Opinion
NOT TO BE PUBLISHED
Solano County Super. Ct. No. SL 001897
Pollak, J.
Plaintiff The Housing Group (Housing Group) appeals from a judgment entered in favor of defendant Great American Insurance Company (Great American) on its complaint for breach of contract and bad faith denial of the duty to defend. The trial court concluded that Great American did not owe Housing Group a duty to defend consolidated claims arising out of its development of a housing subdivision. We conclude that the trial court properly granted Great American’s motion for summary adjudication of Housing Group’s claim with regard to the action filed by the subdivision homeowners based on the “owned property” exclusion in its policy. And substantial evidence supports the trial court’s finding that Great American did not owe a duty to defend against a cross-complaint filed by an adjacent landowner because Housing Group failed to give Great American timely notice of the adjacent landowner’s claim. Accordingly, we shall affirm.
Factual and Procedural Background
In 1979, Housing Group purchased a large parcel of undeveloped land in Vallejo from adjoining landowner Leland Hancock. During the same year, Housing Group began development of the land, eventually building single family homes in what would become known as the Seaview Community (Seaview). The first homes in Seaview were completed in May 1980 and sold in August 1980.
Many years later, Housing Group was sued by several different Seaview homeowners and the Seaview Homeowners Association for property damages resulting from the alleged negligent development of the subdivision. These suits were consolidated and in 1994, a single amended complaint was filed alleging various causes of action including breach of warranties, strict liability, trespass and nuisance against Housing Group, Hancock, another adjacent landowner and other contractors and engineers (hereafter, the homeowners’ complaint). The complaint alleges that Seaview is located “on the summit of a ridge above Sandy Beach Road” and that “the steep slope immediately adjacent and providing geological support to the subject properties has been and continues to be extremely unstable and problematic and periodically subjected to landslides, slope failures, massive erosions, and pernicious soil creep. [¶] . . . [¶] . . . [T]he slope and instability is and at all times herein mentioned was proximately caused by: [¶] (a) Excavations made at the ‘toe’ of the slopes on the coterminous properties . . ., which diminish or eradicate the lateral support that the slope provided to the subject properties. [¶] (b) Improper landscaping, irrigation, uncontrolled surface water run-off and lack of subsurface drainage in the subject properties which in turn increase seepage forces within the subject properties and the adjacent slope. [¶] (c) Construction of fills on the subject property which increase the sheer weight of the land mass supported by the adjacent slope. [¶] . . . [¶] . . . As a proximate result of the slope instability as hereinabove alleged, the subject properties purchased by plaintiffs have sustained extensive direct damage by way of cracking foundations, concrete slabs, floors, walls, ceilings, separations of walls and floors and other structural damage. . . . [¶] . . . [¶] . . . As a further proximate result of slope instability as hereinabove alleged, the subject properties purchased by plaintiffs have sustained direct damage by way of significant diminution of the market value, and have become unmarketable and useless to plaintiffs for their intended purpose of peaceful habitation.”
Hancock filed a cross-complaint against Housing Group for equitable indemnity. The cross-complaint was later amended to allege separate causes of action for negligence (hereafter Hancock’s cross-complaint).
From January 1, 1977, to January 1, 1980, Housing Group was insured under a select liability policy issued by Great American. In 1989, Housing Group provided copies of the homeowners’ complaint to Great American and formally tendered investigation, defense and indemnity of the action. Great American conducted an investigation and informed Housing Group that it would not provide a defense. Great American explained that its “investigation into the above-captioned litigation revealed no occurrence took place during the time our policy was in effect. . . . Our investigation revealed that the construction on this project did not commence until at least January 24, 1980, when the City of Vallejo issued the building permits . . . .” In 1990, Housing Group tendered the defense of Hancock’s initial cross-complaint, which sought only indemnity from the homeowners’ claims. It did not tender the defense of the second amended cross-complaint, which included additional negligence claims for damage to the adjacent property, until 1994, more than four months after the action was settled.
In October 1993, Housing Group filed a complaint against Great American alleging that it had breached its duty to defend the homeowners’ complaint and Hancock’s cross-complaint. The fourth amended complaint in the coverage action alleges among other things that Housing Group tendered the defense in the underlying action and that Great American breached its contract by refusing to provide a complete and adequate defense.
