Thompson v. Crestbrook Ins. Co.

• Decision Date: 21 June 2022
• Docket Number: A161949
• Citation: 81 Cal.App.5th 115,296 Cal.Rptr.3d 138
• Parties: Peter THOMPSON et al., Plaintiffs and Appellants, v. CRESTBROOK INSURANCE COMPANY et al., Defendants and Respondents.
• Court: California Court of Appeals Court of Appeals

81 Cal.App.5th 115

296 Cal.Rptr.3d 138

Peter THOMPSON et al., Plaintiffs and Appellants,

v.CRESTBROOK INSURANCE COMPANY et al., Defendants and Respondents.

A161949

Court of Appeal, First District, Division 4, California.

Filed June 21, 2022

James C. Nielsen, Nielsen Katibah LLP, 100 Smith Ranch Road Suite 350, San Rafael, CA 94903, for Plaintiff and Appellant Peter Thompson.

Marc S. Hines, Brian Lee Pelanda, Hines Hampton Pelanda LLP, 30 Executive Park, Suite 210, Irvine, CA 92614, for Defendant and Respondent Crestbrook Insurance Company.

Tami Kay Lee, Paul Karsten Schrieffer, Christina Anh Ho, P.K. Schrieffer, Inc., 100 N Barranca Ave., Suite 1100, West Covina, CA 91791, for Defendant and Respondent Sander, Jacobs, Cassaver & Griffin Inc.

Tami Kay Lee, Scott Patrick Ward, Clausen Miller, PC, 27285 Las Ramblas, Suite 200, Mission Viejo, CA 92691, for Pub/Depublication Requestor Clausen Miller PC.

John King Beckley, Auto Club Of Southern Calif, 3333 Fairview Rd M/S A451, Costa Mesa, CA 92626-1698, Richard Wardell Loveland, Coddington, Hicks & Danforth, 555 Twin Dolphin Drive - Suite 300, Redwood City, CA 94065, Min K. Kang, Coddington, Hicks & Danforth, 520 Broadway, 2nd Floor, Santa Monica, CA 90401, for Pub/Depublication Requestor Interinsurance Exchange of the Automobile Club.

POLLAK, P.J.

Peter and Toni Thompson and Henstooth Ranch, LLC (collectively, the Thompsons) appeal a summary judgment in favor of Crestbrook Insurance Company (Crestbrook) and Nationwide Agribusiness Insurance Company (Nationwide) (collectively, the insurers) and Sander, Jacobs, Cassayre & Griffin, Inc. (the agent). The court held that the insurers had no duty to defend the Thompsons in an action involving a parcel they own in Sonoma County. The parcel is subject to a conservation easement ( Civ. Code, § 815 et seq. ) in favor of Sonoma Land Trust (SLT), which prohibits any impairment of the land's conservation values.

SLT sued the Thompsons in 2015, alleging that they had done work on the parcel that caused damage in violation of the conservation easement. The Thompsons tendered defense of the action to another insurer not a party here, The Burlington Insurance Company (Burlington). Burlington declined the tender on the ground that the SLT action did not arise from an "occurrence," defined as an "accident." The Thompsons filed a coverage suit removed to federal court which resulted in a judgment upholding the denial of coverage, affirmed by the Ninth Circuit Court of Appeals. ( Henstooth Ranch, LLC v. Burlington Ins. Co. (N.D. Cal. 2018) 293 F.Supp.3d 1067, aff'd by mem. opn. (9th Cir. 2019) 770 Fed.Appx. 804 ( Burlington ).) While that appeal was pending, the Thompsons tendered defense of the SLT action to Crestbrook and Nationwide, under policies identical in relevant part to the Burlington policy. The insurers declined the tender, the Thompsons filed the present action, and the trial court ultimately upheld the denial of coverage based on the same analysis as the federal court. We shall affirm the judgment, not on the ground adopted by the trial court, but on the ground that the federal court judgment precludes relitigation of whether the SLT action arose from an "accident" within the meaning of the two insurers’ policies.

Factual and Procedural History

In 2009, the parcel's then-owners deeded SLT a conservation easement over the entire parcel to prevent the loss of its scenic, natural-habitat, and open-space values that would occur if the parcel were developed. With narrow exceptions, the easement bars: (1) commercial, industrial, agricultural, or residential use of the parcel; (2) construction of new roads or structures; (3) off-road use of motor vehicles; (4) waste disposal; (5) excavation or alteration of the land; and (6) removal or destruction of trees, except as required for specified purposes. It requires the parcel's owners, before undertaking any restoration activity, to secure SLT's written approval of a vegetation-management plan.

In 2013, the Thompsons acquired the parcel. They also acquired an adjacent parcel, held by a limited liability corporation which they formed, Henstooth Ranch LLC (Henstooth), on which they planned to build a house.

