Lead Opinion
Opinion
—Building а structure that encroaches onto another’s property is not an accident even if the owners acted in the good faith but mistaken belief that they were legally entitled to build where they did. Because their homeowners policy did not provide coverage for nonaccidental occurrences, the owners’ insurer had no duty to defend when the owners were sued by the adjoining landowner as a result of the encroachment. Accordingly, the owners’ insurer was entitled to summary judgment in the action for breach of contract and bad faith brought by the owners. We therefore grant the insurer’s petition for writ of mandate and direct that the superior court grant its motion.
FACTS
Real parties in interest, Kenneth and Dorothy Bourguignon, owned property in Big Bear adjoining the Leach property. In 1984, Louise Leach granted them an access easement over a five-and-one-half-foot-wide portion of her property that bordered theirs. After their property suffered earthquake damage, the Bourguignons wanted to renovate and rebuild their residence and obtained Leach’s signature on a “Lot Line Adjustment” application submitted to the City of Big Bear for the five-and-one-half-foot easement. The city approved the application on November 3, 1994, and a certificate of compliancе was recorded in January 1995. The Bourguignons completed construction in October 1995, and a corrected certificate was recorded that month.
In 2002, Ron and Marie Parsons negotiated to purchase the Leach property and subsequently found that the Lot Line Adjustment was a cloud on title. They obtained an assignment of any rights possessed by Leach and her two sons to contest its validity. The Parsonses then purchased the Leach property.
The Parsonses disputed the validity of the Lot Line Adjustment, asserting that Leach had conveyed a one-third interest in the property to her two sons in 1988 and the latter had not signed the Lot Line Adjustment application.
The Bourguignons tendered their defense to petitioner Fire Insurance Exchange (Fire Insurance), which had issued a homeowner policy to them in 1999. Fire Insurance refused to defend the suit on the ground that it owed no duty to defend because it had no potential liability under the policy.
The Bourguignons sued Fire Insurance for breach of the insurance contract and bad faith. Fire Insurance moved for summary judgment on the ground that the Parsonses’ claims did not present any potential basis for recovery. Specifically, it argued that any losses to the Parsonses resulted from the Bourguignons’ intentional act of building over the lot line and, thus, was not the result of an “accident.” Secondly, the Parsonses’ claims for equitable relief did not constitute damages covered by the policy. Finally, the Parsonses did not allege any property damage within the meaning of the policy because they did not allege any “physical injury to or destruction of’ tangible property.
The trial court denied summary judgment finding that there was a triable issue of fact whether the Bourguignons’ intentional act of constructing their home could constitute an “accident” because they did not intend to encroach but acted under the mistaken belief they had legally acquired title to the disputed property. It also found that the Parsonses’ trespass claim could support a claim for damages even though they did not pray for damages and, lastly, that the Parsonses’ cross-complaint alleged a tangible fee simple interest in their property.
DISCUSSION
Our analysis begins with the principles that determine an insurer’s duty to defend. The potential for coverage creates the insurer’s duty to defend. The insurer “must defend a suit which potentially seeks damages within the coverage of the policy.” (Gray v. Zurich Insurance Co. (1966)
Thus, we first look to the terms of the policy. The policy in question covers “those damages which an insured becomes legally obligated to pay because of . . . property damages . . . resulting from an occurrence to which this coverage applies.” An “occurrencе” is defined in turn as “an accident including exposure to conditions which results during the policy period in . . . property damage.”
Fire Insurance contends that the Bourguignons’ action in building a structure at a specified location is not an accident but an intentional act so that there is no coverage. The Bourguignons counter that they were mistaken that they owned the property where they built the house so that the encroachment on the Parsonses’ property was an accident.