Great American and Housing Group filed cross-motions for summary adjudication of whether Great American owed Housing Group a duty to defend the homeowners’ complaint and Hancock’s cross-complaint. The trial court granted Great American’s motion with respect to the homeowners’ complaint on the ground that the “owned property” exclusion in the Great American policy precluded the possibility of coverage. The court found, however, that triable issues of material fact existed as to whether Great American had a duty to defend with respect to Hancock’s cross-complaint.
Following a bench trial, the court issued a statement of decision and judgment finding in favor of Great American. The court found that Housing Group failed to provide timely notice of the amended claims alleged in Hancock’s cross-complaint and was not excused from providing the required notice. Housing Group filed a timely notice of appeal from the resulting adverse judgment.
Discussion
1. Great American did not owe Housing Group a duty to defend the homeowners’ complaint.
The trial court ruled on the parties’ cross-motions for summary adjudication that “there was no duty to defend created by the allegations of the lawsuit by the Homeowners or Homeowners’ Association.” The court explained, “The subject insurance policy contained an ‘owned property’ exclusion . . . . Since it was uncontested that plaintiff owned the property during the policy period and did not sell any parcels until after the policy period ended, the ‘owned property’ exclusion precluded the possibility of coverage under the policy as to any claims by subsequent owners of that property.” We review the trial court’s ruling de novo. (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142.)
The Great American policy provides that Great American agrees “[t]o pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of property damage caused by an occurrence.” “Property damage” is defined as, among other things, “physical injury to or destruction of tangible property which occurs during the policy period including the loss of use thereof at any time resulting therefrom.” An “occurrence” is defined as “an accident, including continuous or related exposure to conditions, which results during the policy period in bodily injury or property damage neither expected nor intended from the standpoint of the insured.” The policy expressly excludes coverage for “property damage to property owned or occupied by or rented to the insured . . . .”
According to Housing Group, it closed escrow on its purchase of the Seaview property in May of 1979. Development activities, including excavation and grading on the Seaview property and on the adjacent property, began in approximately May 1979 and continued throughout the remainder of the year. It is also undisputed that the Great American policy period ended as of January 1, 1980, and the first home was not sold until August of 1980. While the parties disagree on whether the Seaview homeowners alleged sufficiently that property damage resulting from the development occurred during the policy period, the undisputed facts establish that the property was owned by Housing Group throughout the portion of the policy period in which the development was taking place. Thus, even assuming that property damage occurred while the policy was in effect, that damage is not covered because of the “owned property” exclusion.
Housing Group emphasizes that the homeowners’ complaint alleges that Housing Group purchased the Seaview property between 1975 and 1977. This factual dispute, however, is immaterial. The exact date of the purchase of the property is irrelevant absent an allegation that Housing Group began development prior to purchasing the property. As discussed post, there are no such allegations in the homeowners’ complaint.
Housing Groups’s arguments to the contrary are not persuasive. First, relying on Standard Fire Ins. Co. v. Spectrum Community Assn. (2006) 141 Cal.App.4th 1117, 1125-1136, Housing Group argues that Great American’s duty to defend is not dependant on whether the plaintiffs in the Seaview action owned their property during the policy period. This is a correct statement of the law, and is consistent with this court’s prior observation, made with respect to Great American’s unsuccessful petition for a writ of mandate, that “[t]he insurance policy, as written, does not impose the duty to defend only when the third party plaintiff owns the property during the policy period.” However, this is irrelevant to the issue now before us. In Standard Fire Ins. Co. v. Spectrum Community Assn., supra, at page 1131, the court held that for purposes of determining potential coverage and duty to defend, “[t]he question is not when the [property owner] suffered damage. The question is when the damage about which the [property owner] complains occurred.” The court explained that “ ‘under the terms of the insurance policies . . ., the event triggering coverage is one that causes “physical injury to or destruction of tangible property” during the policy period. Nowhere do the policies say to whom that property must belong, save that it must not belong to the insured. In other words, the policies themselves do not expressly require that the eventual claimant own the property at the time the property is damaged for coverage to ensue; they merely require that the damage, the “physical injury to . . .. tangible property,” take place during the policy period.’ ” (Ibid., quoting Garriott Crop Dusting Co. v. Superior Court (1990) 221 Cal.App.3d 783, 791, italics added.) Because the undisputed evidence establishes that Housing Group owned the property in 1979 when the development work was being performed, the “owned property” exclusion necessarily precludes coverage.
