This disposition is not appropriate for publication and is not precedent *

except as provided by 9th Cir. R. 36-3.

NOT FOR PUBLICATION

UNITED STATES COURT OF APPEALS

 FOR THE NINTH CIRCUIT

WANDA A. SELL, individually and as

Trustee of the Nancy A. Muhs Trust,

 Plaintiff - Appellant,

 v.

NATIONWIDE MUTUAL INSURANCE

COMPANY,

 Defendant - Appellee.

No. 11-15492

DC No. 2:09 cv-1584 GEB

MEMORANDUM*

Appeal from the United States District Court

for the Eastern District of California

Garland E. Burrell, District Judge, Presiding

Argued and Submitted July 19, 2012

San Francisco, California

Before: TASHIMA, CLIFTON, and MURGUIA, Circuit Judges.

 Plaintiff Wanda Sell is a trustee and senior beneficiary of a trust that

includes a ranch. Rigoberto Ocegueda is a residual beneficiary of the trust. 

Ocegueda filed a petition in state court seeking an order removing Sell as trustee

FILED

AUG 14 2012

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
The parties are diverse and the amount in controversy requirement for 1

diversity jurisdiction is met. 

2

and directing the trustee to provide him with possession and control of the ranch. 

In the petition, Ocegueda alleged that Sell failed to meet the trust’s conditions to

receive the ranch. There is no evidence that Ocegueda had been physically present

on or physically possessed the ranch since the trust was established. The trust held

liability coverage on the ranch (as part of a Farmowner’s Policy) with Defendant

Nationwide Insurance Company (“Nationwide”). The policy provides

endorsements for both personal and advertising injury liability and property

damage. 

Sell tendered defense of Ocegueda’s suit to Nationwide. Nationwide refused

to defend the suit. Sell then sued Nationwide in California state court in her

personal capacity and in her capacity as trustee. Nationwide removed the case to

federal court under 28 U.S.C. § 1441(b). Sell alleges breach of contract and 1

breach of the implied covenant of good faith and fair dealing; she seeks damages

and declaratory relief. The district court granted summary judgment to

Nationwide. Sell timely appealed. 
3

We review the district court’s grant of summary judgment de novo and

apply the substantive law of California. Conestoga Servs. Corp. v. Exec. Risk

Indem., Inc., 312 F.3d 976, 980-81 (9th Cir. 2002). We reverse in part.

1. The trust’s policy includes coverage for claims of personal injury

resulting from “[t]he wrongful eviction from, wrongful entry into, or invasion of

the right of private occupation of a room, dwelling or premises that a person

occupies, committed by or on behalf of its owner, landlord or lessor.” This

language is part of a standard form comprehensive general liability policy. 

Nationwide argues that Ocegueda’s claim is not covered because he did not

physically possess the ranch. We hold that it is at least ambiguous that the policy

covers Ocegueda’s claim. See Bank of the W. v. Super. Ct., 833 P.2d 545, 552

(Cal. 1992). 

Nationwide does not dispute that if the policy did not include the limitation

“that a person occupies,” that under California law the policy could implicate

invasions of more than just the right of possessory occupancy. Indeed, many cases

interpreting the “right of private occupation” without the “occupies” limitation

have held that the right of private occupation provides liability protection for

claims alleging a broad range of interferences. See, e.g., Martin Marietta Corp. v.
4

Ins. Co. of N. Am., 47 Cal. Rptr. 2d 670, 683 (Ct. App. 1995) (requiring coverage

of actions against insured to remediate groundwater and other environmental

contamination); State Farm Fire & Cas. Co. v. Westchester Inv. Co., 721 F. Supp.

1165, 1168 (C.D. Cal. 1989) (requiring coverage of actions based on racial

discrimination claim brought by prospective tenants against insured).

Nationwide argues that the addition of the phrase “that the person occupies”

to the policy is sufficient under California law to unambiguously require actual

physical possession by the third-party claimant. A North Carolina court has

rejected this argument. See Hobbs Realty & Constr. Co. v. Scottsdale Ins. Co., 593

S.E.2d 103, 108 (N.C. Ct. App. 2004). In that case, the third-party claimants had

acquired a right to occupy the premises by acquiring a lease, but never actually

occupied the premises because the insured refused to provide them with a key to

gain entry into the premises, allegedly for racially discriminatory reasons. Id. at

105. The court held that “the proper inquiry is not whether a party has physically

assumed control of the property, but whether he has obtained a legally enforceable

right to do so.” Id. at 108. Similarly, a California Court of Appeal has explained

that the “occupies” limitation “clarif[ies] that the wrongfulness of the ejection must

consist in, or attach to, an invasion of the right of occupation.” Zelda, Inc. v.