“Accident” is given a commonsense interpretation that it is an unintentional, unexpected, chance occurrence. (St. Paul Fire & Marine Ins. Co. v. Superior Court (1984)
An accident does not occur whеn 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)
Where the insured intended all of the acts that rеsulted in the victim’s injury, the event may not be deemed an “accident” merely because the insured did not intend to cause injury. (Ray v. Valley Forge Ins. Co. (1999)
In several cases pertinent to our analysis, the courts have refused to find an accident in circumstances where the insured committed an act based on a mistaken belief in the legal right to engage in that conduct. Thus, in both Quan and Lyons a third party claimed the insured committed some act of sexual assault and the insured relied on a mistaken belief that there was consent. Because the insured intended to commit the act, the occurrence was not an accident even if the insured believed it was consensual. (Quan, supra,
The principle that an insured’s mistake of fact or law does not transform a purposeful act into an accident has been applied in situations other than those involving sexual contact and assault and battery. In Collin, supra,
Vavasour is one of three cases from the federal courts that interpret the term “accident” in the context of property disputes that more closely resemble the facts before us. The other decisions are Allstate Ins. Co. v. Salahutdin (N.D.Cal. 1992)
We will discuss these three cases in turn at some length because of their factual similarity, starting with Salahutdin.
In contrast, in Vavasour, the Vavasours and their neighbor owned adjoining properties with no boundary fences or markings. The neighbor erected a boundary fence across land the Vavasours had long used as a driveway. When the Vavasours sued their neighbor, he cross-complained for trespаss, alleging the Vavasours had been driving on his land. The court determined that this allegation triggered the possibility of coverage under the Vavasours’ policy,
In Bailey, supra,
Although none of these three decisions are binding on this court, we find the reasoning of Salahutdin and Bailey to be the more persuasive and are in accord with the principle in California that the term “accident” refers to the nature of the conduct itself rather than to its consequences. Vavasour stands out in singular contrast to the prevailing rule. {Collin, supra, 21 CaI.App.4th at p. 812.) As we have discussed, any suggestion in Vavasour that the harm occasioned by intentional conduct may constitute an accident when the person engaged in the conduct is unaware of its wrongful charactеr is contrary to the holdings of our state courts. (See, e.g., Quan, supra,
Also instructive is Modem Development Co. v. Navigators Ins. Co. (2003)
So too here, the Bourguignons intended to build the house where they built it. Accepting their contention that they believed they owned the five- and-one-half-foot strip of land and had the legal right to build on it,
In light of the court’s ruling that there is no coverage becаuse the claimed damage does not arise from an “accident,” the court need not consider the additional issue whether the Parsonses have alleged property damage.
Let a peremptory writ of mandate issue directing the Superior Court of San Bernardino County to set aside its order denying petitioner’s motion for summary judgment and to issue a new and different order granting that motion.
The motion to augment and dismiss is denied.
Petitioner is directed to prepare and have the peremptory writ of mandate issued, copies served, and the original filed with the clerk of this court, together with proof of service on all parties.
Petitioner to recover costs.
Gant, J., concurred.
Notes
The decision in State Farm Fire & Casualty Co. v. Superior Court (2008)
We do not believe it is significant for our purposes that the holding in Delgado was limited to the insured’s unreasonable, subjective belief in the need for self-defense. The injured third party had alleged an unreasonable belief only, and, in any case, liability would not have attached to the insured’s action if he had acted reasonably.
Salahutdin was decided before Vavasour but was published after that decision.
The Bourguignons have moved to augment the record and to dismiss the petition based upon the superior court’s decision in the underlying encroachment case, Bourguignon v. Parsons (Super. Ct. San Bernardino County, 2009, No. SCVSS110419). In that case, the court found that the encroachment was not a willful or intentional act by the Bourguignons to take a portion of the аdjoining property but rather appeared to be the result of an inadvertent error or mistake by them and their architect. We deny the motion to augment, however, because the decision in the underlying action was not before the court when it ruled on the summary judgment motion. (Vans Companies, Inc. v. Seabest Foods, Inc. (1996)
Dissenting Opinion
I respectfully dissent. I would affirm the trial court’s denial of Fire Insurance Exchange’s (Fire Insurance) motion for summary judgment.