Next, Housing Group argues that “[t]he homeowners’ amended complaint raised the possibility that development activities for which [Housing Group] was allegedly responsible on land other than the Seaview subdivision caused damage to subdivision land during [Great American’s] policy period before [Housing Group] purchased the land.” However, nothing in the paragraphs of the homeowners’ complaint cited by Housing Group supports this argument. The amended complaint alleges that Housing Group purchased the Seaview property from the adjacent landowners with the express and implied warranty that the adjacent land owners would do nothing to their property that would render the Seaview property unfit for the development of a single family home subdivision. The complaint alleges further that the Seaview property was damaged by excavations on the slopes owned by the adjacent landowners, that “excavations caused by [an adjacent land owner] produced a loss of subjacent and lateral support of the coterminous slope supporting the subject properties,” and that the adjacent land owners “breached their duty of care by failing and refusing to maintain and to prevent eradication of the subjacent and lateral support of the slope . . . .” There are no allegations that Housing Group was responsible for work performed by the adjacent landowners prior to its purchase and development of the Seaview property, or even that any excavation work took place prior to Housing Groups’s development of the property. The allegations of the amended complaint cannot be understood to allege property damage resulting from work performed by Housing Group prior to its purchase of the Seaview property. This is entirely consistent with Great American’s undisputed evidence that development of the property did not begin until after the property was purchased by Housing Group in 1979.
Third, Housing Group argues that “the ‘owned property’ exclusion does not apply to the alleged damage caused by [Housing Group] to the property owned by the Adjacent Bluff Owners.” However, no adjacent property owners are plaintiffs in the Seaview action. The complaint was filed on behalf of Seaview property owners and named the adjacent property owners as additional defendants.
The potential coverage for claims asserted against Housing Group by adjacent property owner Hancock is discussed in the following section.
Finally, Housing Group argues that “the ‘owned property’ exclusion did not rule out the possibility of personal injury coverage.” As set forth above, property damage is defined under the policy to include the loss of use of tangible property. “Personal injury” is defined under the policy as injury “arising out of one or more of the following offenses . . .: [¶] . . . [¶] . . . wrongful entry or eviction, or other invasion of the right of private occupancy.” The homeowners’ complaint alleges that the “development, mass production and excavation activities of [Housing Group] constitute a public nuisance . . . in that such activity is injurious to the health of all plaintiffs purchasing the subject property comprising the Seaview Community . . . and is an obstruction to their free use and enjoyment of their property, and an interference with their comfortable enjoyment of life and property.” The complaint also alleges a cause of action for trespass against the adjacent land owners, for which indemnity was sought in the cross-complaints against Housing Group, based on “[t]he excavation, improvement and other activities conducted by [the adjacent landowners] on their respective properties coterminous with the subject properties.” Housing Group argues that there was a possibility of coverage because these claims fall within the personal injury coverage and are not barred by the owned property exclusion. We disagree.
