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Safeco Ins. Co. of America v. Andrews

United States Court of Appeals, Ninth Circuit
Sep 27, 1990
915 F.2d 500 (9th Cir. 1990)

Summary

holding that the "claims do not expose [the seller] to liability for any damage to tangible property, but rather for economic loss resulting from [the seller's] alleged failure to discover and disclose facts relevant to the property's value and desirability"

Summary of this case from Homesite Ins. Co. v. Zajac

Opinion

No. 88-6548.

Argued and Submitted January 31, 1990.

Decided September 27, 1990.

Raymond H. Goettsch, Perona, Langer, LaTorraca Beck, Long Beach, Cal., for plaintiff-appellant.

Kate M. Neiswender, argued, H. Melvin Swift, Jr., Lagerlof, Senecal, Drescher Swift, Los Angeles, Cal., for defendant-appellee David O. Andrews.

Bruce S. Alpert, Anker, Schwartz, Alpert Hymes, Encino, Cal., for defendant Kandace Kuehl.

Appeal from the United States District Court for the Central District of California.

Before NELSON, BRUNETTI and KOZINSKI, Circuit Judges.


The appellant, Safeco Insurance Company of America ("Safeco"), filed suit against its insured, David Andrews ("Andrews"), in the United States District Court for the Central District of California, seeking declaratory relief from its duty to defend and indemnify Andrews in a state court lawsuit. Jurisdiction is based on diversity of citizenship. Safeco claimed that the lawsuit did not fall within the liability coverage of a homeowner's policy owned by Andrews and sought summary judgment. Andrews claimed that Safeco owed him a defense and moved for partial summary judgment. The district court denied Safeco's motion and granted summary judgment in favor of Andrews on the duty to defend issue. We reverse.

STATEMENT OF FACTS

On March 1, 1985, appellee Andrews entered into a written agreement to sell real property located at 2609 Glen Green, Los Angeles, California (the "Glen Green property"), to Kandace Kuehl ("Kuehl"). Andrews owned a homeowner's policy, purchased from appellant Safeco and effective from September 26, 1984. Under its Liability Coverages section, the policy provides:

COVERAGE E — PERSONAL LIABILITY

If a claim is made or a suit is brought against any insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies, we will:

1. pay up to our limit of liability for the damages for which the insured is legally liable; and

2. provide a defense at our expense by counsel of our choice even if the allegations are groundless, false or fraudulent. We may make any investigation and settle any claim or suit that we decide is appropriate.

Andrews canceled the policy as of April 1, 1985. Escrow on the property sale closed on April 8, 1985.

On September 9, 1986, Kuehl filed a complaint in Los Angeles Superior Court against Andrews and other defendants. The first amended complaint, filed on January 12, 1987, listed four causes of action against Andrews, including negligent failure to inspect the property and inform Kuehl of certain alleged defects in the Glen Green property, misrepresentation, breach of contract, and rescission of contract. The complaint is based on Andrews's alleged failure to discover and properly inform Kuehl of:

facts materially affecting the value or desirability of the subject real property including, but not limited to the following:

A. That the subject real property had a serious problem with unstable, shifting and moving earth, which produced and continues to produce sudden landslides.

B. That the subject real property had defective and inadequate electrical wiring.

C. That the subject real property had defective plumbing including improper drainage from the main sewer line.

D. That a basement addition had severe water leakage.

(Emphasis added.)

Andrews, relying on the policy that had been in effect through April 1, 1985, tendered his defense to Safeco, which accepted under a reservation of rights. Safeco then filed this declaratory judgment action, claiming that it owes Andrews no duty to defend because Kuehl's lawsuit does not allege any "property damage" within the meaning of the policy nor any "occurrence" within the meaning of the policy.

