The California Court of Appeal ruled that a general liability policy does not provide coverage to a homeowner who grades a neighbors' property because of a mistaken understanding of the property lines. The homeowner’s policy contained standard language creating coverage for property damage caused by an “occurrence,” which the policy defined as an “accident.” The insurer did not have a duty to defend the policyholder because a mistake as to property lines did not qualify as an accident and trigger coverage under the policy.

Background Facts

Maryann Ghukasian is the owner of a home in Glendale, California. She purchased a homeowner's policy from Aegis Security Insurance Company (Aegis). The record shows that she retained contractors to level land and clear trees in an area she understood to be part of her property. It turned out that the section the contractor worked on was not in fact Ghukasian's, but rather belonged to her neighbors. The neighbors sued Ghukasian as well as the contractor and others for trespass and negligence. Ghukasian tendered this underlying action to Aegis. She cited a clause in the policy which provides coverage, "If a suit is brought against the policyholder for damages because of…. property damage caused by an occurrence to which this coverage applies."

The policy further defines an "occurrence" as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results during the only period in …. property damage." Aegis denied coverage for the underlying action because it argued that the contractor's work in this case was not accidental , but rather intentional and therefore was not covered by the policy. Ghukasian then sued Aegis for breach of insurance contract, declaratory relief, and insurance bad faith. Aegis moved for summary judgment arguing that it had no duty to defend Ghukasian under these circumstances and the trial court granted that motion.

The trial court found that, "Ghukasian's mistaken belief as to the boundaries of the property does not transform her intentional act of hiring contractors to clear and level land into an accident for the purposes of being covered as an occurrence under the policy." Her actions excluded her from coverage under the policy. Ghukasian appeals this decision.

Aegis Did Not Have a Duty to Defend Policyholder

Under the policy that Ghukasian purchased with Aegis, an occurrence triggering coverage had to qualify as an accident. Aegis argues that based on a long line of case law, any intentional acts on the property, even if the act was performed pursuant to a mistaken belief, does not trigger an insurance company's duty to defend the policyholder. In Albert v. Mid-Century Ins. Co. (2015) 236 Cal.App.4th 1281, 1289, the court found that when the policyholder caused damage on a neighbor's property when they erected a fence and pruned trees on it due to a mistake as to the property line, they were not owed a duty by the insurer to defend them against the neighbor's lawsuit.

In a second case supporting the insurer, Fire Ins. Exchange v. Superior Court, (2010) 181 Cal.App.4th 388, 104 Cal.Rptr.3d 534 found that, "When an insured intends the acts resulting in an injury or damage, it is not an accident merely because the insured did not intend to cause the injury. The insured's subjective intent is irrelevant." This case also involved a mistaken understanding of property lines.

The case at hand is similar in that Ghukasian cleared land and graded areas she thought were part of her property. That mistake caused her to trespass on her neighbor's land and cause the damage which is the subject of this lawsuit. The court here found that the "leveling of land" and "cutting of trees" were not "unexpected or unforeseen" events, as would be required to trigger the duty to defend under their policy with Aegis. Ghukasian instructed the contractor to do the work on the portion of the land that rightfully belonged to her neighbor. Her mistake as to the property lines is irrelevant and her actions remained intentional and not accidental.

Ghakasian argues that a decision in the United States Court of Appeals for the Ninth Circuit, Liberty Surplus Ins. Corp. v. Ledesma & Meyer Construction Co. (2018) 5 Cal.5th 216, 233 Cal.Rptr.3d 487, 418 P.3d 400 supports her point of view. That court defined the term "accident" as "more comprehensive than the term negligence and thus includes negligence." In that case, an employee's wrongful acts against a third party were deemed an unexpected consequence. Here Ghukasian intentionally requested the grading and tree cutting and was the direct cause of the injury to the neighbors. Therefore, this court finds that the current case is easily distinguishable from Liberty Surplus. In fact, Liberty stated that no accident occurred to trigger coverage "unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage."

The evidence in the case at hand clearly shows that the acts of Ghukasian were not accidental and therefore, Aegis is not obligated to defend her against the neighbors' suit or provide coverage for the incident. The trial court decision to grant Aegis summary judgment is affirmed.

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