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Mesa Underwriters Specialty Insurance Co. v. Blackboard Insurance Specialty Co.

United States District Court, N.D. California

July 15, 2019

Mesa Underwriters Specialty Insurance Company, Plaintiff,
Blackboard Insurance Specialty Company, et al., Defendants.



         The Court herein considers two pending motions: one joint motion for partial summary judgment brought by plaintiff Mesa Underwriters Specialty Insurance Company (“Mesa”) and nominal defendants NDO Group, LLC, Danny Haber, Alon Gutman, and Dion Ross (collectively “NDO Group”), and the other, a motion for summary judgment by defendant Blackboard Insurance Specialty Company (“Blackboard”)[1]. Both motions concern Blackboard's alleged duty to defend NDO Group against the claims asserted in an underlying action filed in the Superior Court of the State of California, County of Alameda, Action No. RG16-822634, entitled Knapp, et al., v. Haber, et al. The Court heard oral argument on the cross-motions on May 28, 2019.

         Having duly considered the parties' written and oral arguments, and the admissible evidence submitted, and for the reasons set forth herein, the Court Orders as follows: Mesa Underwriters' motion for partial summary judgment on the issue of Blackboard's duty to defend is Granted and Blackboard's cross-motion for summary judgment is Denied. The allegations of the complaint in the underlying action included claims as to which Blackboard owed a duty to defend NDO Group under Coverage A (bodily injury and property damage) and Coverage B (personal and advertising injury).

         I. Summary of Facts [2]

         A. The Underlying Action

         On April 1, 2016, NDO acquired a “single room occupancy, ” long-term residential hotel located at 392 11th Street, Oakland, California (“Hotel”), in which a number of low-income tenants were residing. NDO group began renovations on common areas and some units in the Hotel shortly thereafter. While NDO negotiated buyouts with 20-25 tenants, several tenants continued to reside in the Hotel under the terms of their leases.

         On July 8, 2016, some tenants of the Hotel filed a complaint in Alameda County Superior Court, Knapp, et al. v. Haber, et al., No. RG16822634, alleging eight causes of action: (1) violation of the Oakland Tenant Protection Ordinance; (2) breach of covenant of quiet use and enjoyment; (3) breach of implied warranty of habitability; (4) intentional infliction of emotional distress; (5) nuisance; (6) negligence; (7) wrongful eviction; and (8) elder abuse. (Jones Decl. Exh 1, “Tenants' Complaint.”) The tenants alleged in pertinent part:

Since the Defendants purchased the Property . . . they have engaged in a pattern or practice to create, or have by their actions and/or omissions allowed to exist, conditions, conduct and a climate at the Property which have and continued to adversely affect Plaintiffs, in violation of Oakland's Tenant Protection Ordinance (Oakland Municipal Code§§ 8.22.600, et seq.) TPO and other state and local laws.

(Id. ¶ 16(h).) The tenants amended their complaint on July 21, 2016, to add a claim for violation of the Fair Employment and Housing Act. (Jones Decl. Exh. 2, “Tenants' FAC”.) The tenants alleged that, among other things, the following:

         NDO Group directed ongoing construction and renovation activities that disrupted the quiet enjoyment of the plaintiffs' homes and resulted in the constructive and wrongful evictions of tenants. (Id. at ¶ 16.) The tenants were no longer being supplied heat, garbage pickup, or secure mail delivery. (Id. ¶ 16 (k), (m), (n).) The apartments all around them were gutted to the studs, large holes were created in the ceilings of apartments (including apartment of a tenant-plaintiff), and construction debris was dumped down the holes. (Id. at 7-8.) Some of the tenants were forced to vacate their units due to water leaks, failure to repair habitability defects, ongoing wrongful entries to their apartments, noise, dust, and a continuing nuisance resulting from the construction activities. (Id. at ¶ 16.)

         The tenants filed a Second Amended Complaint on May 1, 2017, alleging ongoing construction activities that disrupted the tenants' quiet enjoyment and the habitability of their apartments. (Jones Decl. Exh. 4, “Tenants' SAC”.) The SAC added allegations that: defendants demolished communal bathrooms in the Hotel; defendants created holes in the walls of the apartments, including a tenant-plaintiff's room; and one tenant plaintiff (Howe) fell and injured his knee on or about November 2, 2016, in an unlit stairwell and eventually was forced to vacate his unit on January 29, 2017, due to the dangerous living conditions. (Id. at 9-10.) The SAC further alleged that one of the remaining tenant-plaintiffs (Chavez) endured “gaping holes in the walls allowing the cold air to penetrate his unit and preventing him protection from the elements while being unable to plug in his wall heater because Defendants construction efforts cut-off the electricity. . . . personal belongings [being] ruined due to water leaks in his closet . . . [, and] days when the water supply was completely cut off.” (Id. at 11.)

         The tenants filed a Third Amended Complaint on May 22, 2018. (Jones Decl. Exh. 11, “Tenants' TAC”.) As to remaining tenant-plaintiff Prather, the TAC added new allegations that he had lost use of a toilet, sink, and shower due to lack of sufficient water pressure; and that he was coerced to vacate his room temporarily for repairs only to find upon his return that his belongings had been thrown out. (Id. at 11.) As to tenant-plaintiff Chavez, the TAC alleged that he had been forced to vacate his unit as of July 25, 2017, after having been physically assaulted at the hands of one of the construction workers who had blocked his entry and shouted “this is a construction zone! No. one lives here.” (Id. at 11-12.) In the July 12, 2017 assault, the TAC alleges that the construction worker choked Chavez, pushed him against a wall, forced him down a stairwell and shoved him to the ground. (Id. at 12.) Chavez sustained injuries and was taken away in an ambulance for treatment. (Id. at 12.) The TAC alleged that a member of the NDO Group (Ross) was seen talking with the construction worker who assaulted Chavez before the police arrived on the scene. (Id. at 12.) Chavez never returned to sleep at the Hotel thereafter. (Id. at 12-13.)

         B. The Policy

         On November 18, 2016, a few months after NDO Group had begun its ongoing work on the Hotel Traveler, NDO Group purchased a commercial general liability insurance policy from Blackboard. (Jones Decl. Exh. 3.) One year later NDO Group purchased a renewal policy from Blackboard. (Jones Decl. Exh. 5.) The Blackboard policies share the same coverage form (CG 00 00 04 13), which contains two basic coverages-Coverage A, liability for bodily injury and property damage, and Coverage B, liability for personal and advertising injury. The relevant Coverages sections of the policies state as follows:


1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” 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 “bodily injury” or “property damage” to which this insurance does not apply.
b. This insurance applies to “bodily injury” or “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory”;
(2) The “bodily injury” or “property damage” occurs during the policy period; and
(3) Prior to the policy period, no insured listed under Paragraph 1. of Section II-Who Is An Insured and no “employee” authorized by you to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known prior to the policy period.
2. Exclusions
This insurance does not apply to:
a. Expected Or Intended Injury “Bodily injury” or “property damage” expected or intended from the standpoint of the insured. This exclusion does not apply to “bodily injury” resulting from the use of reasonable force to protect persons or property.

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