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Government Employees Insurance Co. v. Nadkarni

United States District Court, N.D. California, San Francisco Division

November 22, 2019





         The plaintiff, Government Employees Insurance Company (“GEICO”), filed this declaratory-relief action to determine whether its umbrella insurance policy - issued to the defendants Anshuman and Renuka Nadkarni, who are former landlords defending a state-court wrongful-eviction lawsuit brought by their former tenants - requires it to defend and indemnify the defendants.[1] The policy is an occurrence policy.[2] The complaint has three claims: (1) a claim for declaratory relief regarding GEICO's duty to defend; (2) a claim for declaratory relief regarding GEICO's duty to indemnify; and (3) a claim for reimbursement.[3] GEICO moved for summary judgment on claim one, its duty to defend, on the ground that the wrongful eviction took place outside of the policy period.[4] The defendants counter that GEICO cannot prove that the eviction took place before the policy period, the provable facts are that the eviction was during a period that overlapped the policy period, and GEICO thus has a duty to defend under California law (a duty broader than the duty to indemnify) because there is a possibility that the policy covers a claim.[5] Because the eviction occurrence took place before the policy period, the court grants GEICO's motion for partial summary judgment on claim one.


         1. The Eviction

         The defendants bought a residential property in February 2017 that was rented to tenants, who had lived there since 2008 and who had a written lease with the previous owner.[6] The lease created a month-to-month tenancy that required rent to be paid on the first of each month and allowed termination by either party with 30 days' written notice.[7] According to the defendants, they told the tenants in September 2017 that they wanted to move into the property in the summer of 2018.[8]On March 13, 2018, they served the tenants with a “60 Day Notice of Termination of Tenancy.”[9]On April 2, 2018, tenant Rosa Venegas sent the defendants' lawyer a message asking for additional relocation expenses for co-tenant Epifanio Venegas, who was elderly.[10] On April 21, 2018, the defendants emailed her to schedule a walk-through of the property the next day.[11] The former tenants apparently vacated the unit on April 21, 2018.[12] On April 29, 2018, the defendants met with the tenants at the property, the tenants surrendered their keys, and the defendants gave the tenants their security deposit and the additional relocation expenses.[13] The tenants paid rent for April but did not pay rent thereafter.[14] They left personal property at the property, and on or about May 13, 2018, the defendants instructed their contractor - without contacting the tenants first - to dispose of the personal property.[15]

         The defendants contend that the tenants had “access” to the property for the first two weeks in May, despite the surrender of keys and the lack of rent payment.[16] Ms. Nadkarni said that based on the 60-day notice served March 13, 2018, the defendants believed that the tenants had until May 12, 2018 to use the property, and that - even though the tenants surrendered their keys - “we believed that they had other copies of the keys. We were planning to change the locks eventually.”[17] When the defendants left the property on April 29, 2018, the tenants were still in the unit moving their things, and there were “items in the closets, appliances in the garage, and personal property in a locked storage in the garage.”[18] The defendants returned to the unit after the 60-day period expired and found “items left in the closets” and personal property in the locked storage unit of the garage.”[19] They “had been told” not to disturb or remove the personal property until after the 60 days, but once that period expired, they told the contractor to throw away the personal property.[20]

         In statements filed under penalty of perjury with the San Francisco Rent Board on June 11, 2018 and November 8, 2018, the defendants said that they obtained possession of the property on May 1, 2018.[21] Ms. Nadkarni admitted that they had completed their owner move-in when they bought the GEICO policy on May 7, 2018.[22] More specifically, when asked at her deposition why she bought the GEICO policy at issue here, Ms. Nadkarni said that she wanted coverage for contractor issues “or any kind of eviction issues.”[23] She did not anticipate a wrongful-eviction lawsuit from the tenants on the purchase date of the policy because the defendants “had successfully completed our owner move-in, ” and they selected the insurance coverage as landlords (presumably generally) because it had wrongful-eviction coverage.[24]

