Albert v. Mid-Century Insurance Company

In Albert v. Mid-Century Ins. Co., 236 Cal.App.4th 1281 (May 20, 2015), the California Second District Court of Appeal affirmed the trial court’s entry of summary judgment in favor of Mid-Century Insurance Company (“Mid-Century”) in connection with its denial of defense of an underlying lawsuit alleging that the insured, Shelly Albert (“Albert”), intentionally damaged an adjacent property owner’s olive trees when she hired a contractor to trim and prune them in compliance with an order by the Los Angeles County Fire Department. The coverage dispute involved an underlying lawsuit brought by a neighbor of Albert for damage caused to his property when Albert erected an encroaching fence and pruned 9 mature olive trees on the underlying plaintiff’s property. Albert tendered the defense of the lawsuit to Mid-Century. In response, Mid-Century denied the defense of such lawsuit based on the absence of an “occurrence” as defined in Albert’s Mid-Century homeowner’s policy. Thereafter, after a period of nearly two years of exchanges of demands and information between Albert and Mid-Century, she filed a complaint for breach of contract and bad faith against Mid-Century. Subsequently, Mid-Century filed a motion for summary judgment which was granted by the trial court. In affirming the trial court’s entry of summary judgment, the Court of Appeal referred to the language of the Mid-Century policy which stated as follows:

“We will pay those damages which an insured becomes legally obligated to pay because of: We do not have any duty to defend or settle any suit involving actual, alleged, threatened or declared … property damage not covered under this liability insurance. This applies whether or not the suit is groundless, false or fraudulent.” (Boldface omitted.) The policy defines an “occurrence” as “an accident, including exposure to conditions, which occurs during the policy period, and which results in … property damage … during the policy period. Repeated or continuous exposure to the same general conditions is considered to be one occurrence.” (Boldface omitted.)

The policy also set forth a number of exclusions, including one for “Intentional acts,” which the policy defined as “property damage … which is caused by, arises out of or is the result of an intentional act by or at the direction of the insured. By way of example this includes but is not limited to any intentional act or intentional failure to act by an insured, whether a criminal act or otherwise, where resulting injury or damage would be objectively expected to a high degree of likelihood, even if not subjectively intended or expected. This exclusion applies even if: … the injury or damage is different or greater or of a different quality than that intended or expected.”

The Court of Appeal characterized the parties’ dispute as follows:

Defendant contends it had no duty to defend plaintiff in Mr. Baccouche's lawsuit, reasoning that the claims all arose from plaintiff's nonaccidental conduct. Plaintiff contends there was a triable issue of fact regarding whether her conduct was accidental within the meaning of the policy, thereby precluding summary judgment. We agree with defendant.

The Court of Appeal also described an insurer’s duty to defend as follows:

An insurer owes its insured a broad duty to defend against claims creating a potential for indemnity. (Quan v. Truck Ins. Exchange (1998) 67 Cal.App.4th 583, 590 [79 Cal. Rptr. 2d 134].) The duty to defend is broader than the duty to indemnify, and may exist even if there is doubt about coverage. (Id. at p. 591; see Frake, supra, 197 Cal.App.4th at p. 577.) When determining whether a duty to defend exists, the court looks to all of the facts available to the insurer at the time the insured tenders its claim for a defense. (Vann v. Travelers Companies (1995) 39 Cal.App.4th 1610, 1614–1615 [46 Cal. Rptr. 2d 617].) Initially, the court compares the allegations of the complaint with the terms of the policy. (Frake, supra, at p. 578.) The proper focus is on the facts alleged in the complaint, rather than the alleged theories for recovery. Nevertheless, the insured “‘“may not speculate about unpled third party claims to manufacture coverage”’ … , and the insurer has no duty to defend where the potential for liability is ‘“tenuous and farfetched.”’ … The ultimate question is whether the facts alleged ‘fairly apprise’ the insurer that the suit is upon a covered claim.” (Michaelian v. State Comp. Ins. Fund (1996) 50 Cal.App.4th 1093, 1106 [58 Cal. Rptr. 2d 133], citations omitted.) Facts extrinsic to the complaint may also be examined and may either establish or preclude the duty to defend. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 19 [44 Cal. Rptr. 2d 370, 900 P.2d 619].) Any doubt as to whether the facts give rise to a duty to defend is resolved in favor of the insured. (Vann, at pp. 1614–1615.)