DISCUSSION

An insurer's duty to defend is much broader than the duty to indemnify. CNA Casualty of California v. Seaboard Surety Co., 176 Cal.App.3d 598, 605, 222 Cal.Rptr. 276 (1986). An insurer bears a duty to defend its insured whenever there is any potential of liability that arguably comes within the scope of the insurance policy. Id.; Paramount Properties Co. v. Transamerica Title Ins. Co., 1 Cal.3d 562, 571, 83 Cal.Rptr. 394, 463 P.2d 746 (1970); Gray v. Zurich Ins. Co., 65 Cal.2d 263, 275-77, 54 Cal.Rptr. 104, 419 P.2d 168 (1966). Moreover, coverage clauses are to be interpreted broadly so as to afford the greatest possible protection to the insured. Reserve Ins. Co. v. Pisciotta, 30 Cal.3d 800, 808, 180 Cal.Rptr. 628, 640 P.2d 764 (1982).

Safeco's coverage clearly does not extend to Kuehl's claims for breach of contract or rescission of contract. The policy excludes liability "under any . . . contract or agreement except those directly relating to the maintenance or use of the insured location." Kuehl's claims for negligent failure to inspect or inform and for misrepresentation are not specifically excluded by the policy.

Andrews's coverage for personal liability is described in section E of the Safeco policy, which reads in relevant part:

If a claim is made or a suit is brought against any insured for damages because of bodily injury or property damage caused by an occurrence to which this coverage applies, we will . . . provide a defense at our expense . . . even if the allegations are groundless, false, or fraudulent.

(Emphasis added).

Under the policy, "property damage" is defined as "physical injury to or destruction of tangible property, including loss of use of this property." An "occurrence" is defined as "an accident, including exposure to conditions which results, during the policy period, in bodily injury or property damage."

Kuehl is seeking damages for Andrews's alleged negligence in failing to inspect and inform him of defects in the property and for misrepresentation "materially affecting the value or desirability" of the property. Kuehl's claims do not expose Andrews to liability for any damage to tangible property, but rather for economic loss resulting from Andrews's alleged failure to discover and disclose facts relevant to the property's value and desirability. Such harm is outside the scope of the policy. See Allstate Insurance Co. v. Miller, 743 F. Supp. 723 (N.D.Cal. 1990). Although the defective condition of the property is an element of Kuehl's claims, the defects cannot, even when interpreting the policy broadly, be considered the cause of Kuehl's damages. The cause of the damage was Andrews's alleged misrepresentations, which are not an "occurrence" or a "peril insured against" under the terms of the policy. There is, therefore, no potential for liability that arguably comes within the scope of the insurance coverage provided by Safeco.

For the above reasons, the district court's denial of Safeco's motion for summary judgment and the grant of Andrews's partial summary judgment is reversed.

REVERSED.


Summaries of

Safeco Ins. Co. of America v. Andrews

United States Court of Appeals, Ninth Circuit
Sep 27, 1990
915 F.2d 500 (9th Cir. 1990)

holding that the "claims do not expose [the seller] to liability for any damage to tangible property, but rather for economic loss resulting from [the seller's] alleged failure to discover and disclose facts relevant to the property's value and desirability"

Summary of this case from Homesite Ins. Co. v. Zajac

holding that “[t]he cause of the damage [to the property] was Andrews's alleged misrepresentations, which are not an ‘occurrence’ ... under the terms of the policy. There is, therefore, no potential for liability that arguably comes within the scope of the insurance coverage provided by Safeco.”

Summary of this case from State Farm Fire & Cas. Co. v. Chung

holding that a failure to disclose an alleged misrepresentations regarding defective condition of property does not constitute an “occurrence”

Summary of this case from State Farm Fire & Cas. Co. v. Wimberly

holding that damages from negligent failure to inform of unstable earth, faulty wiring, defective plumbing, and water leakage were economic damages and therefore not covered property damage

Summary of this case from Payne v. Grinnell Mut. Reinsurance Co.

holding that damages from negligent failure to inform of unstable earth, faulty wiring, defective plumbing and water leakage were economic damages and therefore not covered property damage

Summary of this case from Boggs v. Great Northern Insurance Company

holding there is no coverage for a claim of misrepresentation against the insured seller of a home for failure to disclose defects in the home to the buyer

