No Accident, No Occurrence, No Duty to Defend or Indemnify
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Intentionally cutting trees on the neighbors’ land, even if the insured acted on the good faith, but mistaken belief, that the trees were on her land, is not an accident for purposes of insurance coverage. In Maryam Ghukasian v. Aegis Security Insurance Company, B311310, California Court of Appeals, Second District, Fourth Division (April 14, 2022) the California Court of Appeal explained the difference between intentional acts and accidents required for there to be an occurrence for which a defense is required.
FACTUAL BACKGROUND
Maryam Ghukasian sued Aegis Security Insurance Company (Aegis) for breach of contract, insurance bad faith, and declaratory relief after Aegis denied her tender of a lawsuit brought against her by her neighbors. The underlying lawsuit alleged Ghukasian graded land and cut down trees on her neighbors’ property. The trial court granted Aegis’s motion for summary judgment, holding Aegis had no duty to defend because Ghukasian’s homeowner’s policy did not provide coverage for nonaccidental occurrences. It explained that intentionally cutting trees on the neighbors’ land, even if Ghukasian acted on the good faith, but mistaken belief, that the trees were on her land, is not an accident for purposes of insurance coverage.
Ghukasian appealed, contending the California Supreme Court’s decision in Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co. (2018) 5 Cal.5th 216 (Liberty Surplus) impliedly disapproved case law holding an intentional act is not an “accident,” as the term is used in the coverage clause of a liability policy, even if the intentional act causes unintended harm.
Ghukasian owns a home in Glendale, California. Ghukasian purchased a homeowner’s policy from Aegis. In August 2018, while the policy was in effect, she hired contractors to level land and clear trees on land she understood to be a part of her property. The land Ghukasian’s contractor cleared and leveled was not owned by Ghukasian, however, but by Ghukasian’s neighbors, Vrej and George Aintablian (collectively, the neighbors).
The neighbors sued Ghukasian and others, including the contractor, in the underlying action. The complaint that Ghukasian and her contractor “entered upon [the neighbors’] [p]roperty without [the neighbors’] consent,” “made deep cuts . . . into a natural hill on [the neighbors’ property],” “caused a natural swale located on [neighbors’ property] to be filled with dirt[, ]” which “prevented the flow of water in and through the swale,” and “removed, cut down and carried off timber, trees, and underwood from [the neighbors’ property].”
Aegis denied coverage for the underlying action on the ground it owed no duty to defend because the complaint alleged intentional (as opposed to accidental) conduct and various exclusions in the policy barred coverage.
DISCUSSION
On summary judgment, to prevail on the duty to defend issue, the insured must prove the existence of a potential for coverage, while the insurer must establish the absence of any such potential.
The policy at issue covers property damage resulting from an occurrence, which is defined as an accident. Ghukasian’s deliberate act of hiring contractors to clear and level the neighbors’ land, which was ultimately cleared and leveled, was intentional conduct.
The Court of Appeal noted that the insured’s subjective intent was irrelevant. The complaint in the underlying action alleged harm from Ghukasian’s intentional conduct. The leveling of land and cutting of trees were not unexpected or unforeseen events. An accident, on the other hand, is never present when the insured performs a deliberate act unless some additional, unexpected, independent, and unforeseen happening occurs that produces damage.
In the context of liability insurance, an accident is an unexpected, unforeseen, undesigned happening or consequence from either a known or an unknown cause. To the contrary, it is undisputed Ghukasian specifically instructed her contractor to level certain land and cut trees, which is exactly what was done. Ghukaskian’s mistaken belief about the boundaries of her property is irrelevant to determining whether the conduct itself-leveling land and cutting trees-was intentional.
Ghukasian’s intentional conduct was the immediate cause of the injury; there was no additional, independent act that produced the damage. Therefore, the Liberty Surplus Ins. case did not control.
The scope of the duty to defend does not depend on the labels given to the causes of action. There are no allegations, or evidence, that the neighbors’ property was damaged by an accident even though their complaint uses the term negligence. Thus, although the underlying action alleges a cause of action for negligence, the factual allegations reflect intentional acts.
Because the undisputed evidence demonstrates the acts for which the neighbors seek to impose liability on Ghukasian were not accidental, Ghukasian failed to carry her burden to show the neighbors’ claims may fall within the scope of the policy. Ghukasian is not entitled to coverage and therefore, her claims for breach of contract and declaratory relief fail as a matter of law, her bad faith claim also fails.
The judgment was affirmed and Aegis was awarded its costs on appeal.
ZALMA OPINION
The plaintiff’s lawyer, understanding insurance, tried to bind Ghukasian’s insurer by alleging that her conduct was negligent. The court, not bound by the eight corners rule that applies in some jurisdictions, interpreted the policy and facts as alleged, all of which were intentional conduct and concluded that there was no potential of an accident causing the damage.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].
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