Court Opinion

ID: 9750953
Source: CourtListenerOpinion
Date Created: 2023-08-28 15:51:20.115485+00
Date Added: 2024-06-11T07:26:29.710148
License: Public Domain

*1163NARES, J.
I respectfully dissent. The Devins purchased a home in Huntington Beach and obtained an all risk homeowners’ policy from United Services Automobile Association (USAA). In 1984, the Devins sold the home to the McNairs and purchased another home in Carlsbad. Their homeowners’ insurance policy with USAA had been renewed annually since 1981 and basically contained identical indemnity and defense provisions. The relevant portions of the policies provide:
“Coverage E—Personal Liability, [f] If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage based on an occurrence to which this coverage applies, we will: [f] 1. pay up to our limit of liability for the damages for which the insured is legally liable; H[] and 2. provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent. We may investigate and settle any claim or suit that we decide is appropriate. Our duty to settle or defend ends when the amount we pay for damages resulting from the occurrence equals our limit of liability.
“ ‘Occurrence’ means an accident, including exposure to conditions, which results, during the policy period, in: a. bodily injury; or b. property damage.
“. . . ‘Property damage’ means physical injury to, destruction of, or loss of use of tangible property.”
Personal liability coverage was excluded for liability on contracts, except “written contracts . . . that directly relate to the ownership ... of an insured location.”
“Accident” is not defined in the USAA policies, but in a “Quick Reference Policy Summary” provided to the Devins by USAA, it states:
“This policy insures your home and other structures located on and appertaining to your residence premises. In addition, this policy gives you coverage for your personal property and provides financial protection when you are held liable for damage to the property of others or for injury to others—both on and off your property.”
In July 1986, the McNairs sued the Devins, alleging the house was damaged by sliding, slipping, settling, sinking, fracturing and buckling. The McNairs further alleged the Devins “knew or should have known, that the property had experienced extensive subsidence damage and that said subsidence problems were continuing, and would continue to cause severe structural damage to the house and the property.” According to the McNairs’ *1164complaint, the Devins did not disclose these conditions, causing them property damages as well as damages for emotional and physical distress. The factual basis for these allegations is unclear, and there are no dates set forth in the McNairs’ complaint regarding when the subsidence and damages supposedly occurred.
The Devins denied these allegations. USAA did not dispute the Devins’ denials. There was never any resolution of the McNairs’ complaint on the merits. Instead, USAA rejected the Devins’ tender of the McNairs’ action on numerous grounds. After the Devins filed this bad faith action, USAA paid the McNairs’ claims for cost of repair but refused to reimburse the Devins for the attorney fees and costs of $3,900.24 they had incurred in defending the McNairs’ complaint.
The case proceeded to trial, and the trial court granted USAA’s motion for nonsuit. The majority admits the nonsuit was granted for the wrong reason, but nevertheless affirms.
In reaching that result, the majority states and then disregards the applicable standard of review established by our Supreme Court “ ‘requiring evaluation of the evidence in the light most favorable ... to plaintiff’s case and most strongly against the defendant and resolving all presumptions, inferences and doubts in favor of . . . plaintiff.’ ” (Natty v. Grace Community Church (1988) 47 Cal.3d 278, 291 [253 Cal.Rptr. 97, 763 P.2d 948], quoting Carson v. Facilities Development Co. (1984) 36 Cal.3d 830, 839 [206 Cal.Rptr. 136, 686 P.2d 656].) The majority does so by limiting the facts and record presented, focusing only on those which support USAA. Further, in footnote 5 at pages 1157-1158, ante, the majority “agrees” with USAA’s objection to the plaintiffs’ expert witness’ testimony, despite the trial court’s having overruled the objection. There is no basis for the majority’s disregarding the trial court’s ruling. Our Supreme Court in Neal v. Farmers Ins. Exchange (1978) 21 Cal.3d 910, 924 [148 Cal.Rptr. 389, 582 P.2d 980] specifically held such expert opinion admissible by “one who, by profession and experience, was peculiarly equipped to evaluate such matters in the context of similar disputes.” The Devins’ expert was qualified, and under Evidence Code section 801, his testimony was properly admitted. The expert’s testimony is undisputed that the third party complaint against the plaintiffs (the Devins) alleged facts which were an “occurrence” or “accident” within the meaning of the policy and would also constitute property damage and bodily injury as defined by the policy.
Even if this testimony were insufficient, the majority should hardly be able to claim there was no “bodily injury.” The trial court itself found the *1165complaint against the Devins alleged “bodily injury.” Although this is a factual question, the majority apparently decides it as a matter of law, completely omitting the trial court’s finding from its opinion. Instead, according to the majority, the third party complaint sought only economic damages, i.e., loss of value. The majority does not support this statement with citation to the record, because the record does not support this conclusion. USAA paid the third party’s claim for cost of repair to property which had been covered by a policy issued by USAA to the Devins.1
The underlying case against the Devins encompassed more than just misrepresentation claims. This is not a situation in which the issue is whether the Devins misrepresented the condition of the premises to the McNairs, despite the McNairs’ pleadings. In a recorded statement requested by USAA, the Devins informed USAA that the McNairs had removed a very large palm tree adjacent to the side of the building where the McNairs were now alleging subsidence and property damage had occurred. USAA did not investigate the effect, if any, the removal would have on the house. Further, Robert Devin testified during trial that he had previously been a carpenter and involved in construction. When shown pictures of an attempted repair of the house in a crawl space, he testified the work was shoddy. The record is clear that the McNairs were actually seeking damages for costs of repair, *1166because they believed that Devin either negligently did the work of repair or caused it to be done.
Thus, none of the cases dealing with the question of whether negligent misrepresentation is or is not a covered claim are relevant. The majority acknowledges the distinction between the pleadings and the facts as they existed at the time of trial, but chooses to disregard them. Instead, the majority establishes a narrow definition of the words “property damage.” However, this narrow definition has been specifically rejected by our Supreme Court in AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807 [274 Cal.Rptr. 820, 799 P.2d 1253]. Additionally, to the extent decisions from the federal courts are relevant, they too have rejected the narrow interpretation of the words “property damage” which the majority contends applies here. (Aetna Cas. & Sur. Co., Inc. v. Pintlar Corp. (1991) 948 F.2d 1507, 1513.) Certainly, construing “property damage” as a layperson would read it—as we must—the Devins would have reasonably expected USAA to indemnify them for costs of repairing the residence since there was no investigation of when subsidence occurred. USAA did, in fact, pay the claim. Yet, the majority disregards this fact as well as others in this record. I cannot agree with such a narrow reading of the words “property damage.”
Additionally, where, as here, the testimony as well as the superior court’s findings undisputedly establishes that the McNairs were seeking damages for both “property damage” and “bodily injury,” manifestly, USAA had a duty to defend the Devins.
For the first time, where, as here, there is a potential claim for coverage triggering the duty to defend, the majority allows the insurer to unilaterally decide whether it has a duty to defend its insureds without any prior judicial determination. Although the duty to defend is concededly broader than the duty to indemnify, this insurer indemnified but refused to defend. The majority rewrites the long-established insurance law in this opinion. (See State Farm etc., Ins. Co. v. Superior Court. (1956) 47 Cal.2d 428 [304 P.2d 13]; General Ins. Co. of America v. Whitmore (1965) 235 Cal.App.2d 670 [45 Cal.Rptr. 556]; Allstate Ins. Co. v. Fisher (1973) 31 Cal.App.3d 391 [107 Cal.Rptr. 251].)
I would, therefore, reverse the granting of the nonsuit.
Appellants’ petition for review by the Supreme Court was denied August 20, 1992. Mosk, J., was of the opinion that the petition should be granted.

