A federal district court in California has ruled that an insurer did not have to defend landlords sued by a tenant alleging that she and her children had been forced to vacate the apartment they rented because it was neither zoned for residential use nor habitable.
The Case
Andrea Thomas-Paul asserted in a lawsuit she filed against Chitra and Prakash Darke that she rented a two-bedroom apartment unit in a multiple-unit building in Oakland from the Darkes for herself and her minor children; that she discovered, among other issues, that the heater did not work, the property was infested with mice and rats, hot water was routinely unavailable for weeks at a time, the ceiling leaked water, and the security bars on the windows were unsafe or inoperable; and that despite her repeated complaints, the Darkes had not corrected the defects.
Ms. Thomas-Paul said that she complained to the city, which inspected the property and notified the Darkes, in writing, about the defective condition of the property and requested that they correct the issues within a specified period.
According to Ms. Thomas-Paul, the Darkes failed to do so and continued demanding rent from Ms. Thomas-Paul. She said that the city eventually "red tagged" the property "because [it] was not zoned for residential use" and required that Ms. Thomas-Paul and her children relocate "because the property was not zoned for residential use and or was not habitable."
Ms. Thomas-Paul said that she and her children were forced to vacate the apartment on or about July 1, 2018 and that she was displaced from the property, denied exclusive use of the property, and denied quiet enjoyment of the property beginning on July 1, 2018.
Ms. Thomas-Paul's complaint contained 14 causes of action against the Darkes for, among other things, negligence, nuisance, violation of state and local habitability and zoning laws, constructive eviction, breach of contract, and breach of the implied warranty of habitability.
The Darkes' commercial general liability insurance carrier, Scottsdale Insurance Company, asked the U.S. District Court for the Northern District of California to declare that it had no obligation to defend the Darkes in Ms. Thomas-Paul's lawsuit because it did not allege "loss of tangible property not physically injured" within the meaning of its policy.
Scottsdale moved for summary judgment.
The District Court's Decision
The district court granted the motion.
In its decision, the district court explained that the damages sought by Ms. Thomas-Paul – including, for example, damages for relocation expenses and loss of exclusive use of the unit – fell within the definition of "economic loss."
Therefore, the district court continued, Ms. Thomas-Paul's action, which alleged the loss of a leasehold interest, did "not raise a potentially covered claim" for "loss of use of tangible property."
The district court concluded that because Ms. Thomas-Paul's action did not raise a potential claim under that policy provision, it did not have to analyze other requirements for coverage, and Scottsdale did not have a duty to defend the Darkes in Ms. Thomas-Paul's action.
The case is Scottsdale Ins. Co. v. Darke, No. 19-cv-02225-YGR (N.D. Cal. Nov. 22, 2019). Attorneys involved include: For Scottsdale Insurance Company, Plaintiff: Rebekah Rose Shapiro, LEAD ATTORNEY, Mark Eric Inbody, Selman Breitman LLP, San Francisco, CA. For State Farm General Insurance Company, Defendant: Curtis Lloyd Metzgar, LEAD ATTORNEY, Wade & Lowe, Ontario, CA.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].