Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Santa Clara County Super. Ct. No. 105 CV 042719
ELIA, J.In this appeal, John and Myra Mahoney seek review of a determination that their personal liability umbrella policy did not cover litigation brought against them over residential property. Appellants specifically contend that the underlying lawsuit triggered a duty of defense by respondent State Farm General Insurance Company because the lawsuit alleged personal injury resulting from wrongful detention of real property, or alternatively, bodily injury resulting from an accident. We disagree with appellants' interpretation of the coverage provisions of their insurance policy and therefore must affirm the judgment in State Farm's favor.
Background
1. The Underlying Litigation
In 1997 Donald and Betty Matlock owned a 36-acre parcel that they wished to subdivide. In September of that year they sold this property to William Mayer and Carol Cauthorn-Mayer (the Mayers) under an agreement providing that if the Matlocks recorded a final subdivision map within two years, the Mayers would deed six of the resulting lots (26 acres) to the Matlocks while retaining the seventh 10-acre parcel. If two years elapsed without recordation of the final map, then the Mayers would keep the entire 36-acre tract upon payment to the Matlocks of $800,000. The Mayers subsequently granted the Matlocks a one-year extension of the period for recording the final map.
In January 2000 appellants purchased the Mayers' interest in the property, subjecting themselves to the terms of the Matlock-Mayer agreement. The deadline for recording the final map was again extended to December 31, 2000, but that date also passed. On January 5, 2001, appellants tendered their check for $800,000 to the Matlocks, but the Matlocks rejected the tender, contending that appellants had unreasonably failed to cooperate in accomplishing the subdivision approval in order to trigger the $800,000 payment provision for the entire 36-acre parcel. Appellants then sued the Matlocks to quiet title and to obtain declaratory and injunctive relief. The Matlocks cross-complained for specific performance, declaratory relief, and damages for breach of contract and promissory fraud. The alleged damages for appellants' fraudulent promise included anxiety, worry, and aggravation of the Matlocks' pre-existing health afflictions.
In March 2003 the trial court issued a tentative decision (later adopted as a statement of decision) in which it found that the Matlocks had proved every fact necessary for specific performance of the property conveyance contract and damages. Appellants had breached their contractual duty to cooperate in the process of obtaining recordation of a subdivision map and had even engaged in a bad faith attempt to stop the subdivision. According to State Farm, appellants subsequently reconveyed to the Matlocks the 26-acre parcel and paid damages to the Matlocks. The parties eventually stipulated to an order vacating the tentative decision and decree of specific performance.
It was in the course of this litigation that the present conflict arose between appellants and State Farm.
2. Appellants' Lawsuit against State Farm
After receiving the Matlocks' cross-complaint appellants tendered their defense to State Farm. State Farm initially accepted, subject to a reservation of the right to withdraw the defense if its investigation resulted in a conclusion that the claim was not covered. In July 2001 State Farm advised appellants that it was withdrawing its defense because there was no potential for coverage of the lawsuit. State Farm reasoned that the Matlocks' claims were related to breach of contract associated with the real estate sale, which did not constitute property damage or personal injury. State Farm rejected appellants' assertion that coverage was available for "wrongful detention" within the policy definition of "personal injury."
In July 2002, having received an amended cross-complaint from the Matlocks, appellants requested reconsideration of their tender and asked State Farm to consult coverage counsel in the matter. State Farm then referred the question to attorney Dean Pappas for an opinion. Pappas reviewed the lengthy amended pleading and advised State Farm that the claims in the cross-complaint did not amount to "wrongful detention" as defined in appellants' umbrella policy. That term, Pappas explained, was likely to be interpreted to refer to the wrongful detention of a person, not the wrongful detainer of property. Pappas also noted that the policy limited its applicability to damages resulting from an accident, and that the underlying lawsuit did not involve property damage or loss caused by an "accident." The fraud damages for emotional distress in particular were not subject to coverage as "bodily injury" because they resulted from an economic loss. In any event, he noted, that claim had been dismissed two days before trial.
Pappas also reviewed the question of coverage under appellants' two homeowners policies. Those policies are not at issue in this appeal.
Relying on Pappas's analysis, State Farm reaffirmed its denial of coverage and its refusal to defend appellants in the Matlock litigation. After a further exchange of correspondence over the coverage issue, appellants filed this action to obtain declaratory relief and the policy benefits, along with damages for breach of the covenant of good faith and fair dealing and fraud.