In Titan Corp. v. Aetna Casualty & Surety Co. (1994) 22 Cal.App.4th 457, 473-474 (Titan), the court held that a personal injury endorsement could not be interpreted to negate the policy exclusion for property damage caused by pollution. As in this case, “personal injury” in the Titan policies included injuries arising out of the “ ‘wrongful entry or eviction or other invasion of the right of private occupancy.’ ” (Ibid.) The court explained, however, that while the alleged damage might fit the definition of personal injury, “[t]he policy . . . unambiguously declares it will not pay for either bodily injury or property damage when the cause of such injury or damage is pollution.” (Id. at p. 474.) An interpretation that allowed the pollution-related property damage to “simply be relabeled as an ‘other invasion of the right of private occupancy’ ” would be unworkable because it would “render[] the pollution exclusion a dead appendage to the policy.” (Ibid.) The court interpreted “the coverage afforded by the personal injury portion of the policy as being limited to damages other than the injury to realty which an occupier of land may suffer when his quiet enjoyment of occupancy is disturbed.” (Ibid.) Similarly, in Lockheed Martin Corp. v. Continental Ins. Co. (2005) 134 Cal.App.4th 187, 211, the court held that the insured’s pollution-related property damage was excluded under policies that provided accident-based property damage coverage and occurrence-based personal injury coverage. The court explained, “If we were to interpret the policies as providing occurrence-based personal injury coverage for pollution-related property damage that was not caused by accident, we would effectively nullify [the] distinction” in the policies between property damage coverage and personal injury coverage. (Ibid.)
Similarly, in the present case, interpreting the policy to provide coverage under the personal injury endorsement for the homeowners’ loss of use of their property would render the “owned property” exclusion meaningless. It is not objectionably reasonable to expect that damages Housing Group causes to its own property would be excluded from coverage as property damage and that the same losses would be covered as personal injury. (See Union Oil Co. v. International Ins. Co. (1995) 37 Cal.App.4th 930, 940 [it is not objectively reasonable for an insured to expect “personal injury” to mean “property damage” or to expect that pollution claims would be covered when the policy contained a blanket pollution exclusion].) Hence, the trial court properly granted Great American’s motion for summary adjudication.
2. Great American did not owe a duty to defend Hancock’s cross-complaint.
The trial court found in its statement of decision that the litigation between Housing Group and Hancock settled in February 1994, but that Housing Group did not tender the defense of Hancock’s second amended cross-complaint until June 1994, after Hancock’s claim had been settled. The court concluded that timely notice to the insurance company was a condition precedent to the insured’s right to a defense, that Great American had not waived that condition and, therefore, that there was no duty to defend Hancock’s cross-complaint, no breach of contract, and no possible bad faith.
Initially, Housing Group argues that “[t]he trial court abused its discretion by ignoring the pretrial summary adjudication that [Great American] had a duty to defend Hancock’s [second amended cross-complaint].” Housing Group, however, mischaracterizes the trial court’s ruling on the summary adjudication motions. The trial court did not, as Housing Group suggests, finally determine that Great American owed a duty to defendant Hancock’s second amended cross-complaint. Although the court ruled that “a duty to defend existed as to the second amended cross-complaint filed by Hancock . . .,” the court also acknowledged that “there [were] remaining issues [to try] concerning the duty to defend.” Specifically, the court noted, “The determination as to when the duty to defend first arose cannot . . . be made at this time, as the Hancock . . . first amended complaint has not been provided to the court. Other information such as date of tender of that first amended complaint may be relevant as well, in addition to evidence as to prejudice to Great American from any late tender and possible estoppel based upon the February 20, 1990 letter to plaintiff’s counsel from Great American’s coverage counsel . . . .”
Housing Group contends there is no substantial evidence to support the trial court’s finding that the June 1994 tender of the second amended cross-complaint was untimely. It argues that although terms of the settlement were confirmed by the parties in February 1994, the formal agreement was not finalized until July 1994 and the action was not dismissed until August 1994. The date on which the settlement was finalized, however, is not critical to the timeliness of the tender.
The Great American policy provides that “[i]f a claim is made or suit is brought against the insured, the insured shall immediately forward to the company every demand, notice, summons or other process received by him of his representative.” The policy continues, “No action shall lie against the company unless, as a condition precedent thereto, there shall have been full compliance with all the terms of this policy . . . .” Hancock’s second amended cross-complaint was received by Housing Group in January 1992. Tender more than two years later did not satisfy the requirement that the insured immediately forward notice of all claims.
Although Housing Group does not expressly argue that Great American was not prejudiced by the delay, we note that prejudice is undeniable. The purpose of the notice provision is “ ‘to aid the insurer in investigating, settling, and defending claims.’ ” (Pacific Employers Ins. Co. v. Superior Court (1990) 221 Cal.App.3d.1348, 1358.) As the Hancock action was essentially settled by the time Great American was given notice of the underlying claim, it clearly was unable to investigate or participate in the settlement discussions.
