T hi s di s pos i t i on i s notappr opr i a t e f orpubl i c a t i on and i s notpr e c e de nt * e xc e pta s pr ovi de d by 9th C i r . R . 36- 3. NOT F OR P UB L I CAT I ON UN I TE D STATE S C OU RT OF APPE ALS FOR T HE NI NTH CI RC UI T W A N D A A . S E L L , i nd i vi du al l y and as T ru s te e o f

th e N a n c y A . M u h s T ru s t, P la in tif

f - A p p e lla n t, v. N A TI O N W I D E M U TU A L I N SU RA N CE C OMP AN Y, D ef

endant- A pp el l ee . N o. 11- 15492 DC No . 2 : 0 9 c v - 1 5 8 4 GEB ME MOR AN DU M *

A pp ea l fr om the U ni t ed S t at es D i stri ctC ou rt f o rth e E a s te rn D is tr ic t o f C a lif o rn ia G a r l a nd E . B urr e l l , D i s tr i c tJ udge , P r e s i di ng A r gue d a nd S ubm i tt e d J ul y 19, 2012 S a n F r a n c is c o , C a lif

o rn ia B efo re: T A S H IM A , C L IF T O N , an d M U R G U IA , C i rcu i tJu d g es. P l ai nt i ff

W anda S el l i s atrust ee and seni or benefi ci ary of atrustthat in c lu d e s ar a n c h . R ig o b e rto O c e g u e d ais ar e s id u a l b e n e f ic ia ry o f th e tru s t. O ce gu eda f

i l ed a pet i t i on i n st at e c ou rtse eki ng an order re m ov i ng S el l as trust ee 

# FI LED AU G 14 2012 M OLLY C. DW Y ER, CLERK U . S. C O U R T OF APPE ALST he pa rt i e s a r e di ve r s e a nd the a m ounti n c ontr ove r s y r e qui r e m e ntf or 1 d iv e r s ityju r is d ic tio n is m e t. 2 a n d d ir e c tin g th e tru s te e to p r o v id e h im w ith p o s s e s s io n a n d c o n tr o l o f th e r a n c h . I n th e p e titio n , O c e g u e d aa lle g e d th a t S e ll f a ile d to m e e t th e tru s t’s c o n d itio n s to r e c e i ve the r a nc h. T he r e i s no e vi de nc e tha tO c e gue daha d be e n phy s i c a l l y pr e s e nt o n o rp h y s ic a llyp o s s e s s e d th e r a n c h s in c e th e tru s t w a s e s tab lis h e d . T h e tru s t h e ld l i abi l i ty c ove r a ge on the r a nc h ( a s pa rtof aF a rm ow ne r ’ s P ol i c y ) w i th D e f e nda nt N at i on w i de Insurance C om pany (“N at i on w i de”) . T he po l i cyprov i des e n d o r s e m e n ts f

o rb o th p e r s o n a l a n d a d v e rtis in g in ju ry liab ilitya n d p r o p e rty d a m a g e . S el l t endered defe nse of O ce gu eda’ s s ui tt o N at i on w i de. N at i on w i de re fuse d t o d ef end the sui t . S el l then sued N at i on w i de i n C al i forni a s t at e c ou rti n h er p e r s o n a l c ap a c itya n d in h e rc ap a c itya s tru s te e . N a tio n w id e r e m o v e d th e c a s e to f e de r a l c ourtunde r28 U . S . C . § 1441( b) . S e l l a l l e ge s br e a c h of c ontr a c ta nd 1 brea ch of the i m pl i ed covenant of go od fa i th and fa i r dea l i ng ; she s ee ks dam ages a n d d e c la r a to ry r e lie f

. T h e d is tr ic t c o u rt g r a n te d s u m m a ry ju d g m e n t to N a tio n w id e . S e ll tim e ly ap p e a le d .3

W e r e vi e w the di s tr i c tc ourt ’ s gr a ntof s um m a ry j udgm e ntde novo a nd ap p ly th e s u b s ta n tiv e la w o f C a lif o rn ia . C o n esto g a Servs. C o rp . v. E xec. R isk Indem . , Inc. , 3 1 2 F .3 d 9 7 6 , 9 8 0 - 8 1 ( 9 th C ir . 2 0 0 2 ) . W e r e v e r s e in p a rt.

