23rd Jun 2011

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Encroachments; coverage under liability policy

An encroachment onto an adjacent owner’s property [see § A26 ADJACENT (ADJOINING) PROPERTY] can be either a permanent encroachment or a temporary encroachment. The former (permanent encroachment) is treated as a ‘permanent trespass’. Where the encroachment is able to be removed thereby restoring the adjoining owner’s property to the condition immediately prior to the encroachment, the encroachment is a ‘temporary encroachment’. [Borg v. Transamerica Ins. Co. (1996) 47 Cal.App.4th 448, 459, 54 Cal.Rptr.2d 811]

— ILLUSTRATION [Permanent and temporary encroachment]

1. Permanent encroachment. The foundation of a two story office building encroaching on an adjoining owner’s property is a permanent encroachment (permanent trespass).  [American Empire Surplus Lines v. G. E. Leach (1990) 223 Cal.App.3d 226, 228-229, 272 Cal.Rptr. 704]

2. Permanent encroachment. A homeowner’s action in building a house on a particular spot consistent with public records (which were ultimately shown to be erroneous) encroaching on an adjacent property is not an “accident” where the neighbor is suing for adverse possession. [Fire Ins. Exchange v. Superior Court (2010) 181 Cal.App.4th 338, 104 Cal.Rptr.3d 534]

3. Temporary encroachment. A deck extending out from a house is a temporary encroachment if the suit is for removal of the deck plus requesting damages for loss of use. [Borg v. Transamerica Ins. Co. (1996) 47 Cal.App.4th 448, 459, 54 Cal.Rptr.2d 811]

Duty to defend

Under a CGL policy, an “occurrence” is an accident, including exposure to conditions [§ C100 CONTINUOUS OR REPEATED EXPOSURE TO CONDITIONS [§ C100:1 In general]] which causes property damage or loss of use during the policy period. Potential coverage and a duty to defend exists where a complaint sues for an injunction compelling an insured to remove an encroachment, to restore the plaintiff’s property to a pre-encroachment condition, and seeking loss of use damages. [Borg v. Transamerica Ins. Co. (1996) 47 Cal.App.4th 448, 459, 461, 54 Cal.Rptr.2d 811]

“Good faith but mistaken belief” – building a permanent encroachment

Building a structure that encroaches onto another’s property is not an “accident” even if the owner acted in the good faith but mistaken belief that they were legally entitled to build where they did. [Fire Ins. Exchange v. Superior Court (2010) 181 Cal.App.4th 388, 104 Cal.Rptr.3d 534] See § A26 ADJACENT (ADJOINING) PROPERTY; § F44 FORTUITOUS [§ F44:7]; § I58 INTENTIONAL ACT [§ I58:7]; § M38 MISTAKE [§ M38:3.1].

— OBSERVATION [Fire Ins. Exchange v. Superior Court (2010) 181 Cal.App.4th 388, 104 Cal.Rptr.3d 534, questionable dictum]:

Fire Ins. Exchange v. Superior Court involved a permanent encroachment upon another’s land. See § E15 ENCROACHMENT [§ E15:1 In general]. As such there existed a permanent trespass, and no coverage. But the Fire Ins. Exchange opinion did not stop there. The court thereafter discussed Collin v. American Empire (1994) 21 Cal.App.4th 787, 810 (a conversion case which barred coverage under Insurance Code § 533), Merced Mutual v. Mendez (1989) 213 Cal.App.3d 41 (sexual acts case), Quan v. Truck Ins. (1998) 67 Cal.App.4th 583, 598 (sexual assault case). See § S32 SEXUAL ACTS. All three cases implicated Insurance Code § 533. See § W15 WILLFUL ACT [§ W15:1 Generally]. [Fire Ins. Exchange, supra, at 181 Cal.App.4th 388, 392-393, citing Collin, Merced Mutual, Quan] The Fire Ins. Exchange court paid no attention to the distinction between an intentional act (coverage for) and a deliberate act (no coverage) as discussed in Hogan v. Midland Nat. Ins. (1970) 3 Cal.3d 533, 560, 91 Cal.Rptr. 153. See § D24 DELIBERATE ACT [§ D24:2 Deliberate act defined]. The consequence of an act is an important factor in considering whether an accident occurred or did not occur under California law [see § C80 CONSEQUENCES OF ACT], and cannot be ignored by mere citation to Insurance Code § 533 opinions. See analysis of all cases at § I58 INTENTIONAL ACTS [§ I58:1 Categories of intentional acts]. Failure to comprehend the decisions of Hogan v. Midland Nat. Ins., supra, Gray v. Zurich (1966) 55 Cal.2d 263 at fn. 12, Meyer v. Pacific Employers (1965) 233 Cal.App.2d 32, Chu v. Canadian Indem. (1990) 224 Cal.App.3d 86, 97-99, renders the discussion of “accident” in Fire Ins. Exchange v. Superior Court mere dictum. See § D24 DELIBERATE ACT [§ D24:1]. It has long been established that under a CGL policy, the state of mind of the actor is a valid consideration when determining the existence of an occurrence. See 7A Appleman INSURANCE LAW § 4492-4492.02 (1979) discussed at § D24 DELIBERATE ACT [§ D24:2.1]. The rationale in Collin, supra, is erroneous as discussed at § I58 INTENTIONAL ACT [§ I58:1 (d. 2. Error of Collin v. American Empire Ins.)]

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