Both parties moved for summary adjudication of the issue of State Farm's duty to defend. The trial court granted State Farm's motion and denied appellants' motion, finding no coverage of the Matlocks' cross-action under appellants' umbrella policy. The parties then stipulated to the entry of judgment and appellants agreed to dismiss their cause of action for fraud in order to expedite this appeal.
Discussion
1. Scope and Standard of Review
"A summary adjudication motion is subject to the same rules and procedures as a summary judgment motion. Both are reviewed de novo. [Citations.] The moving party must point to undisputed facts that compel adjudication or judgment in its favor. If the moving party is successful, the opposing party must then raise triable issues as to the other's assertions of undisputed fact. In considering this appeal, we take into account each party's dual obligation in justifying . . . adjudication while resisting the other party's motion." (Lunardi v. Great-West Life Assurance Co. (1995) 37 Cal.App.4th 807, 819.)
When summary adjudication is based on the interpretation of the terms of an insurance policy, our de novo review entails an examination of those terms in accordance with the settled precepts governing construction of contracts. " 'Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ. Code, § 1636.) Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639.) The "clear and explicit" meaning of these provisions, interpreted in their "ordinary and popular sense," unless "used by the parties in a technical sense or a special meaning is given to them by usage" (id., § 1644), controls judicial interpretation. (Id., § 1638.)' [Citations.]" (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18; TRB Investments, Inc. v. Fireman's Fund Ins. Co. (2006) 40 Cal.4th 19, 27.)
" 'The insurer is entitled to summary adjudication that no potential for indemnity exists . . . if the evidence establishes as a matter of law that there is no coverage. [Citation.]' " (Powerine Oil Co., Inc. v. Superior Court (2005) 37 Cal.4th 377, 390; Standard Fire Ins. Co. v. Spectrum Community Ass'n (2006) 141 Cal.App.4th 1117, 1124.) Because the duty to defend is broader than the duty to indemnify, the insurer must undertake the defense of its insured "if it becomes aware of, or if the third[-]party lawsuit pleads, facts giving rise to the potential for coverage under the insuring agreement. [Citations.]" (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 19.) On the other hand, if there is no possibility of coverage in light of either the allegations of the complaint or the extrinsic facts, the insurer may decline to defend. "This is because the duty to defend, although broad, is not unlimited; it is measured by the nature and kinds of risks covered by the policy." (Ibid.)
2. The Policy Provisions
Appellants' umbrella policy contained the promise to pay the "net loss" up to a specified amount if appellants were "legally obligated to pay damages for a loss." The disputed provisions were located in the definitions section of the policy. The term "net loss" was defined as "the amount you are legally obligated to pay as damages for bodily injury, personal injury or property damage" as well as reasonable expenses incurred at State Farm's request to cover investigation, settlement and defense of a claim. "Loss" was defined as "a. an accident, including injurious exposure to conditions, which results in bodily injury or property damage during the policy period . . . or [¶] b. the commission of an offense, or series of similar or related offenses, which result in personal injury during the policy period."
The primary focus of the controversy was whether the definition of "personal injury" encompassed the harm alleged in the Matlocks' cross-complaint. Personal injury was defined as "injury caused by one or more of the following offenses: [¶] a. false arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution; [¶] b. libel, slander, defamation of character or invasion of rights of privacy." Appellants contended that "wrongful detention" included torts involving interference with another's interests in real property. The trial court agreed with State Farm, however, that "wrongful detention" referred to an intentional act against a person, not property, particularly when read in the context of the policy. The court also rejected appellants' assertions that (1) the Matlocks' fraud cause of action alleged an offense resulting in "personal injury," within the meaning of the second definition of "loss" (an offense resulting in personal injury); and (2) the alleged emotional distress and physical symptoms constituted "bodily injury" resulting from an "accident" within the first description of the term "loss."
Appellants renew their arguments on appeal. They first take issue with the superior court's determination that "personal injury" coverage for "wrongful detention" was not intended to encompass interference with interests in real property. Appellants point out that "wrongful detention" was placed next to "wrongful eviction" in the list of personal injury offenses. The latter having been "judicially recognized to be associated almost exclusively with real property," appellants argue, "wrongful detention" likewise "must be construed to include torts involving interference with interests in real property." But the full context of "wrongful detention" indicates that "personal injury" embraces wrongs inflicted on another person: The person is falsely arrested, falsely imprisoned, wrongfully evicted from property, wrongfully detained on the premises of the tortfeasor's property, or subjected to malicious prosecution.