The record reflects the McNairs offered to settle their claims against the Devins for $28,000—the costs of repair only. USAA rejected this offer by letter dated September 28, 1987. It was not until the Devins filed their bad faith action that USAA paid the $5,000. The majority’s statement that USAA paid the $5,000 as and for “nuisance value” is not supported by the record. In fact, USAA paid the McNairs’ claim after the Devins rejected USAA’s offer to advance the sums necessary to settle the McNair case on certain conditions. In their reply brief, the Devins correctly note this type of letter can by itself support “USAA’s bad faith effort to coerce a release of claims against it, in return for settling the underlying claim.” (See White v. Western Title Ins. Co. (1985) 40 Cal.3d 870, 886 [221 Cal.Rptr. 509, 710 P.2d 309].)
In his declaration filed in opposition to USAA’s motion for summary judgment/summary adjudication of issues and again at trial, Michael T. McCall, counsel for the McNairs, testified that “[a]t no time did anybody from USAA or anyone purporting to act on their behalf question me about the type of damages sought by the McNairs from the Devins.” The majority admits, on page 1155, ante, that the Devins made USAA aware that the McNairs were asserting “claims for property damage and bodily injury.” Yet, the majority disregards USAA’s failure to investigate exactly what claims were being alleged. Despite this failure to investigate, the majority admits, on page 1155, ante, that at trial, “the examiner for USAA stated he did not know when the property damage began, but it conceivably began after the property had been sold.”
In the recorded statement requested by USAA, their adjuster asked Robert Devin if Devin had made any repairs in the crawl space. During trial, Devin was again asked about repairs he had made or caused to have had made during his ownership of the property. The only logical inference which I draw from this line of questioning is that the McNairs could have amended the complaint to allege a simple cause of action for negligence. Instead, the majority sets forth various exclusions which USAA argues could apply. However, since the case never proceeded further than a nonsuit on concededly wrong grounds, I would reverse and allow the parties to present these arguments to a trier of fact, and not to this court, for resolution.