Summary of this case from Vecchia v. Gage, No

finding no property damage under insurance contract for claims based upon seller's alleged misrepresentation of the property's condition

Summary of this case from 757BD LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA

finding that the misrepresentations caused the economic damages, but finding that a misrepresentation was not an "occurrence" for which liability would be triggered under the policy

Summary of this case from Cyprus Amax Minerals v. Lexington

finding alleged misrepresentations were not "occurrence" as defined under insurance policy

Summary of this case from Nova Cas. Co. v. Able Constr., Inc.

noting that a misrepresentation that materially impacts the value of a property does not constitute "damage to tangible property," but only "economic loss," which is "outside the scope of the [insurance] policy"

Summary of this case from O'Dell v. Pac. Indem. Co.

noting that claims for negligent misrepresentation "do not expose [the defendant] to liability for any damage to tangible property, but rather for economic loss resulting from [the defendant's] alleged failure to discover and disclose facts relevant to the property's value and desirability"

Summary of this case from Prudential v. Boyle

examining the claims against the insured to determine whether there was coverage for alleged property damage

Summary of this case from 757BD LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA

stating "[the purchaser's] claims do not expose [the seller] to liability for any damage to tangible property, but rather for economic loss resulting from [the seller's] alleged failure to discover and disclose facts relevant to the property's value and desirability"

Summary of this case from 757BD LLC v. Nat'l Union Fire Ins. Co. of Pittsburgh, PA

underlying complaint alleged misrepresentations regarding “unstable, shifting and moving earth,” “defective and inadequate electrical wiring,” “defective plumbing,” and “severe water leakage” in the basement, and did not allege that any of those property defects were caused by the insured

Summary of this case from Hartford Fire Ins. Co. v. Tempur-Sealy Int'l, Inc.

In Safeco Insurance Co. of America v. Andrews, 915 F.2d 500 (9th Cir. 1990), the court held that alleged misrepresentations regarding the condition of certain real property, made through failure to discover nonobvious defects, did not constitute an "occurrence" as defined in an identically worded policy as the ones at issue here.

Summary of this case from American States Ins. Co. v. Canyon Creek

In Safeco, a purchaser of real property brought claims against the insured/seller of negligent failure to inspect property and inform buyer of defects, misrepresentation, breach of contract, and rescission of contract.

Summary of this case from Cyprus Amax Minerals v. Lexington

In Safeco Ins. Co. of America v. Andrews, 915 F.2d 500 (9th Cir. 1990), the seller of certain real property, Mr. Andrews, was sued by the buyer, Ms. Kuehl, for negligent failure to inspect the property, misrepresentation, breach of contract, and rescission of contract.

Summary of this case from Unigard Security Insurance v. Murphy Oil USA, Inc.

In Safeco Ins. Co. of America v. Andrews, a seller's misrepresentations about the condition or defects of the property to be sold were held not to fall within the definition of occurrence. Safeco, 915 F.2d at 502.

Summary of this case from Erie Ins. Exch. v. Maxwell

In Safeco, an insured seller of a home sought a declaration that its insurer had a duty to defend and indemnify the insured in a suit by the purchaser of the home.

Summary of this case from Cyprus Amax Min. v. Lexington Ins. Co.

applying California law

Summary of this case from Wood v. Safeco Ins. Co. of America

In Safeco Ins. Co. of America v. Andrews (9th Cir. 1990) 915 F.2d 500, the Ninth Circuit reviewed a California case involving a claim of coverage for property damage under a similar policy on similar facts.

Summary of this case from Warner v. Fire Ins. Exchange
Case details for

Safeco Ins. Co. of America v. Andrews

Case Details

Full title:SAFECO INSURANCE COMPANY OF AMERICA, A WASHINGTON CORPORATION…

Court:United States Court of Appeals, Ninth Circuit

Date published: Sep 27, 1990

Citations

915 F.2d 500 (9th Cir. 1990)

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