1 . T he trust ’ s pol i cyi ncl ud es coverage f or cl ai m s of per sonal i nj ury r e s ul t i ng f

r om “ [ t ] he w r ongf

ul e vi c t i on f

r om , w r ongf

ul e ntry i nt o, ori nva s i on of the r i ghtof

pr i va t e oc c upa t i on of

ar oom , dw e l l i ng orpr e m i s e s tha tape r s on o c c u p ie s , c o m m itte d b y o ro n b e h a lf o f its o w n e r , la n d lo r d o rle s s o r .” T h is la n g u a g e is p a rt o f

as ta n d a r d f

o rm c o m p r e h e n s iv e g e n e r a l liab ilityp o lic y . N a t i onw i de a r gue s tha tO c e gue da ’ s c l a i m i s notc ove r e d be c aus e he di d not ph ys i ca l l y posse ss the ranch. W e hol d thati ti s a tl ea stam bi gu ou s thatthe po l i cy c o v e r s O c e g u e d a ’s c la im . Se e B a n k o f th e W . v . Su p e r . C t. , 833 P . 2d 545, 552 ( C a l. 1 9 9 2 ) . N a t i onw i de doe s notdi s put e tha ti f the pol i c y di d noti nc l ude the l i m i t a t i on “th a t ap e r s o n o c c u p ie s ,” th a t u n d e rC a lif o rn iala w th e p o lic y c o u ld im p lic a te i nv as i on s of m ore than j ustthe ri gh tof po ss es soryoccupancy. Indeed, m any c as es i nt e rpr e t i ng the “ r i ghtof pr i va t e oc c upa t i on” w i thoutthe “ oc c upi e s ” l i m i t a t i on ha ve he l d tha tthe r i ghtof pr i va t e oc c upa t i on pr ovi de s l i abi l i ty pr ot e c t i on f or c la im s a lle g in g ab r o a d r a n g e o f in te r f e r e n c e s . Se e, e . g. , M

art i n Mari et ta C orp. v.4

I n s . C o . o f N . A m. , 47 C a l . R ptr . 2d 670, 683 ( C t . A pp. 1995) ( r e qui r i ng c ove r a ge of ac t i on s a gai nsti nsured t o rem edi at e groun dw at erand o ther e nv i ronm ent al c o n ta m in a tio n ) ; State Farm Fi r e & Cas . C o. v . W e s tc he s te rI

nv . C o. , 721 F . S upp. 11 65 , 11 68 (C . D . C al . 19 89 ) ( re qu i ri ng coverage of a ct i on s bas ed on ra ci al di sc ri m i nat i on cl ai m brou gh tby prospect i ve t enant s a gai nsti nsured). N at i o n w i d e arg u es th atth e ad d i t i o n o f th e p h rase “th atth e p erso n o ccu p i es” t o the po l i cyi s s uffi ci entun der C al i forni a l aw t o u nam bi gu ou sl y r equi re ac tual ph ys i ca l po ss es si on by the thi rd-party c l ai m ant . A N orth C ar ol i na courthas r e je c te d th is a r g u m e n t. Se e H obbs R e al t

y& C ons tr . C o. v . Sc ot t s dale I ns . C o. , 593 S . E . 2d 10 3, 10 8 (N . C . C t . A pp . 20 04 ). In thatca se , the thi rd-party c l ai m ant s had a c qui r e d ar i

ght to o c c u p y th e p r e m is e s b y a c q u ir in g ale a s e , b u t n e v e ra c tu a lly o c c u p ie d th e p r e m is e s b e c au s e th e in s u r e d r e f u s e d to p r o v id e th e m w ith ak e y to g a in e n try in to th e p r e m is e s , a lle g e d ly f o rr a c ia llyd is c r im in a to ry r e a s o n s . I d. at 1 0 5 . T h e c o u rt h e ld th a t “th e p r o p e rin q u iry is n o t w h e th e rap a rty h a s p h y s ic a lly a s s u m e d c o n tr o l o f

th e p r o p e rty , b u t w h e th e rh e h a s o b ta in e d ale g a llye n f o r c e ab le r i ght t o d o so. ” I

d. at10 8. S i m i l ar l y, a C al i forni a C ou rtof A pp ea l has e xp l ai ned th atth e “ o ccu p i es” l i m i t at i o n “ cl ari f[i es] th atth e w ro n g fu l n ess o f th e ej ect i o n m u st c ons i s ti n, ora tt a c h t o, a n i nva s i on of the r ig h t o

f occupat i on . ” Zelda , Inc. v. N o r th la n d I n s . C o. , 66 C al . R ptr. 2d 35 6, 36 4 (C t . A pp . 19 97 ) ( em ph as i s a dd ed);5

