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Federal Insurance Company v. Steadfast Insurance Company

September 24, 2012

FEDERAL INSURANCE COMPANY, PLAINTIFF, CROSS-DEFENDANT AND APPELLANT,
v.
STEADFAST INSURANCE COMPANY, DEFENDANT, CROSS-COMPLAINANT AND APPELLANT; LIBERTY SURPLUS INSURANCE CORPORATION, DEFENDANT, CROSS-DEFENDANT AND RESPONDENT.



APPEAL from a judgment of the Superior Court of Los Angeles County, Alan S. Rosenfield, Judge. (Los Angeles County Super. Ct. No. BC399699)

The opinion of the court was delivered by: Mosk, J.

CERTIFIED FOR PUBLICATION

Affirmed.

INTRODUCTION

The United States brought an action against the insureds--the Sterling defendants--for discrimination under the Fair Housing Act (42 U.S.C. § 3601, et seq.) (Sterling action). The primary insurance carriers, Steadfast Insurance Company (Steadfast) and Liberty Surplus Insurance Corporation (Liberty), insured against claims for "wrongful eviction," "wrongful entry," and "invasion of the right of private occupancy." The excess and umbrella insurance carrier, Federal Insurance Company (Federal), insured against those claims and specifically insured against claims for discrimination. At different times in the Sterling action, Steadfast and Federal provided a defense for the Sterling defendants.

Federal sought a determination that it had no duty to defend in the Sterling action and claimed reimbursement from Steadfast and Liberty for defense fees and costs it expended on behalf of the insured defendants in the Sterling action. Steadfast, inter alia, sought reimbursement from Federal and Liberty for the defense fees and costs it expended in that action. The trial court granted summary judgment and summary adjudication against Federal.

We hold that only Federal had a duty to defend in the Sterling action because it issued the only insurance policy that provided coverage for discrimination claims. Neither Steadfast nor Liberty had a duty to defend because their policies did not cover the claims in the Sterling action. We therefore affirm the judgment.

BACKGROUND

The Sterling Action

In 2006, the United States, by the United States Department of Justice, filed the Sterling action against Mr. Sterling and others, asserting a single cause of action under, and to enforce, the Fair Housing Act. The United States alleged in the complaint that the Sterling defendants and "their agents and/or employees [had] engaged in a pattern or practice of discrimination on the basis of race, national origin, and familial status in connection with the rental of dwellings owned by [some of the defendants] in violation of the Fair Housing Act."

The discrimination alleged in the complaint in the Sterling action consisted of the following: refusing to rent to non-Koreans*fn1 ; refusing to rent to African Americans or families with children; creating, maintaining, and perpetuating an environment that was hostile to non-Korean tenants; providing inferior treatment to non-Korean tenants in the terms, conditions, and/or privileges of rentals; misrepresenting the availability of units to non-Koreans, African Americans, and families with children; making statements and publishing rental notices or advertisements that expressed a preference for Koreans and discrimination against non-Koreans; and making statements or publishing notices or advertisements in connection with the rental of units that expressed discrimination against African Americans and families with children. In discovery responses in the Sterling action, the Department of Justice asserted that the Sterling defendants' discriminatory practices included entering a tenant's apartment without notice or knocking and evicting tenants with children.

In its complaint in the Sterling action, the Department of Justice contended that the discriminatory acts violated various provisions of the Fair Housing Act (42 U.S.C. § 3604(a)-(d)). The Department of Justice sought to enjoin the alleged discriminatory conduct and other interference with the exercise of rights under the Fair Housing Act, monetary damages for those who suffered discrimination, and civil penalties.

The Sterling defendants tendered the defense of the Sterling action to Steadfast, Liberty, and Federal. At different times, Federal and Steadfast agreed to provide a defense under a reservation of rights. Federal and Steadfast contended that Liberty also agreed to defend the Sterling defendants, which contention Liberty disputed. In connection with the Sterling action, Federal expended $316,907.02 in defense fees and costs before withdrawing its defense and Steadfast expended $5,285,699.54 in defense fees and costs and paid $1,000,000 in settlement costs. Liberty did not provide a defense or otherwise expend any sums in connection with the matter.

The Insurance Policies

The Steadfast Policy

Steadfast issued Policy No. SCO539611-00 for the period from December 31, 2002, to March 31, 2004 (the Steadfast policy) insuring some of those named as defendants in the Sterling action.

The Steadfast policy provided for personal injury and advertising injury liability as follows:

"1. Insuring Agreement.

"a. We will pay those sums that the insured becomes legally obligated to pay as 'damages' because of 'personal injury' or 'advertising injury' to which this insurance applies. We will have the right and duty to defend the insured against any 'suit' seeking those 'damages.' However, we will have no duty to defend the insured against any 'suit' seeking 'damages' for 'personal injury' or 'advertising injury' to which this insurance does not apply. . .

"[¶-¶]

"b. This insurance applies to:

"(1) 'Personal injury' caused by an offense arising out of your business, excluding advertising, publishing, broadcasting or telecasting done by or for you . . . ."

The Steadfast policy defined "personal injury" as "injury, other than 'bodily injury,' arising out of one or more of the following offenses:

"[¶-¶]

"c. Any of the following acts if done by or on behalf of an owner, landlord or lessor:

"(1) Wrongful eviction from,

"(2) Wrongful entry into, or

"(3) Invasion of the right or [sic] private occupancy of a room, dwelling or premises that a ...


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