In the relevant period, Henstooth held a commercial general liability (CGL) insurance policy from Burlington. The Thompsons held a homeowners’ policy from Crestbrook, which covered damages an insured must pay "due to an occurrence," defined to mean "an accident" resulting in "bodily damage, property damage or personal injury." The policy defined "personal injury" to include, among other things, "wrongful entry"—a term not further defined. Henstooth later obtained coverage instead under a Nationwide policy that was similar to the Crestbrook policy, but that defined "personal ... injury" to include "wrongful entry into ... a room, dwelling or premises that a person occupies."

In 2014, without consulting SLT, the Thompsons hired contractors to do work on the easement parcel, including relocating a 180-year-old oak tree from the easement parcel to the house parcel. Consequently, in November 2015, SLT filed an action in Sonoma County Superior Court, asserting claims for breach of contract, violation of the conservation easement ( Civ. Code, § 815.7 ) and damage to trees ( Civ. Code, § 3346 ; Code Civ. Proc., § 733 ).

SLT's complaint against the Thompsons alleged that, in late 2014, SLT learned that the Thompsons "had begun extensive work" on the easement parcel. They were building "a new road to move [a 180-year-old] oak tree" from the easement parcel to the house parcel. SLT staff observed "a newly graded road running nearly the length of the [easement parcel]" from its boundary with the house parcel to the tree. SLT also learned of "a separate incident in which the Thompsons or their contractors" had dredged sediment from a pond on the house parcel and spread it over a portion of the easement parcel. In November 2014, SLT staff observed further grading. Despite the requirements of the easement, the Thompsons had not sought SLT's permission for any of these activities.

SLT alleged that its staff attempted to visit the site, but the Thompsons put them off repeatedly. In December 2014, SLT sent the Thompsons a notice "detailing the steps SLT required them to undertake to restore the property," which included hiring a consultant to draft a restoration plan for SLT's review. In spring 2015, the Thompsons instead "unilaterally undertook their own ‘restoration’ efforts," which not only "failed to remedy [their] past violations" but "caused further harm" to the easement parcel by "fostering growth of non-native species and weeds" and causing "further erosion that reached bedrock" in places. The further harm allegedly was caused by both the Thompsons’ "asserted efforts ‘to restore’ [the parcel]" and their "initial unlawful activities." In a June 2015 site visit, SLT staff observed that the Thompsons had conducted "additional unlawful grading" and had "installed a culvert and a short new road" on the easement parcel.

After that visit and threats of litigation, the Thompsons hired a contractor recommended by SLT to create a restoration plan. The Thompsons gave the plan to SLT for its approval and "agreed not to undertake further unilateral efforts to restore the property." But in November 2015, with the rainy season looming, the Thompsons and SLT reached an impasse over restoration plans. By then, "the original damage done ... when the Thompsons first graded the road, removed the oak tree, and disposed of dredged materials ha[d] worsened significantly over time due to both erosion of unprotected soils and the Thompsons’ own, additional activities." SLT then filed suit and, in December 2015, Henstooth tendered the action to Burlington, which declined to provide a defense.

In August 2016, while the SLT action was pending, the Ninth Circuit published an opinion certifying to the California Supreme Court the following question, "Whether there is an ‘occurrence’ under an employer's [CGL] policy when an injured third party brings claims against the employer for the negligent hiring, retention, and supervision of the employee who intentionally injured the third party?" ( Liberty Surplus Ins. Corp. v. Ledesma & Meyer Constr. Co., Inc. (9th Cir. 2016) 834 F.3d 998, 1000 ( Ledesma certifying opn.).) The policy at issue in Ledesma defined "occurrence" to include an "accident" in terms identical to the policies at issue here. ( Id. at pp. 1001–1002.) The Supreme Court accepted the certified question in October 2016. (Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co., Inc. , S236765, Supreme Court Mins., Oct. 19, 2016) .)

A month later, Henstooth sued Burlington, seeking a declaration that the pending SLT action was based on an "occurrence" under its CGL policy, obligating Burlington to provide a defense to the action. Burlington removed the action to federal court. In late 2017, the parties filed cross-motions for summary judgment, which the district court resolved in a January 2018 order finding no duty to defend.

The district court in Burlington summarized the relevant law as follows: " ‘An accident does not occur when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage.’ [Citation.] ‘Where the insured intended all of the acts that resulted in the victim's injury, the event may not be deemed an "accident" merely because the insured did not intend to cause injury.’ [Citation.] ‘That does not mean, however, that coverage is always precluded merely because the insured acted intentionally and the victim was injured.’ [Citation.] ... ‘Rather, an accident may exist "when any aspect in the causal series of events leading to the injury or damage was unintended by the insured and a matter of fortuity." ’ [Citation.] ‘However, "where damage is the direct and immediate result of an intended ... event, there is no accident."...