United States District Court, N.D. California, San Francisco Division
ORDER GRANTING GEICO'S MOTION FOR PARTIAL SUMMARY
JUDGMENT RE: ECF NO. 34
LAUREL
BEELER UNITED STATES MAGISTRATE JUDGE.
INTRODUCTION
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.
STATEMENT
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.
GOVERNING
LAW
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. ...