DISCUSSION
A. Standard of Review
The independent standard of review is applied to the trial court’s order denying Fire Insurance Exchange’s (Fire Insurance) motion for summary judgment. (Baroco West, Inc. v. Scottsdale Ins. Co. (2003)
1. Step One: Identifying Issues Raised by the Pleadings
a) Complaint
In the Bourguignons’ first amended complaint against Fire Insurance, the Bourguignons alleged that Fire Insurance breached its contract with the Bourguignons. Specifically, the Bourguignons alleged that Fire Insurance breached its contract by (1) not promptly providing the Bourguignons with a copy of their policy; (2) failing to promptly conduct a fair and complete investigation into the facts and circumstances of the claims asserted against the Bourguignons; (3) refusing to provide a defense for the Bourguignons; (4) not allowing the Bourguignons to choose their own attorney; and (5) limiting the payment of attorney’s fees to $125 per hour. In regard to the specific policy language, the Bourguignons contended that Fire Insurance agreed to defend them against allegatiоns of “property damage” and “personal injury”; the Bourguignons claimed that the Parsonses’ cause of action for trespass (encroaching on the Parsonses’ property) qualified as an action for “property damage” and “personal injury.”
b) Motion for Summary Judgment
In its motion for summary judgment, Fire Insurance argued that it did not breach its contract with the Bourguignons because it had no duty to defend them. In its first argument, Fire Insurance asserted that it has no duty to defend against a suit that cannot result in an award of damages. Fire Insurance claimed that the Parsonses’ requests for equitable relief did not constitute damages. Second, Fire Insurance asserted that none of the Parsonses’ causes of actions concerned “bodily injury” or “property damage.” Fire Insurance argued that an interest in an easement or leasehold did not constitute tangible property for purposes of “property damage.” Third, Fire Insurance asserted that the policy only covered property damage caused by accidents, and the Bourguignons’ encroachment was intentional, i.e., not an accident.
2. Step Two: Fire Insurance’s Burden
I now analyze whether Fire Insurance has met its burden of showing that the Bourguignons failed to allege a triable issue of fact regarding Fire Insurance’s purported breach.
a) Relevant Law
“[W]hen the case turns on the interpretation or application of the terms of an insurance policy, [the court] review[s] the terms of the policy to determine
b) Remedy
Fire Insurance contends that it does not have a duty to defend against equitable claims, and therefore, it could not have breached its contract because the Parsonses only sued the Bourguignons for equitable relief. I disagree.
“ ‘Every person who suffers detriment from the unlawful act or omission of another, may recover from the person in fault a compensation therefor in money, which is called damages.’ [Citation.] The subject matter of an action and the issues involved are determinable from the facts alleged rather than from the title of the pleading or the character of damage recovery suggested in connection with the prayer for relief. [Citations.]” (Buxbom v. Smith (1944)
When a party constructs a permanent building, which encroaches upon the land of another, the trespass is considered permanent, and causes of action for damages and injunctive relief accrue. (Troeger v. Fink (1958)
The Parsonses sued the Bourguignons for trespass, i.e., encroaching on their property. Based upon the facts alleged, the Parsonses could be awarded damages. Therefore, Fire Insurance is not entitled to summary judgment on this point.
Moreover, in their prayer for relief on the trespass action, the Parsonses requested (1) an injunction, (2) punitive damages, (3) costs and attorney’s fees, and (4) “other relief the court finds just and proper.” Consequently, although the prayer for relief is not controlling, I find further support for my opinion in the Parsonses’ prayer, because the Parsonses did not foreclose on
Additionally, while the Parsonses allege an action for trespass, I note that a large portion of the trespass action also alleges that the Bourguignons engagеd in fraud. To the extent that the cause of action could be separated into two causes of action, one for trespass, and a second for fraud, I note that legal damages are also available following a finding of fraud. (Civ. Code, § 1709.)
c) Property Damage
Fire Insurance asserted that none of the Parsonses’ causes of actions concerned “bodily injury” or “property damage.” Therefore, Fire Insurance argued that it did not breach its duty to defend the Bourguignons because the Parsonses’ lawsuit does not involve bodily injury or property damage. I disagree.
The insurance policy obligates Fire Insurance to “pay those damages which an insured becomes legally obligated to pay because of bodily injury, property damage or personal injury resulting from an occurrence to which this coverage applies. ... [f] ... [f] At [Fire Insurance’s] expense and with attorneys of [its] choice, [it] will defend an insured against any covered claim or suit.” The insurance policy defines “property damage” as “physical injury to or destruction of tangible property covered by this policy and resulting loss of use.” “ ‘[Tjangible property’ ... is meant to exclude intangible economic interests and property rights. It has been defined in its plain and ordinary sense as limited to property having physical substance apparent to the senses, including real estate. [Citations.]” (Borg v. Transamerica Ins. Co. (1996)
In the Parsonses’ second amended cross-complaint, they allege that they “have been damaged by being denied [(1)] clear title, and [(2)] the use and enjoyment [of] the property they purchased . . . .” The Parsonses further allege that they “will be irreparably] harmed by the continued existence of the Bourguignon[s’] home on their property and will be denied the full use and value thereof because it cannot be developed, sold, or improved with [the] encroachment and cloud on title.”
