An insured’s good faith but mistaken construction of a house on neighboring property does not constitute an “occurrence,” or “accident,” within the meaning of a homeowners policy. ( Fire Ins. Exch. v. Superior Court (2010) 181 Cal.App.4th 388)
Facts
Kenneth and Dorothy Bourguignon owned property in the City of Big Bear adjacent to property owned by Louise Leach. In 1984, Leach granted the Bourguignons an access easement over a five-and-a-half-foot wide portion of her property that bordered the Bourguignons’ property. Later, in 1988, Leach conveyed a one-third interest in her property to her two sons.
Subsequently, the Bourguignons’ house suffered earthquake damage. In order to renovate and rebuild their house, the Bourguignons obtained Leach’s signature on an application for a “lot-line adjustment” for the five-and-half-foot easement. The City approved the application and a certificate of compliance was recorded. The Bourguignons then proceeded to construct a house which was partially located on the five-and-a-half-foot wide section of property.
Years later, Robert and Marie Parsons negotiated to purchase Leach’s property and discovered that the “lot-line adjustment” was a cloud on title. The Parsons obtained an assignment of any rights possessed by Leach and her two sons to contest the validity of the lot-line adjustment, and the Parsons then purchased Leach’s property. Thereafter, the Parsons disputed the validity of the lot-line adjustment on the ground that Leach had previously conveyed a one-third interest in the property to her sons, who did sign the application for the lot-line adjustment.
The Bourguignons sued the Parsons for quiet title and adverse possession of the easement. The Parsons cross-complained against the Bourguignons for quiet title, declaratory relief and fraud.
The Bourguignons tendered defense of the cross-complaint to their homeowners insurer, Fire Insurance Exchange (“Fire Insurance”). Fire Insurance refused to defend the Bourguignons asserting, among other things, that the Bourguignons’ alleged liability to the Parsons did not arise from an “occurrence,” or “accident,” as required by the policy.
Thereafter, the Bourguignons sued Fire Insurance for breach of contract and bad faith. Fire Insurance moved for summary judgment, claiming that the Bourguignons’ intentional act of building over the lot line was not the result of an “accident.” The trial court denied Fire Insurance’s motion, and Fire Insurance filed a petition for writ of mandate in the Court of Appeal.
Holding
The Court of Appeal granted the petition for writ of mandate and ordered the trial court to enter summary judgment in favor of Fire Insurance. The Court held that the undisputed facts showed the Bourguignons intended to build their house where they did. Even if the Bourguignons believed that they owned the five-and-half-foot strip of land and believed that they had the legal right to build on it, their act of construction “was intentional and was not an accident even though they acted under a mistaken belief that they had the right to do so.” According to the Court, the Bourguignons’ “mistaken belief in their legal right to build does not transform their intentional act of construction into an accident.”
Comment
Following prior California decisions, the Court of Appeal held that where an insured commits an act based on a mistaken belief that his conduct is legal, such act does not constitute an “accident.” Here, the Bourguignons constructed the house based on a mistaken belief that they owned the five-and-a-foot strip of property and had the right to build there. That was not an “accident.”
One justice dissented, arguing that the Bourguignons’ alleged liability should be deemed to arise from an “accident.” According to the dissenting justice, while the Bourguignons may have intended to build a house, they did not necessarily intend to build the house on their neighbors’ property. Under such circumstances, the Bourguignons’ alleged liability could have arisen from an “accident.”