The decision on which appellants rely, Fibreboard Corp. v. Hartford Accident and Indemnity Co. (1993) 16 Cal.App.4th 492, does not support their position. Indeed, Fibreboard grouped the offenses in the policies at issue into four categories, of which false arrest, detention and malicious prosecution were in one, while wrongful entry, wrongful eviction, and "other invasion" of privacy rights were in another. The Fibreboard court clearly regarded "wrongful eviction" as a tort associated with real property. (Id. at p. 515.) But it did not conclude that invasion of privacy automatically referred exclusively to real property just because it was listed in the same group as wrongful entry and eviction. On the contrary, the court recognized that "other invasion of an individual's right of privacy" could refer to an intrusion on "a person's land, home, or other quarters or physical space, or with respect to a person's private affairs or concerns." (Ibid.) Whether wrongful detention refers to real property interests simply cannot be determined merely by its placement in the list of offenses.
If its location next to the tort of wrongful eviction does bear significance, appellants represent it as the "counterpart" or "correlative" of "wrongful eviction." Wrongful eviction, however, entails the ousting of or dispossessing a person from the subject property. (See Cunningham v. Universal Underwriters (2002) 98 Cal.App.4th 1141, 1154, quoting Ballentine's Law Dict. (3d ed.1969) p. 424, col. 1; Black's Law Dictionary (8th ed. 2004) ["The act or process of legally dispossessing a person of land or rental property"].) If wrongful detention is to have any comparable meaning, it must refer to the act of detaining a person on property.
The interpretation of the disputed provision need not be so complex, however. Reading the policy in light of the rules of contract interpretation discussed above, we can only conclude that the "ordinary and popular sense" of "wrongful detention" connotes the restriction of a person, not the withholding of property rightfully belonging to someone else. (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822.) If the provision said "wrongful retention" or "wrongful detainer" we would conclude otherwise. But it did not.
Appellants contend that to interpret "wrongful detention" to apply only to persons would render it redundant of another listed offense, false imprisonment. These two acts are not synonymous, however. " 'The tort of false imprisonment is the nonconsensual, intentional confinement of a person, without lawful privilege, for an appreciable length of time, however short.' [Citation.] A person is falsely imprisoned 'if he is wrongfully deprived of his freedom to leave a particular place by the conduct of another.' " (Molko v. Holy Spirit Assn. (1988) 46 Cal.3d 1092, 1123, superseded on another point as recognized in Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 854.) A detention often connotes a temporary restraint pending an investigation of suspected illegal conduct or a precursor to arrest. Although wrongful detention, false imprisonment, and false arrest all overlap, they are sufficiently distinct as to continue to be used in standard policy language. Furthermore, any sharing of common features is tangential to the main issue, what a reasonable insured would expect in insurance coverage from the words used in the umbrella policy.
Appellants cite a number of decisions using the words "wrongful detention" or "wrongfully detained" in connection with interference with rights in personal and real property. (See, e.g., Hirschberg v. Goodwin (1931) 113 Cal.App. 550, 551 [action for quiet title and damages for wrongful detention]; Coleman v. Dawson (1930) 110 Cal.App. 201, 213 [referring to contention that land was "wrongfully detained"]; Milstein v. Turner (1951) 107 Cal.App.2d 184, 186 [action seeking possession of the premises and damages for its "wrongful detention"]; Kelly v. McKibben (1880) 54 Cal. 192, 195 [referring to damages for the wrongful detention in action for detinue].) In none of these cases, however, did the term "wrongful detention" appear in an insurance policy. If, as appellants acknowledge, the words used in a policy must be read from the vantage point of a reasonable insured, we cannot expect ordinary persons seeking insurance to understand its terms based on appellate decisions from the 1930's, 1920's, and even 1800's.
Similarly, that the Legislature has used the words "detention" and "detain" in statutes referring to property (e.g., Code of Civil Procedure §§ 512.010, 667; Civ. Code § 2223) is of little assistance to the ordinary person seeking insurance coverage. Numerous California statutes also use those words in the context of wrongfully holding a person. (See, e.g., Civ. Code §§ 4603-4611 [child taken or detained in violation of custody decree]; Pen. Code §§ 146 [detaining while impersonating public officer], 209 [kidnapping or detaining for ransom], 490.5(f)(1) [merchant's detention of suspected shoplifter], 833.5 [detention of suspect]). It is the policy itself that defines the context of the language of coverage. Appellants themselves insist that "an insured is not expected to understand subtle legal distinctions" or have knowledge of "the nuances of the law." Appellants must observe the same principles.