I interpret the Parsonses’ second amended cross-complaint as alleging that the Parsonses have suffered a direct рhysical encroachment onto their real property; and the physical encroachment is an injury to their property, which has resulted in a loss of use. (See Borg, supra, A1 Cal.App.4th at pp. 457-458 [reaching a similar conclusion].) Therefore, in my opinion, the Parsonses’
d) Accident
Fire Insurance asserts that the insurance policy only covered property damage caused by accidents, and the Bourguignons’ encroachment was intentional, i.e., not an accident. Therefore, Fire Insurance contends that it is not bound to defend the Bourguignons. I disagree.
“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. [Citations.]” (Delgado v. Interinsurance Exchange of Automobile Club of Southern California (2009)
“This concept of fortuity is basic to insurance law. [Citation.] Insurance typically is designed to protect against contingent or unknown risks of harm [citation], not to protect against harm that is certain or expected. [Citation.] In other words, such insurance generally protects against risks of loss rather than certainties of loss. [Citations.]” (Waller v. Truck Ins. Exchange, Inc. (1995)
The Bourguignons may have acted “intentionally,” in that their act of building their house was knowing and voluntary; however, there is ample support in the record for a finding that their conduсt was executed without the objective of encroaching on the Leaches’/Parsonses’ property. The Parsonses’ second amended complaint alleges that the Parsonses became aware of the cloud on their title in April 2003, when the Parsonses bought the property from the Leaches. However, the Parsonses allege that they did not become aware of the encroachment until May 2004, because “[a]ll building records, plans, and public notices indicate that the structure on [the Bourguignons’ property] is on the property line, not over it.” If the Parsonses knew of the cloud on the title, but it was not clear for a year that the Bourguignоns’ house was on the Parsonses’ property, then there is reason to believe that the Bourguignons also were unaware that their home was on the Parsonses’
In sum, thеre is support in the record for the conclusion that the Bourguignons’ objective was to build on their own property, i.e., not to encroach; therefore, I would affirm the trial court’s ruling that Fire Insurance was not entitled to summary judgment on the issue of whether the encroachment constituted a covered occurrence under the policy.
The majority relies on the theory that a “mistake of fact” does not create an accident, and therefore, the Bourguignons’ mistake regarding their property line does not make their encroachment an accident. I am not persuaded by the majority’s reasoning. The Bourguignons’ failure to take the prоper precautions, e.g., conduct a thorough title search and/or conduct a property survey, which likely would have prevented the “mistake,” does not prove that the Bourguignons’ objective was to encroach on their neighbors’ property. The Parsonses’ allegations that (1) the Bourguignons sought to file a lot line adjustment; (2) the plans and permits showed the residence being built within the property lines; and (3) it took over a year for the Parsonses to discover the encroachment, negates, in my mind, an argument that the Bourguignons had an objective to build on the Parsonses’ property. (See Cross v. Zurich General Acc. & Liability Ins. Co. (7th Cir. 1950)
As presented ante, our Supreme Court has explained that “ ‘[w]hen a driver intentionаlly speeds and, as a result, negligently hits another car, the speeding would be an intentional act. However, the act directly responsible for the injury—hitting the other car—was not intended by the driver and was fortuitous. Accordingly, the occurrence resulting in injury would be deemed an accident.’ [Citations.]” (Delgado, supra,
I would not call the collision with the other car a “mistake of faсt” because the speeding driver mistakenly believed that the other car was not there, or
e) Conclusion
In sum, I would affirm the trial court’s denial of Fire Insurance’s summary judgment motion because Fire Insurance has not negated the Bourguignons’ claim for breach of contract.
A petition for a rehearing was denied February 22, 2010, and the petition of real parties in interest for review by the Supreme Court was denied April, 22, 2010, S180839.