H on H . W al t erC roskeyetal . , R utt erG rp. , C al i forni a P ra ct i ce G ui de: Insurance L i t i ga t i on ¶ 7: 1073. 3 ( 2011) ( de f i ni ng “ oc c upi e s ” i n the l i m i t a t i on a s “ the pe r s on had the r i

ght to o c c u p yr e a l p r o p e rty , a s o w n e ro rte n a n t” ) . W e c o n c lu d e th a t it is a t le a s t a r g u ab le th a t th e “o c c u p ie s ” lim ita tio n d o e s n o t r e q u ir e th e th ir d - p a rty to p h ysi cal l y p o ssess th e p ro p erty. A l though thi s pol i c y de f i ne s “ unoc c upa nc y ” or“ unoc c upi e d, ” thi s de f i ni t i on is in su ff icien t t o es tab li sh th at “o cc u p ies” o r “o cc u p an cy ” r eq u ires a th ird p ar ty’s p h y s ic a l p o s s e s s io n . N a t i onw i de a l s o a r gue s tha tthe “ oc c upi e s ” l i m i t a t i on i s r e nde r e d r e dunda nt i f i ti s i nt erpret ed t o n otre qu i re ph ys i ca l po ss es si on . W e di sa gree because other c o u rts h a v e id e n tif

ie d s e v e r a l p o s s ib le m e a n in g s o f th is c lau s e . O n e p o s s ib le e xpl a na t i on i s tha tthe “ oc c upi e s ” phr a s e i s i nc l ude d t o una m bi guous l y e xc l ude su i t s b ro u g h tb y prospect i ve r e s id e n ts a s s e rtin g r a c ia l d is c r im in a tio n in h o u s in g . See P ow el l

v. A lem az, Inc. , 76 0 A . 2d 11 41 , 11 47 (N . J. S up er . C t . A pp . D i v. 20 00 ); Ki ngs P oi nte Apt

s . v . State Farm Fi r e & Cas . C o. , 145 F . 3d 1331, 1998 W L 27 93 71 , at*2 n. 1 (6th C i r. 19 98 ) ( un pu bl i shed t abl e dec i si on ). A no ther r at i on al e x p la n a tio n is th a t th e p h r a s e c la r if ie s “th a t th e o f

f e n s e w o u ld o n lyap p ly to l andl ord-t enantdi sput es ” and no tt o “ sui t s by nei gh bo ri ng l ando w ners for nui sance and tre spas s c l ai m s. ” M atthew B ender, C al i forni a I nsurance Law & P ra ct i ce §6

4 9 . 6 0 (2 0 1 2 ). T h e S ev en th C i rcu i th as co m m en t ed th atth e “ o ccu p i es” p h rase a tte m p ts “to r e f

in e th e n a tu r e o f

th e p r e r e q u is ite ‘r ig h t’ o f p r iv a te o c c u p a n c y ” to

“ excl ud e[ ] atl ea stun approv ed sub-l es se es . ” U ni ted Stat es v. Sec. M

gm t. C o. , Inc. , 96 F . 3d 26 0, 26 5 (7th C i r. 19 96 ). W e n e e d n o t d e c id e w h ic h o f th e s e m e a n in g s , if an y, is co rr ec t; w e p ro v id e th es e ill u stra ti o n s to d em o n stra te th at N atio n w id e’s read i n g i s n o tth e o n l y reaso n ab l e i n t erp ret at i o n t o av o i d m ak i n g “ o ccu p i es” s u rp lu s a g e . 2. B ec au se N atio n w id e h ad a d u ty to in d em n ify u n d erth e p o li cy ’s p e r s o n a l liab ilityc o v e r a g e , N a tio n w id e h a d ad u ty to d e f e n d . H o ra ce M a n n In s. Co . v . Ba r b a r a B. , 84 6 P . 2d 79 2, 79 5 (C al . 19 93 ) ( “ [T ] he du ty t o d ef end i s broader th a n th e d u ty to in d e m n if y .” ) . 3 . T h e p r o p e rty d a m a g e s e c tio n o f th e in s u r a n c e p o lic y e x p lic itly prot ec t s onl y property dam age w hi ch i s c ause d b y an “ ac ci dent . ” “ U nd er C al i forni a l aw , the w ord ‘ ac ci dent ’ i n the coverage c l ause of a l i abi l i ty pol i cy r e f e r s t o the c onduc tof

