Safeco Ins. Co. v. Fireman's Fund Ins. Co.

• Decision Date: 14 March 2007
• Docket Number: No. B187743.,B187743.
• Court: California Court of Appeals Court of Appeals
• Parties: SAFECO INSURANCE COMPANY OF AMERICA, Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant and Respondent.

55 Cal.Rptr.3d 844

148 Cal.App.4th 620

SAFECO INSURANCE COMPANY OF AMERICA, Plaintiff and Appellant, v. FIREMAN'S FUND INSURANCE COMPANY, Defendant and Respondent.

No. B187743.

Court of Appeal, Second District, Division 1.

March 14, 2007.

Demler, Armstrong & Rowland, Raymond H. Goettsch and James P. Lemieux, Long Beach, for Plaintiff and Appellant.

Horvitz & Levy, Mitchell C. Tilner, Karen M. Bray, Encino; Caron, Constants & Wilson, and Sherry L. Pantages, Glendale, for Defendant and Respondent.

MALLANO, Acting P.J.

In a prior action, an insured homeowner was found liable to a downhill neighbor for a landslide that inundated the neighbor's backyard with dirt and debris. The judgment totaled around $4 million. The homeowner's primary and excess insurers provided a defense and indemnity. This is a declaratory relief action between the insurers concerning the coverage provided under successive policies issued by the primary insurer.

Immediately after the landslide, the City of Los Angeles determined that the neighbor's backyard was unusable and ordered the insured to repair the slope. But the slope went unrepaired for years, and the backyard remained unusable while each of the primary policies was in effect.

The primary insurer issued four successive policies that covered an "occurrence [of] property damage," defined as an accident, including continuous exposure to the same conditions resulting in a loss of use during the policy period. The policies separately covered an "occurrence [of] personal injury," which included "an act . . . that occurs during the policy period and which results [in wrongful entry or eviction]." Each policy had limits of $500,000 per occurrence.

In this case, the primary insurer contended it was liable for only one occurrence, or $500,000. The excess insurer argued that because both property damage and personal injury occurred in all four policy periods, the primary insurer was liable for up to $4 million. The trial court granted summary judgment for the primary insurer, stating that coverage under the primary policies was limited to $500,000. We agree. There was only one occurrence because the ensuing damage was the result of one cause: the landslide. Further, under the policy language, the continuation of any damage into subsequent policy periods — for example, loss of use — did not give rise to multiple occurrences. The judgment is accordingly affirmed.

I BACKGROUND

The parties stipulated to most of the material facts. We also accept as true the additional undisputed facts supported by the cross-motions for' summary judgment. (See Raghavan v. Boeing Co. (2005) 133 Cal.App.4th 1120, 1125, 35 Cal.Rptr.3d 397.)

Harold Lancer and his next-door neighbors owned homes on top of a hill in Encino, California. Their downhill neighbors included Lawrence and Linda Rauch (the Rauches), and Bradley and Mitzi Rapture (the Raptures). On February 27, 1998, a portion of the uphill properties failed, causing a landslide. Dirt and debris deluged the backyards of the Rauches and the Raptures and caused a one-inch bulge in the Rauches' north retaining wall.

Within 24 hours of the slope failure, the City of Los Angeles "yellow tagged" the Rauches' backyard. A yellow tag notice read: "WARNING: THIS SITE HAS BEEN DAMAGED AND MAY BE DANGEROUS TO OCCUPY. FURTHER DAMAGE MAY OCCUR AT ANY TIME. UNAUTHORIZED ENTRY OR OCCUPANCY IS A MISDEMEANOR!. . . [¶] . . . [¶] NO ACCESS TO YARD AREA." The yellow tag remained in the Rauches' backyard more than three years, until at least June 24, 2001. When the city yellow-tagged the backyard, it also ordered Lancer and the other uphill neighbors to repair the slope.

In February 1999, the Rauches filed suit against Lancer and the other uphill neighbors (Ranch v. Lancer (Super.Ct.L.A.County, 1999, No. LC047839)), alleging causes of action for nuisance, trespass, and negligence. In addition to the above facts, the complaint alleged as follows. The yellow tag prevented the Rauches from using their backyard, which included a swimming pool and spa. The uphill neighbors did not comply with the city's repair order. Mud, debris, vegetation, and water from the uphill neighbors' properties continued to flow onto the Rauches' residence when it rained. The Rauches moved a substantial amount of their personal property from the residence and placed it in storage. Their living conditions deteriorated substantially; their residence lost most, if not all, of its market value; and their family life was materially disrupted. The slope remained unstable, posing a risk of additional slippage and further damage to the Rauches. As relief, the complaint sought general damages and injunctive relief to abate the nuisance.

