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Fire Insurance Exchange v. Superior Court of San Bernardino County

January 26, 2010


ORIGINAL PROCEEDINGS; petition for writ of mandate. Donald Alvarez, Judge. Petition granted. (Super.Ct.No. BBCHS00866).

The opinion of the court was delivered by: McKINSTER Acting P. J.



Building a 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 homeowner 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.


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 compliance was recorded in January 1995. The Bourguignons completed construction in October 1995, and a corrected certificate was recorded that month.

In 2002, the Parsons negotiated to purchase the Leach property and 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 Parsons then purchased the Leach property.

The Parsons 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 sued the Parsons for quiet title and adverse possession of this five and one-half foot strip. The Parsons cross- complained for quiet title, declaratory relief and fraud. They sought damages measured by the diminution in value of their property based on the cloud on title as well as punitive damages in addition to seeking quiet title and declaratory relief. In a second amended cross- complaint, the Parsons alleged that the Bourguignons knew that their newly built residence encroached on the Leach property and that they had misrepresented the facts to Leach to obtain her approval. The Parsons added a prayer for a mandatory injunction to require the removal of the structure and for attorney fees and punitive damages.

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 Parsons' claims did not present any potential basis for recovery. Specifically, it argued that any losses to the Parsons resulted from the Bourguignons' intentional act of building over the lot line and, thus, was not the result of an "accident." Secondly, the Parsons' claims for equitable relief did not constitute damages covered by the policy. Finally, the Parsons 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 Parsons' trespass claim could support a claim for damages even though they did not pray for damages and, lastly, that the Parsons' cross- complaint alleged a tangible fee simple interest in their property.


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) 65 Cal.2d 263, 275.) The insurer is excused from its defense obligation only when "the third party complaint can by no conceivable theory raise a single issue which could bring it within the policy coverage." (Id. at p. 276, fn. 15; see also Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 300.) The insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it cannot. (Lyons v. Fire Ins. Exchange (2008) 161 Cal.App.4th 880, 885.) Any doubt as to whether the facts give rise to a duty to defend is resolved in the insured's favor. Even a single claim that does not predominate, but for which there is potential coverage, will trigger the insurer's duty to defend. (Ibid.)

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 "occurrence" 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 Parsons' 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) 161 Cal.App.3d 1199, 1202.)

An accident does not occur when 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) 213 Cal.App.3d 41, 51.) Merced explains the distinction by the following examples: When a driver intentionally speeds and as a result, negligently hits another car, the speeding is 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. This situation is distinct from an instance where a driver speeds and deliberately hits the other car.

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. (Ray v. Valley Forge Ins. Co. (1999) 77 Cal.App.4th 1039, 1045-1046; see also Collin v. American Empire Ins. Co. (1994) 21 Cal.App.4th 787, 810 (Collin).) The insured's subjective intent is irrelevant. (Quan v. Truck Ins. Exchange (1998) 67 Cal.App.4th 583, 598 (Quan); Lyons v. Fire Ins. Exchange, supra,) 161 Cal.App.4th 880.)*fn1 Indeed, it is well established in California that the term "accident" refers to the nature of the act giving rise to liability; not to the insured's intent to cause harm. (Collin, at p. 810.)

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 their 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, 67 Cal.App.4th at p. 598; Lyons v. Fire Ins. Exchange, supra, 161 Cal.App.4th 880.) Similarly in Merced Mutual Ins. Co. v. Mendez, supra, 213 Cal.App.3d 41, acts of oral copulation and attempted oral copulation were held not to be accidents notwithstanding insured's mistaken belief that victim consented. (See also J. C. Penney Casualty Ins. Co. v. M. K. (1991) 52 Cal.3d 1009, 1014 [homeowners policy as a matter of law did not provide coverage for child molestation regardless of lack of intent to harm].) Our Supreme Court has recently reaffirmed this principle in Delgado v. Interinsurance Exchange of Automobile Club of Southern California (2009) 47 Cal.4th 302 , where it concluded that "an insured's unreasonable belief in the need for self-defense does not turn the resulting purposeful and intentional act of assault and battery into `an accident' within the policy's coverage clause."*fn2 (Id. at p. 317.)

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, 21 Cal.App.4th 787, a misunderstanding of legal rights did not turn conversion of property into an accident. (See also Swain v. California Casualty Ins. Co. (2002) 99 Cal.App.4th 1 [mistaken belief that acts were lawful did not render wrongful eviction of tenant an accident]; Lipson v. Jordache Enterprises, Inc. (1992) 9 Cal.App.4th 151, 159 [An employment termination, even if due to a mistake of fact, is an intentional act and the mistake of fact does not transform it into an accident that triggers an insurer's duty to defend].) In surveying the then-extant case authority, Collin located only one case that had departed from these principles-Allstate Ins. Co. v. Vavasour (N.D.Cal. 1992) 797 F.Supp. 785 (Vavasour).

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) 815 F.Supp. 1309, 1310 (Salahutdin) ...

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