A Landslide Causing a Continuous Loss of Use of Property Spanning Multiple Policies Triggers One "Occurrence" Limit06.14.2007
In Safeco Ins. Co. of America v. Fireman's Fund Ins. Co., 148 Cal.App.4th 620 (2007), the California Court of Appeal examined whether damage that spanned over four policy periods triggered a single policy limit or multiple limits under general liability policies. The Court held that the cause of the damage - a landslide - constituted a single "occurrence," and therefore, a primary insurer that issued four successive policies was responsible for only a single policy limit.
The insured had a home on a hilltop in Encino, California. In February 1998, a portion of the insured's and neighboring uphill properties failed, causing a landslide and depositing dirt and debris on properties downhill. The City "yellow-tagged" one of the downhill homes' backyard, barring entry, and ordered the uphill owners to repair the slope. The yellow tag remained for more than three years, during which the downhill owners claimed loss of use of their backyard. Eventually, the downhill owners sued the insured and the other uphill owners in separate suits for negligence, trespass, and nuisance.
At the time of the landslide, the insured had a homeowners insurance policy from Fireman's Fund Insurance Company, which was renewed for three successive years. Each policy had a policy limit of $500,000 per "occurrence." The insured also had a personal umbrella policy with Safeco Insurance Company, which was renewed for two successive years. Each Safeco policy had a policy limit of $5 million per "occurrence" excess of the Fireman's Fund policies. Both the Fireman's Fund and Safeco umbrella policies covered claims for "bodily injury," "property damage" and "personal injury" caused by an occurrence. The Safeco umbrella policies stated they did not provide coverage until all underlying insurance limits had been exhausted.
Fireman's Fund defended the insured in the suits. One of the two suits settled, with Fireman's Fund contributing $50,000 to the settlement.
Before the second suit went to trial, the insured and other uphill owners agreed to pay into a trust to repair the slope. Fireman's Fund contributed $450,000 toward this settlement and asserted that its payments totaling $500,000 exhausted its policy limits. Safeco disagreed. Fireman's Fund continued to defend the insured, reserving the right to seek reimbursement from Safeco.
In the second suit, the insured and other uphill owners were ordered to pay over $3.8 million in damages. The insured's share of the judgment exceeded $2 million. Firemans' Fund paid $500,000 toward settlement and $265,000 in defense costs. Safeco paid $1.54 million indemnity on the insured's behalf.
Safeco sued Fireman's Fund, asserting that Fireman's Fund was obligated to pay multiple policy limits. The trial court ruled in favor of Fireman's Fund. On appeal, Safeco contended that Fireman's Fund covered the insured under all four policies because the the landslide took place during the first policy and the resulting loss of use of property continued through the three later policies. The Court of Appeal disagreed.
The Court reasoned that "[w]hen there is a single cause of multiple injuries (or a number of causes that result in a greater number of injuries), courts often look to the cause rather than the injuries in determining the amount of insurance coverage." Where one uninterrupted and continuing cause results in multiple injuries to property, there is a single accident or "occurrence" limiting the insurer's liability to one "occurrence" limit. In this case, assuming there was a loss of use that continued after the first policy period, there was still only one precipitating event of the landslide that resulted in the loss of use. The Court explained the question of the number of limits was distinct from the question of which policies provide coverage, which focuses on the timing of the damage.
Safeco further asserted that each Fireman's Fund policy provided $1 million in coverage as there were two "occurrences" per policy period - $500,000 for "property damage" and $500,000 for "personal injury" in the form of "wrongful entry or eviction," for a total of $4 million under all four policies. Again, the Court disagreed.
The Fireman's Fund policies defined "occurrence" to mean "[a]n accident, including continuous or repeated exposure to the same or similar harmful conditions, which results, during the policy period, in 'bodily injury' or 'property damage.'" For "personal injury," "occurrence" was defined as "[a]n act or series of acts of the same or similar nature that occurs during the policy period and which results in 'personal injury.'" The Court held that the different definitions of "occurrence" determined which policies were triggered, not the amount of coverage. The Court added that if a "wrongful entry or eviction" under the "personal injury" coverage occurred, the downhill owners were evicted once during the first policy period, not continuously or repeatedly. The Court noted that "a triggered policy is not necessarily a policy that pays."
Having determined there was only one "occurrence" and Fireman's Fund had paid its $500,000 per-"occurrence" limit, the Court concluded Fireman's Fund had no duty to pay for defense or indemnity regardless of potential coverage under successive policies. In other words, once Fireman's Fund had paid its limit, it no longer had a duty to defend under policies that were clearly triggered.