Cross-complaints were filed in the Ranch case, including cross-complaints between Lancer and another uphill neighbor for indemnity and comparative fault. Several settlements were reached before the case went to trial.

In February 1999, in a separate case, the Raptures, among others, brought claims against Lancer and the uphill neighbors for nuisance, trespass, and negligence (Shephard v. Lancer (Super.Ct.L.A.County, 1999, No. LC048012) (Rapture case)).

Lancer had obtained a homeowners policy from Fireman's Fund Insurance Company, effective June 24, 1997, to June 24, 1998. Fireman's Fund renewed the policy in three subsequent years, each for a one-year period. The last policy expired on June 24, 2001. The premium went up every year but the last, when it dropped, averaging about $1,600 per year. Each policy had a $1,000 deductible. The policies covered claims against Lancer seeking damages for property damage, bodily injury, and personal injury caused by an occurrence. The limit of liability in each policy was $500,000 per occurrence.

Safeco Insurance Company of America issued a personal umbrella policy to Lancer, effective July 9, 1997, to July 9, 1998. It was renewed annually in two subsequent years, the last policy expiring on July 9, 2000. The Safeco policies covered property damage and personal injury caused by an occurrence. The limit of liability was $5 million per occurrence. The Safeco coverage did not apply to an occurrence until Lancer had exhausted the limits available under all other underlying insurance. Safeco was therefore an excess insurer.

In the Rauch and Rapture cases, Lancer sought a defense and indemnity from Fireman's Fund and Safeco. In or about June 2001, the Rapture case settled for $175,000. On June 8, 2001, Fireman's Fund contributed $50,000 to the settlement. The rest of the settlement was covered by the other uphill neighbors. The Rapture case came to an end.

In the Rauch action, the cross-complaints between Lancer and the other uphill neighbor were settled by agreement that each pay $1.1 million into a trust to repair the slope. On August 8, 2001, Fireman's Fund paid $450,000 toward the settlement. It then took the position that it had exhausted its policy limits of $500,000, arguing that the slope failure had caused only one occurrence under the first of its four policies. Nevertheless, Fireman's Fund agreed to continue defending Lancer, subject to a reservation of rights to seek reimbursement of defense costs from Safeco. Fireman's Fund spent an additional $265,000 in that regard. For its part, Safeco contributed $450,000 toward the settlement of the same cross-complaints, subject to a reservation of rights to seek reimbursement from Fireman's Fund.

In 2001, the complaint in Rauch was tried in two phases. In phase I, the superior court heard evidence regarding the condition of the slope, declared it a nuisance, and ordered that it be abated. The court directed Lancer and the other uphill neighbors to implement a repair plan to be approved by the city and determined that the repairs would cost $3,795,448. Lancer and the other uphill neighbors were found jointly and severally liable for that sum and were instructed to deposit the funds, including all prior settlements, into one or more interest-bearing accounts. The court appointed a receiver to control the funds and supervise the project.

In phase II, a jury found for the Rauches on the nuisance and negligence causes of action and for Lancer and the other uphill neighbors on the trespass claim. The jury found Lancer 50 percent at fault for the slope failure. It awarded $75,500 in economic damages for loss of use and relocation expenses, and $12,500 in noneconomic damages for annoyance, discomfort, and inconvenience.

On September 24, 2003, the superior court entered judgment in favor of the Rauches for $75,500 in economic damages, $12,500 in noneconomic damages, $26,718 in postverdict interest, $65,785 in investigative costs (see Stearman v. Centex Homes (2000) 78 Cal.App.4th 611, 625, 92 Cal.Rptr.2d 761), and $26,992 in litigation costs. Defendants were also ordered, jointly and severally, to deposit $3,795,448 into a fund for slope repairs.

Taking into account the jury's finding that Lancer was 50 percent at fault, his share of the judgment exceeded $2 million. Lancer paid a portion of the judgment with settlements from other parties. Fireman's Fund paid at least $765,000 in the case, including: (1) $500,000 toward settlement of the Rapture case and the cross-complaint against Lancer in Ranch, and (2) $265,000 in defense costs after the settlement payments. Safeco paid $1.54 million on Lancer's behalf: (1) $44,000 of the Rauches' damages; and (2) $1.49 million of the repair fund (including $275,000 of the fund for which Lancer's codefendants were responsible but could not pay).

In July 2002, Safeco filed this declaratory relief action against Fireman's Fund in which it claimed that Fireman's Fund's policies provided Lancer with $500,000 in coverage for property damage and an additional $500,000 in coverage for personal injury during each of Fireman's Fund's four policy periods, for a total of $4 million.

Fireman's Fund filed a cross-complaint against Safeco, alleging three...