Opinion ID: 171220
Heading Depth: 2
Heading Rank: 2

Heading: Unpaid and Discounted Rent

Text: The Mullins argued below that the property-damage provision in the Travelers policy covered High Mountain's liability to the Mullins arising from renting their units at a discount and failing to forward rental income received by High Mountain on the Mullins' units. At oral argument the Mullins explicitly abandoned their claim with respect to the discounted rentals, so we need not address it. To assess the Mullins' claim based on failure to forward rental income, we begin with the pertinent policy language. The Travelers policy covers only those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies. Aplee. Supp.App. at 757 (Travelers Prop. Cas. Policy No. I-660-303C2211-TCT-02 (Policy) § I.1.a). The policy defines property damage as: a. Physical injury to tangible property, including all resulting loss of use of that property. All such loss of use shall be deemed to occur at the time of the physical injury that caused it; or Loss of use of tangible property that is not physically injured. All such loss of use shall be deemed to occur at the time of the occurrence that caused it. Policy § V. 15.a-b. The Mullins do not claim that paragraph (a) provides coverage. The issue, therefore, is whether the Mullins suffered a [l]oss of use of tangible property that [was] not physically injured when High Mountain did not forward the rental payments to them. The Mullins contend that the rental dollars due [them]. . . constitute tangible property. Aplee. Br. at 16 (internal quotation marks omitted). We think not. The Mullins' Rental Management Agreement with High Mountain states: [High Mountain] will provide a monthly accounting to the [Mullins] which reflects all adjusted gross rental revenue, adjustments thereto and expenses earned and incurred by the individual UNIT. This accounting will be provided no later than 30 days after the end of each month. The net rental income shall be mailed to the [Mullins] with the monthly accounting. [High Mountain] may use advance deposit funds obtained in connection with any unit as working capital for its operations and to pay all expenses incurred with regard to the UNIT(S). Aplt.App. Vol. 1 at 69 (Rental Agreement). Thus, High Mountain was not supposed to send the Mullins any tangible items (cash, checks, or the like) that it received. Rather, it would collect (and presumably deposit) rental income and send the Mullins the net rental income (presumably a check) after High Mountain's fees and expenses were deducted. High Mountain's misconduct was not a refusal to deliver tangible property, but simply a failure to pay a debt. There was no property damage within the meaning of the policy, because the money not forwarded to the Mullins was not tangible property. See Johnson v. Amica Mut. Ins. Co., 733 A.2d 977, 979 (Me.1999) (bank-account funds are not tangible property, but merely represent value; therefore, conversion of bank-account funds was not a loss of use of tangible property); Mack v. Nationwide Mut. Fire Ins. Co., 238 Ga.App. 149, 517 S.E.2d 839, 840 (Ga.Ct.App.1999) (money is tangible property only when there is a matter relating to specific coins or notes); Houston Petroleum Co. v. Highlands Ins. Co., 830 S.W.2d 153, 156 (Tex.App.1991) (`the loss of use of tangible property' does not include the loss of initial investments, subscription funds, and profits); Travelers Indem. Co. v. State, 140 Ariz. 194, 680 P.2d 1255, 1256-57 (Ariz.Ct.App.1984) (neither investment certificates nor deposit of money in a bank is tangible property); cf. Capitol Indem. Corp. v. Wright, 341 F.Supp.2d 1152, 1153-54, 1159 (D.Nev.2004) (when employee of nursing home stole over $450,000 from nursing home resident, the money was property that the victim lost the use of because it was hard currencywhich the court inferred from the fact that the victim signed for the money at a bank). See generally 2 Allan D. Windt, Insurance Claims & Disputes: Representation of Insurance Companies & Insured § 11:1 at 11-3 to 11-4 (5th ed.2007); (property that does not have intrinsic value, but rather is merely representative or evidence of value, such as a stock certificate, is intangible property, not tangible property); id. at 11-5 ([A]lthough `the destruction of a stack of currency could certainly be considered a destruction of tangible property,' the destruction or loss of a check or investment certificate is not. . . .). It seems obvious to us that failure to pay money owed as a debt is not the deprivation of use of tangible property. And in light of the authority supporting that proposition, we are comfortable that the Utah Supreme Court would adopt the same view. See Pompa, 520 F.3d at 1142 (in diversity case we must predict how state's highest court would rule). Accordingly, High Mountain's liability to the Mullins for failure to forward rent payments was not covered by the Travelers policy, and Travelers is entitled to summary judgment on this claim.