To the extent that an ordinary person would need clarification of the policy terms, he or she would more likely resort to a dictionary than to obscure appellate decisions or statutes that have no relation to insurance. (Cf. Scott v. Continental Ins. Co. (1996) 44 Cal.App.4th 24, 30 ["When ordinary people do not understand the meaning of a word, they do not turn to the Code of Civil Procedure. They turn to a dictionary"].) Likewise, "[i]n seeking to ascertain the ordinary sense of words, courts in insurance cases regularly turn to general dictionaries." (Id. at p. 29.) The Oxford English Dictionary defines "detain" as "To keep in confinement or under restraint; to keep prisoner. . . . To keep from proceeding or going on; to keep waiting; to stop. (The ordinary current sense.)" (Oxford Eng. Dict., compact ed. (1971) p. 264; Oxford Eng. Dict. online, 2d ed. 1989, (http://dictionary.oed.com/cgi/entry/50062257?query_type=word&queryword=detain&first=1&max_to_show=10&sort_type=alpha&result_place=2&search_id=50Tz-irb9Ul-6841&hilite=50062257) Merriam Webster Online lists three meanings, of which the second, pertaining to property, is obsolete: "1: to hold or keep in or as if in custody ; 2 obsolete: to keep back (as something due): WITHHOLD; 3: to restrain especially from proceeding." (http://www.m-w.com/dictionary/detain) Webster's Third New International Dictionary (p. 616) defines "detain" as "to hold or keep in or as if in custody . . . 3. to restrain esp. from proceeding . . . 4. to hold the attention of . . . " The second definition, "to keep back (as something that is due)," is denoted as archaic. And the American Heritage College Dictionary (3d ed. p. 1997, p. 378) lists the following definitions: "1. To keep from proceeding; delay or retard. 2. To keep in custody or temporary confinement. 3. Obsolete. To retain or withhold (payment or property, for example)." The primary definition of "detention" is "The action of detaining, or condition of being detained." (Oxford Eng . Dict., compact ed. (1971) p. 266; Oxford Eng. Dict. online, (2d ed. 1989)
We have not quoted terms denoted "obsolete."
Thus, the ordinary current meanings of "detain" and "detention" indicate an act directed at a person. To paraphrase another court rejecting an expansive view of "tangible property," to construe "wrongful detention" to include land held in violation of contract rights "requires a strained and farfetched interpretation, doing violence to the plain language of the polic[y]. Such an interpretation would rewrite the polic[y] to fasten on [State Farm] a liability [it has] not assumed." (Giddings v. Industrial Indemnity Co. (1980) 112 Cal.App.3d 213, 219; Kazi v. State Farm Fire and Cas. Co. (2001) 24 Cal.4th 871, 880.)
This conclusion defeats appellants' assertion that State Farm has added a limitation or exclusion that was never plainly or clearly stated in its policy. The phrase at issue is not an exclusion or limitation, and it is not unclear to an ordinary person. Our conclusion also obviates an analysis of how to resolve the asserted ambiguity in the policy. "A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable. [Citation.]" (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 18; AIU Ins. Co. v. Superior Court, supra, 51 Cal.3d at p. 822.) But "a finding of ambiguity in policy language cannot be based on an unreasonable misunderstanding on the part of the insured." (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 913.) "To be given effect by the courts, [the insured's] expectations [of coverage] must be reasonable; it is repeatedly noted that the rules of construction go no f[u]rther than is necessary to protect 'the objectively reasonable expectations of the insured.' [Citation.] In determining the question, the court does not leave its common sense at the door." (Government Employees Ins. Co. v. Superior Court (2000) 79 Cal.App.4th 95, 102 [italics added], quoting AIU Ins. Co. v. Superior Court, supra, 51 Cal.3d at p. 824; Alex Robertson Co. v. Imperial Casualty & Indemnity Co. (1992) 8 Cal.App.4th 338, 343.)
The existence of disagreement over a word or phrase does not alone make it ambiguous, nor does the fact that it has more than one meaning when isolated from its context. (Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868.) "[L]anguage in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract. [Citation.] Courts will not strain to create an ambiguity where none exists. [Citation.]" (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at pp. 18-19.)
Here, appellants' interpretation of the phrase "wrongful detention" to encompass violation of a contractual promise to convey real property is simply not reasonable, particularly when read in its context, which is a group of offenses against persons which together explain the policy term "personal injury." "Where . . . the language of the contract is clear and unambiguous, the insured can reasonably expect only the coverage afforded by the plain language of the contract." (Farm Air Flying Service v. Southeastern Aviation Ins. Services, Inc. (1988) 206 Cal.App.3d 637, 641.) Because the plain, commonly understood meaning of the phrase precludes coverage of the Matlocks' lawsuit, State Farm did not have a duty to defend appellants in that litigation.