Northland Ins. Co., 66 Cal. Rptr. 2d 356, 364 (Ct. App. 1997) (emphasis added);
5

Hon H. Walter Croskey et al., Rutter Grp., California Practice Guide: Insurance

Litigation ¶ 7:1073.3 (2011) (defining “occupies” in the limitation as “the person

had the right to occupy real property, as owner or tenant”). We conclude that it is

at least arguable that the “occupies” limitation does not require the third-party to

physically possess the property.

Although this policy defines “unoccupancy” or “unoccupied,” this definition

is insufficient to establish that “occupies” or “occupancy” requires a third party’s

physical possession. 

Nationwide also argues that the “occupies” limitation is rendered redundant

if it is interpreted to not require physical possession. We disagree because other

courts have identified several possible meanings of this clause. One possible

explanation is that the “occupies” phrase is included to unambiguously exclude

suits brought by prospective residents asserting racial discrimination in housing. 

See Powell v. Alemaz, Inc., 760 A.2d 1141, 1147 (N.J. Super. Ct. App. Div. 2000);

Kings Pointe Apts. v. State Farm Fire & Cas. Co., 145 F.3d 1331, 1998 WL

279371, at *2 n.1 (6th Cir. 1998) (unpublished table decision). Another rational

explanation is that the phrase clarifies “that the offense would only apply to

landlord-tenant disputes” and not to “suits by neighboring landowners for nuisance

and trespass claims.” Matthew Bender, California Insurance Law & Practice §
6

49.60 (2012). The Seventh Circuit has commented that the “occupies” phrase

attempts “to refine the nature of the prerequisite ‘right’ of private occupancy” to

“exclude[] at least unapproved sub-lessees.” United States v. Sec. Mgmt. Co., Inc.,

96 F.3d 260, 265 (7th Cir. 1996). We need not decide which of these meanings, if

any, is correct; we provide these illustrations to demonstrate that Nationwide’s

reading is not the only reasonable interpretation to avoid making “occupies”

surplusage. 

2. Because Nationwide had a duty to indemnify under the policy’s

personal liability coverage, Nationwide had a duty to defend. Horace Mann Ins.

Co. v. Barbara B., 846 P.2d 792, 795 (Cal. 1993) (“[T]he duty to defend is broader

than the duty to indemnify.”). 

3. The property damage section of the insurance policy explicitly

protects only property damage which is caused by an “accident.” “Under

California law, the word ‘accident’ in the coverage clause of a liability policy

refers to the conduct of the insured for which liability is sought to be imposed on

the insured.” Delgado v. Interins. Exch. of the Auto. Club of S. Cal., 211 P.3d

1083, 1088 (Cal. 2009). To determine whether an act was an accident, the relevant

question is whether the insured intended to “commit the act giving rise to liability,”

not whether the insured intended “to cause the consequences of that act.” Collin v.
7

Am. Empire Ins. Co., 26 Cal. Rptr. 2d 391, 403-04 (Ct. App. 1994). Sell does not

identify any accidental conduct on her part. Therefore, the property damage

section of the policy does not provide liability coverage for Ocegueda’s claim.

4. Sell alleges breach of the implied covenant of good faith and fair

dealing and seeks punitive damages. An insurer does not act in bad faith if it

withholds benefits based on a legitimate dispute as to liability. Am. Cas. Co. of

Reading, Pa. v. Krieger, 181 F.3d 1113, 1123 (9th Cir. 1999) (applying California

law); Tomaselli v. Transamerica Ins. Co., 31 Cal. Rptr. 2d 433, 440 (Ct. App.

1994). Because we hold that it was ambiguous whether the policy covered

Ocegueda’s claim, we further hold that Nationwide’s refusal to cover the claim was

not in bad faith. Because Nationwide did not act in bad faith, “punitive damages

are unavailable.” Am. Cas. Co., 181 F.3d at 1123.

Accordingly, we reverse the district court’s grant of summary judgment to

Nationwide on the breach of contract claim and hold that Nationwide has a duty to

defend and to indemnify the trust under the policy’s coverage for personal and

advertising injury liability. We affirm the district court’s grant of summary

judgment to Nationwide on Sell’s bad faith claim and request for punitive
8

damages. Plaintiff-appellant shall recover her costs on appeal from defendantappellee.

