916 F. Supp. 2d 1058
N.D. Cal.2013Background
- BRE Properties operated Berkshire Court, a 26-building Oregon apartment complex, and collected substantial rents from it.
- BRE purchased Berkshire in 1996, later discovering water intrusion and repairing decks and siding 1999–2001 with ABC as the general contractor.
- BRE obtained CGL policies from Genesis (1999–2002) and then from Lexington (2002–2008), both with Self-Insured Retention endorsements.
- Oakmont, the 2008 Oregon state case, alleged BRE misrepresented and failed to disclose defects related to Berkshire; related third-party complaints ensued (ABC and Oakmont I).
- Oakmont II asserted fraudulent misrepresentation; Oakmont I’s third amended complaint later alleged misrepresentation before the 2003 sale of Berkshire to Oakmont; the third amended complaint remained pending.
- The court ruled on cross-motions for summary judgment: Plaintiff Genesis’s motion and Lexington’s motion against BRE were granted; BRE’s motions against Genesis and Lexington were denied; exclusions j(l) and j(2) preclude coverage for Oakmont, and the misrepresentation claim is not covered by the policies.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether exclusion j(l) bars coverage for the Oakmont action | Genesis contends j(l) excludes damage to property you own, rented or occupied. | BRE argues j(l) applies only to property owned at time of damage and not after sale; disputes interpretation of present tense. | Yes; exclusion j(l) precludes coverage. |
| Whether exclusion j(2) bars coverage after BRE sold Berkshire | j(2) excludes damage to premises sold, unless work never occupied or rented by BRE. | BRE argues reasoning from Prudential Maryland Casualty; contends alienated premises should not preclude coverage. | Yes; exclusion j(2) applies to the Oakmont claims post-sale. |
| Whether the misrepresentation claim is covered as an occurrence or economic loss | Misrepresentation can be within policy coverage if it constitutes an occurrence. | Misrepresentation is not an occurrence and yields only economic damages, outside policy period. | No; misrepresentation is not an occurrence and damages are economic, outside coverage. |
| Choice of law governing the policies | Forum state law (California) should apply if there is no conflict. | Not asserted beyond conflict analysis; BRE disputes applicability of forum law. | California law applies. |
Key Cases Cited
- Maryland Casualty Co. v. Reeder, 221 Cal.App.3d 961 (1990) (alienated premises/exclusion analysis; illusory coverage concern)
- Prudential-LMI Commercial Ins. Co. v. Reliance Ins. Co., 22 Cal.App.4th 1508 (1994) (ultimate test: coverage consistent with insured's reasonable expectations)
- Montrose Chemical Corp. v. Superior Court, 6 Cal.4th 287 (1993) (duty to defend vs. duty to indemnify framework; potential coverage analysis)
- Devin v. United Services Auto. Ass'n, 6 Cal.App.4th 1149 (1992) (economic damages vs. property damage; scope of coverage)
- Martin v. State Farm Fire and Cas. Co., 146 Or.App. 270 (1997) (misrepresentation/occurrence framework; pre-sale misrepresentation)