         2. The State Wrongful-Eviction Lawsuit

         The tenants sued the defendants for wrongful eviction on November 7, 2018.[25] The operative state complaint was filed on February 28, 2019 and alleges that (1) the defendants terminated the lease on the ground that the defendants would move into the property and (2) they did not move in within three months (and did not thereafter stay for three years or offer it back to the tenants).[26] An “owner move-in” was the legal ground that allowed the termination of the tenancy.[27] The complaint has the following claims: (1) negligence (by demanding that the tenants vacate the property for an owner move-in and failing to move in) (resulting in serious emotional distress, property damage, property loss, loss of a rent-controlled apartment, and moving costs); (2) wrongful eviction in violation of the San Francisco Rent Ordinance (resulting in the same damages); (3) breach of the covenant of quiet enjoyment (resulting in the loss of a rent-controlled apartment, property damage, property loss, moving costs, and attorney's fees and costs); (4) intentional infliction of emotional distress (resulting in severe emotional distress, mental injury, moving costs, and lose of use and enjoyment of the rental home); (5) a violation of section 37.11A of the San Francisco Rent ordinance by not filing required documents (such as a statement of occupancy within 90 days and updated statements every 90 days thereafter, the notice to vacate, and the notice of termination of tenancy) and by failing to move into the property (resulting in loss of enjoyment of a rent-controlled unit, property damage, property loss, mental injury, emotional distress, statutory damages and penalties, attorney's fees, and litigation costs); (6) unfair business practices for (essentially) the wrongful eviction and the failure to file the documents in violation of the Rent Ordinance, resulting in illegal profits; and (8) as to one former tenant, financial elder abuse warranting punitive damages.[28]

         The property damage specified in the complaint is the value of the personal belongings that the tenants left behind (worth approximately $4, 500).[29] In the underlying wrongful-eviction suit, the tenants do not mention leaving any property behind.[30] Their property damages, rather, stem from having to give away various possessions and the costs associated with their move.[31]

         3. The Insurance Policy

         Before May 8, 2018, the defendants' insurance policy did not cover wrongful evictions.[32] On May 7, 2019, the defendants purchased a policy that did: GEICO Personal Umbrella Policy number P8345980 for the policy period May 8, 2018 to May 8, 2019 (hereinafter the “GEICO policy” or “policy”).[33] “The policy was cancelled effective December 28, 2018.”[34]

         The policy was an occurrence policy: “We pay damages on behalf of an insured arising out of an occurrence, subject to the terms and conditions of this policy.”[35]

         The policy defines “damages” (in relevant part) as the “the total of: (a) damages an insured' must pay (1) legally; or (2) by agreement with our written consent; because of personal injury or property damage covered by this policy.”[36]

         The policy defines “occurrence” as “an accident or event, including a continuous or repeated exposure to conditions which results in personal injury or property damage neither expected or intended by an insured.[37]

         The policy defines “personal injury” in relevant part as “(b) injury arising out of: (i) false arrest, false imprisonment, wrongful eviction, wrongful detention or malicious prosecution.”[38]

         The policy defines “property damage” as “physical injury or destruction of tangible property. This includes the loss of use caused by the injury or destruction. Property damage does not include the loss of money, notes, stock, bonds, or similar instruments, computer data or intellectual property.”[39]

         The policy excludes from coverage damages arising from “Acts committed by any insured, or at any insured's direction, with intent to cause personal injury or property damage.”[40]

         The “Conditions” section of the policy states, “This policy applies to personal injury or property damage which takes place anywhere during the time this policy is in force, provided that suit is brought in the United States, its territories and possessions, or Canada.”[41]

         4. Tender to GEICO

         On November 12, 2018, the defendants tendered the tenants' unlawful-eviction lawsuit to GEICO for a defense and indemnity under the GEICO policy.[42] On December 4, 2018, GEICO declined the defendants' tender of the state complaint for a defense and indemnity.[43] On January 15, 2019, GEICO said that it would provide a defense to the state lawsuit through independent counsel with a full reservation rights (as follows):

a. The “right to disclaim coverage” for the allegations and claims raised by the Venegas action on the grounds that no “personal injury” or “property damage” took place “during the time [the GEICO policy was] in force . . . .”;
d. The “right to withdraw from th[e] defense [of the Nadkarni defendants] upon reasonable notice . . . .”; and
e. The “right to seek recovery from [the Nadkarni defendants] for all defense costs incurred in defending [them] in the Venegas action.”[44]

         5. Other Relevant Procedural History

         GEICO filed its initial complaint on March 11, 2019 and an amended complaint on April 5, 2019.[45] The defendants moved for judgment on the pleadings on the ground that GEICO had a duty to defend and indemnify them as a matter of law.[46] In its opposition, GEICO asked for judgment on the ground that the eviction happened before the policy period began.[47] The court denied the defendants' motion on the ground that the facts - as pled - showed that the eviction happened before the policy period.[48] The court denied GEICO's motion for judgment without prejudice to GEICO's moving for summary judgment after discovery.[49] GEICO later moved for summary judgment.[50] The court held a hearing on November 21, 2019.