the i ns ur e d f

orw hi c h l i abi l i ty i s s oughtt o be i m pos e d on the i nsured. ” D e lg a do v . I n te r in s . E

x c h . o f th e A u to . C lu b o

f S. Ca l. , 211 P . 3d 1083, 1088 ( C a l . 2009) . T o de t e rm i ne w he the ra n a c tw a s a n a c c i de nt , the r e l e va nt q u e s tio n is w h e th e rth e in s u r e d in te n d e d to “c o m m it th e a c t g iv in g r is e to liab ility ,” no tw hether the i nsured i nt ended “ t o cause the consequences of thatac t . ” C ol l i n v.7

A m . E m pi r e I ns . C o. , 26 C a l . R ptr . 2d 391, 403- 04 ( C t . A pp. 1994) . S e l l doe s not i de nt i f y a ny a c c i de nt a l c onduc ton he rpa rt . T he r e f or e , the pr ope rty da m a ge s e c t i o n o f

th e p o l i c y d o e s n o tp r o v i d e l i ab i l i ty c o v e r a g e f o rO c e g u e d a ’ s c l a i m. 4 . S e ll a lle g e s b r e a c h o f th e im p lie d c o v e n a n t o f g o o d f a ith a n d f

a ir d e a lin g a n d s e e k s p u n itiv e d a m a g e s . A n in s u r e rd o e s n o t a c t in b a d f a ith if it w ith h o ld s b e n e f

its b a s e d o n ale g itim a te d is p u te a s to liab ility . A m . Cas . C o. of R eadi ng, P a. v. Kri eger , 1 8 1 F .3 d 1 1 1 3 , 1 1 2 3 ( 9 th C ir . 1 9 9 9 ) ( ap p ly in g C a lif o rn ia la w ) ; T om as e l l iv . T

r ans am e r i c a I

ns . C o. , 31 C a l . R ptr . 2d 433, 440 ( C t . A pp. 19 94 ). B ec ause w e hol d thati tw as am bi gu ou s w hether the po l i cycovered O ce gu eda’ s c l ai m , w e f urther hol d thatN at i on w i de’ s r ef usal t o cov erthe cl ai m w as no ti n b ad fa i th. B ec ause N at i on w i de di d n otac ti n b ad fa i th, “ pu ni t i ve dam ages ar e unavai l abl e. ” A m . Cas . C o. , 181 F . 3d a t1123.

A cco rd i n g l y, w e rev erse th e d is tr ic t c o u rt’s g r a n t o f s u m m a ry ju d g m e n t to N a tio n w id e o n th e b r e a c h o f c o n tr a c t c la im a n d h o ld th a t N a tio n w id e h a s ad u ty to de f e nd a nd t o i nde m ni f

y the trus tunde rthe pol i c y ’ s c ove r a ge f orpe r s ona l a nd advert i si ng i nj ury l i abi l i ty. W e a ff i rm the di stri ctcourt ’ s grantof sum m ary j udgm e ntt o N a t i onw i de on S e l l ’ s ba d f a i th c l a i m a nd r e que s tf orpuni t i ve8

d a m a g e s . P la in tif

f - ap p e lla n t s h a ll r e c o v e rh e rc o s ts o n ap p e a l f r o m d e f e n d a n tappel l ee . AF F I RME D i n p a r t , RE V E RS E D i n p a r t , a n d RE MAND E D.Se l l