Finally, Housing Group argues that substantial evidence does not support the trial court’s finding that Great American did not waive and is not estopped from asserting its right to notice. “In proper circumstances, the insurer may be held to have waived, or be estopped to assert, defenses that it has alleged.” (2 Witkin, Summary of Cal. Law (10th ed. 2005) Insurance, § 324, p. 506, citing Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 34.) “Case law is clear that ‘ “[w]aiver is the intentional relinquishment of a known right after knowledge of the facts.” [Citations.] The burden . . . is on the party claiming a waiver of a right to prove it by clear and convincing evidence that does not leave the matter to speculation, and “doubtful cases will be decided against a waiver” [citation].’ [Citations.] The waiver may be either express, based on the words of the waiving party, or implied, based on conduct indicating an intent to relinquish the right.” (Waller v. Truck Ins. Exchange, Inc., supra, at p. 31.)
Here, Housing Group contends that Great American directed it to stop tendering cross-complaints for indemnity in the Seaview actions, based on a letter from Great American sent in April 1990. The letter read, “Since we have sent numerous letters to your attention advising that Great American would not be participating in the defense or indemnity of Housing Group in any of the Seaview cases, we cannot help but wonder why you continue to tender these cases to Great American for a defense. . . . There is simply no possibility that any of the plaintiffs in the Seaview project could have suffered bodily injury or property damage during the time that Great American insured The Housing Group. [¶] Once again, I am requesting that you stop tendering these Seaview complaints and cross-complaints to Great American for a defense. Great American’s position is not going to change.” However, as the court noted in its ruling on the cross-motion for summary adjudication, “there was no duty to defend created by the allegations of the initial cross-complaint by Hancock . . ., as that initial cross-complaint made no allegations that could be read to seek recovery of damages separate and apart from indemnity for the damages being sought by the homeowners . . . . It would have required too much speculation on the part of Great American to conclude at that time that Hancock . . . would later amend [his] cross-complaint to allege damage to [his] adjacent property.” Because Great American could not have known in 1990 that two years later Hancock would amend his cross-complaint to add new claims of damage to his own property, the 1990 letter cannot be read to apply to a demand for coverage for such a claim and was not a known waiver of its right to notice of such a claim. Nor is there any basis to estop Great American from enforcing its right to notice. Great American’s explanation for denying a defense to the homeowners’ claims - that the homeowners’ houses were not built or purchased until after the Great American policy expired—obviously did not apply to Hancock’s claim for negligence, because Hancock owned the adjacent property at the time of the development in 1979. Hence, the 1990 letter could not reasonably have been understood to apply to the tender of such a claim by Hancock. The evidence fully supports the trial court’s findings and the judgment in Great American’s favor.
Housing Group’s complaint names a number of additional insurance carriers as defendants. The complaint alleges that from 1980 to 1981, Housing Group had excess liability coverage under a policy issued by Motor Vehicle Casualty Insurance Company and from 1992 to 1994, Housing Group had a primary liability policy issued by United National Insurance Company. Prior to trial, Housing Group settled with these carriers and as part of the settlements these carriers assigned to the Housing Group any rights they may have had against Great American for equitable subrogation and contribution. The trial court rejected all of Housing Group’s claims for equitable subrogation and contribution. Because we conclude there was no potential for coverage under the Great American policy for any of the claims asserted in the underlying litigation, we need not reach additional issues relating to Housing Group’s claims asserted on behalf of the other carriers for equitable subrogation and contribution. (See Safeco Ins. Co. of America v. Superior Court (2006) 140 Cal.App.4th 874, 879 [In an action by an insurer to obtain contribution from a coinsurer, the inquiry is whether the nonparticipating coinsurer “had a legal obligation . . . to provide [a] defense [or] indemnity coverage for the . . . claim or action . . ., and the burden is on the party claiming coverage to show that a coverage obligation arose or existed under the coinsurer’s policy”].)
Disposition
The judgment is affirmed. Great American is to recover its costs on appeal.
We concur: McGuiness, P. J., Jenkins, J.