The California Court of Appeal has held that although a landslide resulted in damage during successive primary policy periods, there was only one “occurrence” and hence only one primary policy limit applied. ( Safeco Insurance Company of America v. Fireman’s Fund Insurance Company (2007) WL 764314)
Facts
Harold Lancer and several others owned homes on top of a hill. Lawrence and Linda Rauch and others owned homes at the bottom of the hill. In February 1998, a portion of the uphill properties failed, causing a massive amount of dirt and debris to be deposited onto the downhill properties.
Following the landslide, the slope went unrepaired for over three years, and during that entire time the Rauches were unable to use their backyard. Eventually the Rauches and other downhill neighbors sued Lancer and other uphill owners for nuisance, trespass and negligence. Various parties cross-complained against each other.
At the time of the landslide, Lancer had a homeowners policy through Fireman’s Fund Insurance Company. The Fireman’s Fund homeowners policy covered both “property damage” (defined as physical injury to or loss of use of tangible property) and “personal injury” (defined so as to include wrongful entry and eviction) caused by an “occurrence,” with limits of $500,000 for all damages resulting from any one occurrence. Following the landslide, Fireman’s Fund renewed the policy for three consecutive years.
At the time of the landslide, Lancer also had a personal umbrella policy through Safeco Insurance Company of America. The Safeco umbrella policy also covered “property damage” and “personal injury” caused by an “occurrence,” with limits of $5 million per occurrence.
Fireman’s Fund defended Lancer against the lawsuits brought by the Rauches and the other downhill neighbors. Ultimately Fireman’s Fund paid $500,000 and Safeco paid $450,000 to settle Lancer’s liability to everyone except the Rauches. At that point, Fireman’s Fund contended that it had exhausted its policy limit of $500,000, but agreed to continue to defending Lancer against the Rauches’ claims under a reservation to seek reimbursement of post-exhaustion defense costs from Safeco. The Rauches then proceeded to trial against Lancer and obtained a judgment of over $2 million against him.
Safeco filed a declaratory relief action against Fireman’s Fund, asserting that Fireman’s Fund provided $500,000 for property damage and an additional $500,000 for personal injury during each of Fireman’s Fund’s four policy periods (for a total of $4 million); that both property damage and personal injury occurred during all four policy periods; and that Fireman’s Fund was therefore responsible for all costs of defending and indemnifying Lancer. Fireman’s Fund cross-complained against Safeco, asserting that the landslide had only caused one “occurrence” under the first of Fireman’s Fund’s four policies; that Fireman’s Fund had already exhausted its applicable policy limit of $500,000; and that Safeco was thus obligated to reimburse Fireman’s Fund for all defense costs Fireman’s Fund had paid after exhausting its policy limits.
The trial court ruled in favor of Fireman’s Fund, finding that there was a single occurrence during a single policy period and that Fireman’s Fund’s policy limit was thus $500,000. The trial court thus ruled that Safeco was obligated to indemnify Lancer for any liability above $500,000, and that Safeco was obligated to reimburse Fireman’s Fund for all defense costs Fireman’s Fund had paid after exhausting its policy limits. Safeco appealed.
Holding
The Court of Appeal affirmed. The court held that even assuming the Rauches had suffered both property damage and personal injury, both types of harm resulted from a single cause (i.e., the landslide). According to the court, for purposes of determining policy limits , all damages flowing from a single cause are deemed to be the result of a single “occurrence.” It was irrelevant “that the resulting damage may have continued into subsequent policy periods.” Here, there was only a single occurrence during Fireman’s Fund’s first policy period, so that Fireman’s Fund’s exposure was limited to $500,000.
Comment
The appellate court acknowledged that there might be situations where, even though there is only one “occurrence” (i.e., cause of damage), the insured would be entitled to the policy limits under successive policies. One such situation would be where the insured is liable for “continuous or progressively deteriorating” bodily injury or property damage occurring over successive policy periods.
Here, apparently, the appellate court did not feel that Lancer’s liability arose from “continuous or progressively deteriorating” property damage. Rather, this simply was a situation where the property damage occurred in Fireman’s Fund’s first policy period, and the effects were felt in subsequent policy periods. According to the court, “the mere continuation of damage during successive policy periods, by itself, does not create a series of indefinitely ongoing occurrences.”