v . N at i onw i de I

ns uranc e C o. , N o. 11- 15492 C L I F T O N , C ir c u it J u d g e , d is s e n tin g in p a rt: I r e s pe c t f ul l y di s s e nt , i n pa rt . I c onc l ude tha tP l a i nt i f f W a ndaS e l l i s not e nt i t l e d t o c ove r a ge unde rthe i ns ur a nc e pol i c y i n que s t i on, i s s ue d by D e f e nda nt N a t i onw i de M utua l I ns ur a nc e C om pa ny , a nd thus I w oul d a f f i rm the j udgm e ntof th e d is tr ic t c o u rt in f

u ll. S e ll s h o u ld n o t b e e n title d to c o v e r a g e u n d e rth e “p e r s o n a l in ju ry ” p r o v is io n . T he r e l e va ntl a ngua ge pr ovi de s c ove r a ge f orc l a i m s of

pe r s ona l i nj ury r e s ul t i ng f r om “ [ t ] he w r ongf

ul e vi c t i on f

r om , w r ongf

ul e ntry i nt o, ori nva s i on of the r i ghtof p ri v at e o ccu p at i o n o f a ro o m , d w el l i n g o r p rem i ses th ata p erso n o ccu p i es, c o m m itte d b y o ro n b e h a lf o f its o w n e r , la n d lo r d o rle s s o r .” T h e r e w a s s im p ly n o “e v ic tio n ,” “e n try ,” o r“in v a s io n ” ( w r o n g f u l o rn o t) i nt o “ the r i ghtof

pr i va t e oc c upa t i on of

ar oom , dw e l l i ng orpr e m i s e s tha tape r s on occupi es ” her e, or any c l ai m thatsuch an eventoccurre d. T he pers on w ho se spac e w a s a l l e ge dl y i nva de d w a s R i gobe rt o O c e gue da , a nd the r e w a s no e vi de nc e or ba s i s t o i nf

e rtha the e ve rphy s i c a l l y oc c upi e d the r a nc h ora ny pa rtof i t , a s the m a j or i ty a c know l e dge s , a t2. B u t, th e m a

jo r ityr e a s o n s , th e p o lic y la n g u a g e m ig h t b e s u f f ic ie n tly a m bi guous t o pr ovi de c ove r a ge a ga i ns ta“ r i ghtof oc c upa t i on” e ve n i f

tha tr i ght never i nv ol ved actual occupancy. T hatstri kes m e a s an exces si vel y t ortured 

# FI LED AU G 14 2012 M OLLY C. DW Y ER, CLERK U . S. C O U R T OF APPE ALS2

c o n s tru c tio n o f

th e la n g u a g e , s im p ly in c o n s is te n t w ith “e v ic tio n ,” “e n try ,”

“ i nv as i on , ” or “ thata per son o cc up i es . ” A cl ai m thatl angu age i s a m bi gu ou s does n o tp ro v e th ati ti s. T he m a j or i ty ’ s r e a di ng appe a r s t o r e s te nt i r e l y upon the de c i s i on i n H obbs R e al t y& C ons tr . C o. v . Sc ot t s dale I ns . C o. , 593 S . E . 2d 103, 107 ( N . C . C t . A pp. 2 0 0 4 ) ( “ [ T] h e p h r a s e ‘ i n v a s i o n o f th e r i g h to f

p r i v a t e o c c u p a n c y o f

ar o o m, dw el l i ng or prem i se s thata per son o cc up i es ’ have general l y di st i ng ui shed betw ee n p l ai n t i ffs w h o o w n o r ren ta p ro p erty, an d th o se w h o are m erel y prospect i ve t enant s, bu thave no tent er ed i nt o a contra ct , si gn ed a l ea se , or otherw i se ob t ai ned po ss es soryri gh t s t o the subj ec tprop erty. W e . . . concl ud e thatthe prop eri nq ui ry i s notw hether aparty has ph ys i ca l l y a ss um ed control of the prop erty, bu tw hether he has obt ai ned a l egal l y e nforceabl e r i ght to d o s o .” ) I a m n o t p e r s u a d e d th a t a C a l i f orni ac ourtw oul d r e a c h the s a m e c onc l us i on. M y doubti s e s pe c i a l l y s tr ong i n the c i r c um s t a nc e s he r e , f orthe f a c t s of H o b b s R e a ltyw e r e u n lik e th e f a c ts in o u rc a s e . A t is s u e in th a t c a s e w a s ac la im b y ate n a n t w h o h a d e n te r e d in to ale a s e to p o s s e s s io n o f p r e m is e s . T h e N o rth C a r ol i nac ourte m pha s i z e d tha t“ [ t ] he pa rt i e s c i t e no c a s e s , a nd w e ha ve f ound none , i n w hi c h the unde r l y i ng pl a i nt i f f s a l l e ge t ort i ous be ha vi oroc c urr i ng af ter o b ta in in g ap o s s e s s o ry r ig h t to th e s u b je c t p r o p e rty , b u t b ef

