in relevant part: "We will pay those sums that the insured becomes legally obligated to pay as damages because of 'personal injury'... to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those damages." (Pl.'s Evid., Ex. 12, at 1.) "Personal injury" is defined to include "injury, other than 'bodily injury,' arising out of ... the wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor." (Id., at 3.)

III. DISCUSSION

The parties dispute whether or not Defendant owes Plaintiff a defense of Hollow's Cross-Complaint. Plaintiff seeks a declaration that Defendant has a duty to defend it, arguing Hollow's nuisance claim is covered by the policy's coverage for injury arising out of "invasion of the right of private occupancy of a room, dwelling or premises that a person occupies by or on behalf of its owner, landlord or lessor...." (Pl.'s P. & A. in Supp. of Mot. for Partial Summ. J. ("Mot.") 8:9-19.) Defendant rejoins that it does not owe Plaintiff a defense because "invasion of the right of private occupancy," requires a physical invasion, and "[n]oise simply is not a physical invasion of the right to private occupancy in California." (Def.'s P. & A. in Opp'n to Pl.'s Mot. for Summ. J. ("Opp'n") 9:8-10, 10:20-21.) Defendant further counters that it does not owe Plaintiff a defense since the clause "by or on behalf of its owner, landlord or lessor," modifies the word "invasion," requiring Plaintiff to own the affected property for there to be coverage, and Plaintiff does not own Hollow's property. (Opp'n 7:11-15.)

A. An Insurer's Duty to Defend

Under California law,

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.

Scottsdale Ins. Co. v. MV Transp., 36 Cal.4th 643, 654, 31 Cal.Rptr.3d 147, 115 P.3d 460 (2005) (citation omitted). Further, "[a]ny doubt as to whether the facts give rise to a duty to defend is resolved in the insured's favor." Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076, 1081, 17 Cal.Rptr.2d 210, 846 P.2d 792 (1993).

In a duty to defend case, an insured moving for summary judgment "need only show 'the existence of a potential for coverage,' i.e., 'that the underlying claim may fall within policy coverage.' " Cunningham v. Univ. Underwriters, 98 Cal.App.4th 1141, 1147, 120 Cal.Rptr.2d 162 (2002) (citing Montrose Chem. Corp. v. Sup. Ct., 6 Cal.4th 287, 300, 24 Cal.Rptr.2d 467, 861 P.2d 1153 (1993)). Whereas, an insurer moving for summary judgment " 'must establish the absence of any ... potential' for coverage, i.e., that the underlying complaint 'can by no conceivable theory raise a single issue which could bringit within the policy coverage.' " Id. (citing Montrose Chem. Corp., at 300, 24 Cal.Rptr.2d 467, 861 P.2d 1153 (1993)). "Although the insurer's burden in moving for summary judgment is greater than the insured's burden in bringing its own affirmative motion, this disparity merely reflects the substantive law." Id. (citation omitted).

When an insurer owes a duty of defense, "the insurer is obligated to defend against all of the claims involved in the action, both covered and noncovered...." Horace Mann Ins. Co. v. Barbara B., 4 Cal.4th 1076, 1081, 17 Cal.Rptr.2d 210, 846 P.2d 792 (1993). "To defend meaningfully, the insurer must defend immediately. To defend immediately, it must defend entirely. It cannot parse the claims, dividing those that are at least potentially covered from those that are not." Buss v. Sup. Ct., 16 Cal.4th 35, 49, 65 Cal.Rptr.2d 366, 939 P.2d 766 (1997).

B. 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.

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.

Palmer v. Truck Ins. Exchange, 21 Cal.4th 1109, 1115, 90 Cal.Rptr.2d 647, 988 P.2d 568 (1999) (quotations and citations omitted).

"A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable. But language in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract." Waller v. Truck Ins. Exchange, Inc., 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.2d 619 (1995). "There cannot be an ambiguity per se, i.e. an ambiguity unrelated to an application." Bay Cities Paving & Grading, Inc. v. Lawyers' Mutual Ins. Co., 5 Cal.4th 854, 867, 21 Cal.Rptr.2d 691, 855 P.2d 1263 (1993) (quotation and citation omitted).

If a policy provision has been judicially construed, "it is not ambiguous and the judicial construction of the term...