AFFIRMED in part, REVERSED in part, and REMANDED.
Sell v. Nationwide Insurance Co., No. 11-15492

CLIFTON, Circuit Judge, dissenting in part:

I respectfully dissent, in part. I conclude that Plaintiff Wanda Sell is not

entitled to coverage under the insurance policy in question, issued by Defendant

Nationwide Mutual Insurance Company, and thus I would affirm the judgment of

the district court in full.

Sell should not be entitled to coverage under the “personal injury” provision. 

The relevant language provides coverage for claims of personal injury resulting

from “[t]he wrongful eviction from, wrongful entry into, or invasion of the right of

private occupation of a room, dwelling or premises that a person occupies,

committed by or on behalf of its owner, landlord or lessor.”

There was simply no “eviction,” “entry,” or “invasion” (wrongful or not)

into “the right of private occupation of a room, dwelling or premises that a person

occupies” here, or any claim that such an event occurred. The person whose space

was allegedly invaded was Rigoberto Ocegueda, and there was no evidence or

basis to infer that he ever physically occupied the ranch or any part of it, as the

majority acknowledges, at 2.

But, the majority reasons, the policy language might be sufficiently

ambiguous to provide coverage against a “right of occupation” even if that right

never involved actual occupancy. That strikes me as an excessively tortured

FILED

AUG 14 2012

MOLLY C. DWYER, CLERK

U.S. COURT OF APPEALS
2

construction of the language, simply inconsistent with “eviction,” “entry,”

“invasion,” or “that a person occupies.” A claim that language is ambiguous does

not prove that it is.

The majority’s reading appears to rest entirely upon the decision in Hobbs

Realty & Constr. Co. v. Scottsdale Ins. Co., 593 S.E.2d 103, 107 (N.C. Ct. App.

2004) (“[T]he phrase ‘invasion of the right of private occupancy of a room,

dwelling or premises that a person occupies’ have generally distinguished between

plaintiffs who own or rent a property, and those who are merely prospective

tenants, but have not entered into a contract, signed a lease, or otherwise obtained

possessory rights to the subject property. We . . . conclude that the proper inquiry

is not whether a party has physically assumed control of the property, but whether

he has obtained a legally enforceable right to do so.”) I am not persuaded that a

California court would reach the same conclusion.

My doubt is especially strong in the circumstances here, for the facts of

Hobbs Realty were unlike the facts in our case. At issue in that case was a claim

by a tenant who had entered into a lease to possession of premises. The North

Carolina court emphasized that “[t]he parties cite no cases, and we have found

none, in which the underlying plaintiffs allege tortious behavior occurring after

obtaining a possessory right to the subject property, but before plaintiffs have
3

physically moved in.” Id. at 108. Hobbs Realty quoted United States v. Security

Mgmt. Co., 96 F.3d 260, 265 (7th Cir. 1996), that “a reasonable insured would read

the language as excluding cases where the aggrieved individual was not possessed

of an existing right of private occupancy.”

Ocegueda “was not possessed of an existing right of private occupancy,” so

the policy language should be read to exclude his claim. Ocegueda did not allege

he had an existing possessory right to the property that Sell had “invaded,” causing

him some personal injury. Rather, he contended that Sell herself was not entitled

to possession of the property because she had not satisfied the conditions

established under the trust. As stated in his petition to the state court, Ocegueda

sought an order from the court “to compel the Trustee to provide him with

possession and control of the ranch and allow him to occupy it,” as the successor

beneficiary. His claim of the right to occupy the property depended upon the court

concluding that Sell had not satisfied the conditions of the trust. It was the basis

for Sell’s entitlement to possession of the property, not his, that was put in dispute

by Ocegueda’s petition.. That is not a claim properly covered by the language of

the policy or by the distinction emphasized by the court in Hobbs Realty.

More broadly, in interpreting an insurance policy, the “fundamental goal is

to give effect to the mutual intention of the parties.” Martin Marietta v. Insurance
4

Co. of North America , 47 Cal. Rptr. 2d 670, 675 (Ct. App. 1995). The rule that we

construe ambiguity against the insurer as the drafter of the policy protects “the

objectively reasonable expectations of the insured.” Id. The insurance policy here

was not a title policy, and Sell did not insure herself against her own failure to

satisfy the conditions to her rights under the trust. I do not believe that either “the

mutual intention of the parties” or “the objectively reasonable expectations of the

insured” support coverage under a “farmowner’s” policy against a claim that the

insured did not, in fact, own the farm.

I would affirm.