3. Bodily Injury Coverage
The Matlocks' second cause of action was for fraud. They alleged that appellants had, with intent to defraud and induce the Matlocks' reliance, promised to cooperate in allowing recordation of a final subdivision map before December 31, 2000. In addition to financial expenses and the loss of a profitable sale to a developer, the Matlocks experienced "pain, suffering, anxiety, worry, fatigue, sleeplessness, inconvenience, etc. Cross-complainants are elderly and suffer from certain pre-existing health afflictions which have been aggravated by cross-defendants' [sic] reliance upon cross-defendant's fraud."
Appellants contend that these allegations triggered "bodily injury" coverage. The policy defined "bodily injury" as "physical injury, sickness, disease, emotional distress or mental injury to a person." Appellants implicitly concede, as they must, that the bodily injury must result from an accident to be covered as a loss. Appellants argue that their conduct amounted to an accident because they did not intentionally block the subdivision process but "cooperated the best they could" given the obstacles and erroneous advice they had encountered. Even if appellants did not mean to create emotional and physical suffering, their conduct (alleged as a fraud) could not be deemed an accident. "Unless the term 'accident' is otherwise defined in the policy, it is given a commonsense interpretation: i.e., an 'unintentional, unexpected, chance occurrence.' " (Modern Development Co. v. Navigators Ins. Co. (2003) 111 Cal.App.4th 932, 940, fn. 4, quoting St. Paul Fire & Marine Ins. Co. v. Sup.Ct. (County of Yuba) (1984) 161 Cal.App.3d 1199, 1202.) "In its plain, ordinary sense, 'accidental' means ' "arising from extrinsic causes[;] occurring unexpectedly or by chance[; or] happening without intent or through carelessness." ' [Citations.] Since insurance is designed to protect against contingent or unknown risks of harm, rather than harm that is certain or expected . . ., it is well settled that intentional or fraudulent acts are deemed purposeful rather than accidental and, therefore, are not covered under a CGL policy. [Citations.]" (Chatton v. National Union Fire Ins. Co. (1992) 10 Cal.App.4th 846, 860-861.)
"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. [Citation.] Clearly, where the insured acted deliberately with the intent to cause injury, the conduct would not be deemed an accident. Moreover, 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. Conversely, an 'accident' exists 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 Mutual Ins. Co. v. Mendez (1989) 213 Cal.App.3d 41, 50; see also Modern Development Co. v. Navigators Ins. Co. (2003) 111 Cal.App.4th 932, 940 [unless otherwise defined in the policy, "accident" is given "a commonsense interpretation: i.e., an 'unintentional, unexpected, chance occurrence' "].) "Even more to the point (and contrary to [appellants'] assertion) it is likewise established that negligent misrepresentations causing investment loss or loss of other economic interest are considered purposeful rather than accidental for the purpose of insurance coverage." (Chatton v. National Union Fire Ins. Co., supra, 10 Cal.App.4th at p. 861.)
Nor can the cause of action be deemed a claim of constructive fraud. As State Farm points out, constructive fraud arises from a breach of duty, trust or confidence by a fiduciary to his or her principal. " 'Constructive fraud is a unique species of fraud applicable only to a fiduciary or confidential relationship.' " (Salahutdin v. Valley of California, Inc. (1994) 24 Cal.App.4th 555, 562.)
Because the absence of an accident forecloses coverage, we need not discuss the applicability of Waller v. Truck Ins. Exchange, Inc., supra, where our Supreme Court held that allegations of emotional or physical distress flowing from an economic injury were not covered by the insureds' liability policy. (11 Cal.4th at p. 27.) Appellants' argument that the Matlocks' emotional distress constituted bodily injury is explicitly premised on the existence of a covered "accident." Thus, even if there were merit in appellants' argument that emotional distress arising from economic harm should be considered bodily injury within the meaning of appellants' umbrella policy, it would not help them obtain coverage in these circumstances.
We do note that the Supreme Court in Waller approved the Court of Appeal's reasoning, that the underlying lawsuit " 'sets forth nothing more than a business dispute; the torts alleged in the suit are all business and contract transgressions. Simply put, the gravamen of the [underlying] lawsuit is economic loss.' " (Waller v. Truck Ins. Exchange, Inc., supra, 11 Cal.4th at p. 15, quoting Court of Appeal opn.) We believe that the Waller rationale is applicable here, notwithstanding appellants' hypertechnical focus on the underlying allegations to suggest that the Matlocks "did not allege that their emotional distress and physical injury flowed from economic loss."
Disposition
The judgment is affirmed.
WE CONCUR: RUSHING, P. J., PREMO, J.