Selman Appellate Win Becomes a Published Decision

Selman Breitman congratulates Sheryl Leichenger, Eldon Edson, and Laura Ramos for their successful appellate court representation of Aegis Security Insurance Company resulting in the published California Court of Appeal decision in Ghukasian v. Aegis Security Ins. Co. (2022) , --- Cal.Rptr.3d ----, 2022 WL 1421511 (“Ghukasian”),  a decision which addresses the key coverage issue of what is an “accident” for purposes of liability insurance coverage.

Background:

Aegis had issued a homeowners policy to insured Ghukasian which afforded potential coverage for bodily injury or property damage caused by an “occurrence.”  The “occurrence” definition required “an accident,” and the policy did not define the term “accident.”  The insured was sued by neighbors for damages based on trespass and negligence causes of action.  Plaintiffs alleged that, without their consent, the insured had intentionally cut down trees on, and graded, plaintiff’s land. The insured had specifically instructed her contractor to perform this work on the neighbors’ property under the mistaken belief that she owned the property. The insured tendered her defense to Aegis.

Aegis denied a coverage obligation on the ground that the property damage was not caused by an “occurrence” (“accident”). The insured sued Aegis for breach of contract, declaratory relief, and insurance bad faith. Aegis filed a motion for summary judgment, relying on California Court of Appeal and Supreme Court decisions which had held that, there is no “accident”  where the insured’s intentional act, even one performed based on a mistaken belief, causes injury or damage unless some additional, unexpected, independent, and unforeseen happening occurs that produces injury or damage.  The trial court granted the insurer’s motion. The court explained that the insured’s intentionally having the trees cut and the land graded on the property in question was an intentional act which caused the damage, even though that intentional act was the result of a good faith but mistaken belief that the land in question was owned by the insured. The insured’s conduct which caused the damage (leveling land and cutting trees) was intentional, and, pursuant to California law, an intentional act is not an “accident,” even if the intentional act causes unintended harm.

The insured appealed. 

The Appeal And Its Result:

On appeal, the insured first contended (as have some insureds in other cases) that the California Supreme Court’s decision in Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co. (2018) 5 Cal.5th 216 (Liberty Surplus) had impliedly disapproved the existing California case law holding the insured’s intentional act is not an “accident.” In Liberty Mutual, the California Supreme Court had addressed the question: “When a third party sues an employer for the negligent hiring, retention, and supervision of an employee who intentionally injured that third party, does the suit allege an ‘occurrence’ under the employer's commercial general liability policy?” The Supreme Court’s answer was “Yes.”  “Absent an applicable exclusion, employers may legitimately expect coverage for such claims under comprehensive general liability insurance policies, just as they do for other claims of negligence."

The Court of Appeal rejected the insured’s contention, agreeing with the position of Aegis as presented by Selman Breitman that the Supreme Court in Liberty Surplus did not overrule existing California case law on the “occurrence” (“accident”) issue and that the facts involved in Liberty Surplus were different than those involved in Ghukasian. The appellate court concluded: Liberty Surplus contains no language indicating it intended to overrule prior case law holding intentional acts are not “accidents” merely because the insured did not intend to cause injury. To the contrary, it cited Merced’s definition of what constitutes an accident with approval, i.e., there is no accident when the insured performs a deliberate act “‘unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage.’”

. . . Because the causal sequence of events that led to the alleged injury began with the employer's negligence in hiring the employee, the Liberty Surplus court concluded the employer's alleged negligent hiring constituted an occurrence under the policy (i.e., an accident).. . . It explained the employee's molestation of the third party “may be deemed an unexpected consequence of [the employer's] independently tortious acts of negligence.” . . . By contrast, here Ghukasian's intentional conduct (leveling land and cutting trees) was the immediate cause of the injury; there was no additional, independent act that produced the damage. Liberty Surplus is therefore distinguishable from the facts of this case.

The insured also contended that, because the underlying action included a cause of action for negligence, the complaint alleged an “occurrence” (“accident”) under Liberty Surplus.  The Court of Appeal rejected this contention, agreeing with the position of Aegis as presented by Selman Breitman that, pursuant to California insurance law, the duty to defend turns on the facts alleged in the complaint and available extrinsic facts, not the labels given to a plaintiff’s cause of action. The appellate court concluded:

“The scope of the duty [to defend] does not depend on the labels given to the causes of action ...; instead it rests on whether the alleged facts or known extrinsic facts reveal a possibility that the claim may be covered by the policy.” . . . It is undisputed that both the trespass and negligence causes of action alleged the same facts: Ghukasian and her contractor entered the neighbors’ property without consent and made deep cuts into the hill and removed timber, trees, and underwood from the property. There are no allegations or evidence that the neighbors’ property was damaged by an accident (e.g., by inadvertently dropping equipment on the neighbors’ property). Thus, although the underlying action alleges a cause of action for negligence, the factual allegations reflect intentional acts.

The insured filed a petition for rehearing by the Court of Appeal, which was opposed and denied. Selman Breitman submitted a request to publish the decision, and the Court of Appeal granted that request. The Ghukasian decision is now citable California authority regarding what is an “occurrence” (“accident”), A copy of the published version of the decision can be viewed here.

The insured has filed a petition for review by the California Supreme Court, and a request that the Supreme Court depublish the Court of Appeal’s decision has also been filed. Selman Breitman is filing oppositions to the petition and request on behalf of Aegis.

 

Selman Breitman provides this information for educational purposes. Case results depend upon a variety of factors unique to each case. Case results do not guarantee or predict a similar result in any future case. This information should not be construed or relied on as legal advice or to create a lawyer-client relationship.