         1. Summary-Judgment Standard

         The court must grant a motion for summary judgment if the movant shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). Material facts are those that may affect the outcome of the case. Anderson, 477 U.S. at 248. A dispute about a material fact is genuine if there is enough evidence for a reasonable jury to return a verdict for the non-moving party. Id. at 248-49.

         The party moving for summary judgment has the initial burden of informing the court of the basis for the motion, and identifying portions of the pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate the absence of a triable issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). To meet its burden, “the moving party must either produce evidence negating an essential element of the nonmoving party's claim or defense or show that the nonmoving party does not have enough evidence of an essential element to carry its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co. v. Fritz Cos., 210 F.3d 1099, 1102 (9th Cir. 2000); see Devereaux v. Abbey, 263 F.3d 1070, 1076 (9th Cir. 2001) (“When the nonmoving party has the burden of proof at trial, the moving party need only point out ‘that there is an absence of evidence to support the nonmoving party's case.'”) (quoting Celotex, 477 U.S. at 325).

         If the moving party meets its initial burden, the burden shifts to the non-moving party to produce evidence supporting its claims or defenses. Nissan Fire & Marine, 210 F.3d at 1103. The non-moving party may not rest upon mere allegations or denials of the adverse party's evidence, but instead must produce admissible evidence that shows there is a genuine issue of material fact for trial. Devereaux, 263 F.3d at 1076. If the non-moving party does not produce evidence to show a genuine issue of material fact, the moving party is entitled to summary judgment. Celotex, 477 U.S. at 323.

         In ruling on a motion for summary judgment, inferences drawn from the underlying facts are viewed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986).

         2. The Interpretation of Insurance Agreements

         Because the defendants are California residents, and the parties' dispute relates to an insurance policy covering property located in the state, California substantive law applies in this diversity action. Freeman v. Allstate Life Ins. Co., 253 F.3d 533, 536 (9th Cir. 2001). In California, courts apply contract law to interpret insurance policies:

Interpretation of an insurance policy is a question of law and follows the general rules of contract interpretation. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18, 44 Cal.Rptr.2d 370, 900 P.3d 619 (Waller).) The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the mutual intention of the parties. Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ. Code, § 1636). Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639). The clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, unless used by the parties in a technical sense or a special meaning is given to them by usage (id., § 1644), controls judicial interpretation. (Id., § 1638.) [Citations.] A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable. [Citation.] But language in a contract must be interpreted as a whole, and in the circumstances of the case, and cannot be found to be ambiguous in the abstract. (Id. at p. 18, 44 Cal.Rptr.2d 370, 900 P.2d 619.)
Moreover, insurance coverage is interpreted broadly so as to afford the greatest possible protection to the insured, [whereas] . . . exclusionary clauses are interpreted narrowly against the insurer. (White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 881, 221 Cal.Rptr. 509, 710 P.2d 309.) . . . The burden is on the insured to establish that the claim is within the basic scope of coverage and on the insure to establish that the claim is specifically excluded. (Aydin Corp. v. First State Ins. Co. (1998) 18 Cal.4th 1183, 1188, 77 Cal.Rptr.2d 537, 959 P.2d 1213.)

MacKinnon v. Truck Ins. Exchange, 31 Cal.4th 635, 647-48 (2003) (internal quotations omitted).

         3. An Insurer's Duty to Defend

         An insurer's duty to defend is broader than its duty to indemnify:

An insurer must defend its insured against claims that create a potential for indemnity under the policy. (Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287, 295, 24 Cal.Rptr.2d 467, 861 P.2d 1153 (Montrose); Gray v. Zurich Insurance Co. (1966) 65 Cal. 2d 273, 275, 54 Cal.Rptr. 104, 419 P.2d 168 (Gray).) The duty to defend is broader than the duty to indemnify, and it may apply even in an action where no damages are ultimately awarded. (Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1081, 17 Cal. Rprt. 2d 210, 846 P.2d 792.)
Determination of the duty to defend depends, in the first instance, on comparison between the allegations of the complaint and the terms of the policy. (Montrose, supra,6 Cal.4th 287, 295, 24 Cal.Rptr.2d 467, 861 P.2d 1153.) But the duty also exists where extrinsic facts known to the insurer suggest that the claim may be covered. (Ibid.) Moreover, that the precise causes of action pled by the third-party complaint may fall outside policy coverage does not excuse the duty to defend where, under the facts alleged, reasonably inferable, or otherwise known, the complaint could fairly be amended to state a covered liability. (Gray, supra,65 Cal. ...

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