The Court of Appeal also interpreted the term “occurrence” in the Mid-Century policy as follows:

Here, the policy covers property damage resulting from an occurrence, and the policy defines an occurrence as an accident. “Under California law, the word ‘accident’ in the coverage clause of a liability policy refers to the conduct of the insured for which liability is sought to be imposed on the insured.” (Delgado v. Interinsurance Exchange of Automobile Club of Southern California (2009) 47 Cal.4th 302, 311 (Delgado).) “An intentional act is not an ‘accident’ within the plain meaning of the word.” (Royal Globe Ins. Co. v. Whitaker (1986) 181 Cal.App.3d 532, 537, fn. omitted [226 Cal. Rptr. 435].) “In the context of liability insurance, an accident is ‘“an unexpected, unforeseen, or undesigned happening or consequence from either a known or an unknown cause.”’ [Citation.]” (Delgado, at p. 308.)

The term “accident” refers to the nature of the insured's conduct, and not to its unintended consequences. (Frake, supra, 197 Cal.App.4th at p. 579.) An accident “is never present when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage.” (Merced Mutual Ins. Co. v. Mendez (1989) 213 Cal.App.3d 41, 50 (Merced).) When an insured intends the acts resulting in the injury or damage, it is not an accident “merely because the insured did not intend to cause injury. … The insured's subjective intent is irrelevant.” (Fire Ins. Exchange v. Superior Court (2010) 181 Cal.App.4th 388, 392 [104 Cal. Rptr. 3d 534], citations omitted; see Merced, at p. 48.)

Nevertheless, coverage is not always precluded when the insured's intentional acts result in injury or damage. (Frake, supra, 197 Cal.App.4th at p. 580.) 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.” (Merced, supra, 213 Cal.App.3d at p. 50.)

Based on the interpretation of the term “occurrence” and, in particular, the term “accident” used in the definition of “occurrence,” the Court of Appeal held as follows:

As discussed, ante, it is completely irrelevant that plaintiff did not intend to damage the trees, because she intended for them to be pruned. (Fire Ins. Exchange v. Superior Court, supra, 181 Cal.App.4th at p. 392; see Merced, supra, 213 Cal.App.3d at p. 48.) Moreover, it is undisputed that the contractor intended to cut the trees, and absolutely no facts exist, in the complaint or otherwise, indicating that some unforeseen accident (such as a slip of the chainsaw) caused the damage to the trees. In fact, it was always plaintiff's position that the trees had not been damaged or pruned excessively (and therefore were not subject to an accident), and that they had been cut in accordance to the city's brush clearance ordinance. “An insured may not trigger the duty to defend by speculating about extraneous ‘facts’ regarding potential liability or ways in which the third party claimant might amend its complaint at some future date.” (Gunderson v. Fire Ins. Exchange (1995) 37 Cal.App.4th 1106, 1114 [44 Cal. Rptr. 2d 272].)

Also nonexistent are any facts supporting plaintiff's theory that her negligent supervision of the contractors brings the complaint within the terms of the policy. Negligent supervision requires an employer supervising an employee; who is incompetent or unfit; the employer had reason to believe undue risk of harm would exist because of the employment; and the harm occurs. (Federico v. Superior Court (1997) 59 Cal.App.4th 1207, 1213–1214 [69 Cal. Rptr. 2d 370].) There are simply no facts, in the complaint or otherwise, supporting the elements of this claim.

. . .

Under any view of the underlying events, the trimming of the trees was no accident. Plaintiff failed to carry her burden to show any of Mr. Baccouche's claims may fall within the scope of the policy. (Montrose Chemical Corp. v. Superior Court, supra, 6 Cal.4th at p. 300.) Accordingly, the trial court did not err in granting defendant's motion for summary judgment.