o re pl a i nt i f

f s ha ve3

ph ys i ca l l y m ov ed i n. ” Id . a t 1 0 8 . H o b b s R e a ltyquot e d U

n ite d S ta te s v . Se c u r ity M gm t. C o. , 96 F . 3d 26 0, 26 5 (7th C i r. 19 96 ), that“ a r ea sonabl e i nsured w ou l d rea d the l angu age a s e xcl ud i ng ca se s w here the aggri eved i nd i vi du al w as no tpo ss es se d o f a n e x is tin g r ig h t o f

p r iv a te o c c u p a n c y .” O ceg u ed a “ w as n o tp o ssessed o f an ex i st i n g ri g h to f p ri v at e o ccu p an cy, ” so the pol i c y l a ngua ge s houl d be r e a d t o e xc l ude hi s c l a i m . O c e gue dadi d nota l l e ge he ha d a n e xi s t i ng pos s e s s ory r i ghtt o the pr ope rty tha tS e l l ha d “ i nva de d, ” c aus i ng hi m som e per sonal i nj ury. R ather, he cont ended thatS el l hers el f w as no tent i t l ed t o pos s e s s i on of

the pr ope rty be c aus e s he ha d nots a t i s f i e d the c ondi t i ons e s t abl i s he d unde rthe trus t . A s s t a t e d i n hi s pe t i t i on t o the s t a t e c ourt , O c e gue da s o u g h t a n o r d e rf

r o m th e c o u rt “to c o m p e l th e T ru s te e to p r o v id e h im w ith pos s e s s i on a nd c ontr ol of the r a nc h a nd a l l ow hi m t o oc c upy i t , ” a s the s uc c e s s or benefi ci ary. H i s c l ai m of the ri gh tt o o cc up y the prop erty depended u po n the court c o n c lu d in g th a t S e ll h a d n o t s a tis f ie d th e c o n d itio n s o f

th e tru s t. I t w a s th e b a s is f o rS e ll’s e n title m e n t to p o s s e s s io n o f th e p r o p e rty , n o t h is , th a t w a s p u t in d is p u te by O c e gue da ’ s pe t i t i on. . T ha ti s notac l a i m pr ope r l y c ove r e d by the l a ngua ge of the pol i c y orby the di s t i nc t i on e m pha s i z e d by the c ourti n H ob bs R eal t

y. M o r e b r o a d ly , in in te rp r e tin g a n in s u r a n c e p o lic y , th e “f u n d a m e n ta l g o a l is t o g i ve ef

fe ctt o the m utual i nt ent i on of the part i es . ” M art i n Mari et ta v. Insurance4

C o. of N or th A m e r i c a , 4 7 C a l . R p tr . 2 d 6 7 0 , 6 7 5 ( C t . Ap p . 1 9 9 5 ) . T h e ru l e th a twe c ons true a m bi gui ty a ga i ns tthe i ns ur e ra s the dr a f t e rof the pol i c y pr ot e c t s “ the obj ec t i vel y r ea sonabl e e xp ec t at i on s of the i nsured. ” Id . T he i nsurance pol i cyhere w a s n o t atitle p o lic y , a n d S e ll d id n o t in s u r e h e r s e lf a g a in s t h e ro w n f

a ilu r e to s a t i s f y the c ondi t i ons t o he rr i ght s unde rthe trus t . I do notbe l i e ve tha te i the r“ the m utua l i nt e nt i on of

the pa rt i e s ” or“ the obj e c t i ve l y r e a s onabl e e xpe c t a t i ons of the i ns ur e d” s upportc ove r a ge unde ra“ f a rm ow ne r ’ s ” pol i c y a ga i ns tac l a i m tha tthe i n s u r e d d i d n o t , i n f

a c t , o w n th e f

a rm. I w o u l d a f

f i rm.