Procedural Posture

Appellant insureds sought review of an order of the Superior Court, Los Angeles County (California), which granted summary judgment to appellees, an insurer and its agency, in appellants’ action alleging that appellees wrongfully failed to defend them, as required under their homeowners policy, when sued for misrepresentation purportedly committed in connection with the sale of their home.

Nakase Law Firm is a commercial litigation attorney

Overview

Appellant insureds argued that appellee insurers were obligated to defend appellants against claims made by purchasers of their home, because the defective plumbing in the house was a covered risk under their homeowners policy, which was in effect when damage was caused to their home. The court disagreed, explaining that appellants’ potential liability to the purchasers was not based upon defective plumbing, but upon appellants’ fraudulent misrepresentation as to, and concealment of, the defective plumbing. Thus, the deceptive acts did not constitute an “occurrence” under the policy that would trigger appellees’ duty to defend, and the resulting damages were not to person or property, as the policy required. The purposeful misrepresentation did not constitute an “accident” that would be covered by the policy, and the damages sought were for economic loss and attendant emotional distress, the court explained. Occurrence-based liability policies were not intended to cover emotional distress damages resulting from an economic loss. As there was no possibility of coverage, appellees had no duty to defend.

Outcome

An order granting summary judgment to appellee insurers was affirmed, because appellees had no duty to defend appellant homeowners under a homeowner policy against claims by house buyers arising from defective plumbing where liability was based on intentional misrepresentation by appellants about the plumbing; thus, there was no “accident” triggering a duty to defend.