A“Wrongful Eviction” May or May Not Be Intentional
Liability insurance policies, under the personal injury cover, agrees to insure against certain offenses including the offense of wrongful eviction.
In State Farm Fire and Cas. Co. v. Otten, Not Reported in N.W.2d 2016 , Court of Appeals of Minnesota , WL 2946110 (May 23, 2016) was asked to hold State Farm responsible for an agreed judgment arising from an intentional wrongful eviction. The insured complained that the offense was specifically insured against while the insurer convinced the trial court that the intentional nature of the eviction was not an “occurrence” and intentional conduct was specifically excluded.
Joseph and Kristen Otten and T.E.O. Properties, Inc. own a rental home insured under a Rental Dwelling Policy issued by State Farm.
The policy provides business-liability coverage as follows: “If a claim is made or a suit is brought against any insured for damages because of bodily injury, personal injury, or property damage to which this coverage applies, caused by an occurrence, and which arises from the ownership, maintenance, or use of the insured premises, we will: ¶ 1. pay up to our limit of liability for the damages for which the insured is legally liable; and ¶ 2. provide a defense at our expense by counsel of our choice. We may make any investigation and settle any claim or suit that we decide is appropriate. Our obligation to defend any claim or suit ends when the amount we pay for damages, to effect settlement or satisfy a judgment resulting from the occurrence, equals our limit of liability.” (Emphasis added.)
The policy also contains an intentional-acts exclusion, which excludes coverage for: “a. bodily injury, personal injury, or property damage: ¶ (1) which is either expected or intended by an insured; or ¶ (2) to any person or property which is the result of willful and malicious acts of an insured; b. bodily injury, personal injury, or property damage arising out of the rendering or failing to render professional services….”
In addition, the policy contains a separate exclusion related to mold.
In May 2011, Braun and his then wife entered a lease agreement to rent the home from June 1, 2011 to May 31, 2012. Before entering the lease, the Brauns inquired about the presence of mold in the home because Braun’s stepdaughter had respiratory problems. The Ottens said they were unaware of any mold.
On May 16, 2012, a toilet malfunctioned in the home, causing water to flood the bathroom floor. When Joseph Otten visited the home to perform repairs, Braun asked him to have the home inspected for mold. According to Braun, Joseph Otten then revealed that the home had mold when he purchased it. Joseph Otten refused to have the home inspected and asked the Brauns to move out.
On May 18, 2012, the Ottens gave the Brauns a letter titled “Notice to end lease,” stating: “The rental agreement ends May 31, 2012 12:00 noon. You must be moved out by that time. An unlawful detainer will be filed if this is not met.” The Brauns vacated the home on May 31.
Braun sued the Ottens and T.E.O., alleging several claims, including wrongful eviction. The parties in Braun’s lawsuit entered a Miller–Shugart agreement in which the Ottens and T.E.O. agreed there was a substantial likelihood they would be found liable and (1) consented to pay $500 on Braun’s fraudulent-inducement claim and all issues related to mold and (2) consented to a $35,892 judgment on Braun’s breach-of-contract and wrongful-eviction claims. Braun agreed not to collect the judgment from the Ottens and T.E.O. but only to “seek to satisfy this judgment from State Farm.” The district court entered judgment for Braun against the Ottens and T.E .O. in the amount of $35,892.
State Farm sued the Ottens, the Brauns, and T.E.O., seeking a declaratory judgment that it had no duty to indemnify the Ottens and T.E.O.
A district court must grant summary judgment “if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that either party is entitled to a judgment as a matter of law.” Generally, the extent of an insurer’s liability is determined by its insurance contract with its insured. The district court concluded both that coverage was not triggered because there was no “occurrence” and that, even if coverage had been triggered, the intentional-acts exclusion applied because the injuries were expected or intended.
Braun is correct that the insurance policy generally contemplates coverage for wrongful eviction. The policy generally provides coverage for “personal injury,” including injury arising from a “wrongful eviction.” The policy, however, provides coverage for personal injury only if the injury is “caused by an occurrence.” An “occurrence” is defined as an “accident.” While “accident” is not defined by the policy, our supreme court has defined “accident” as it appears in an insurance policy to mean an unexpected, unforeseen, or undesigned happening or consequence. The policy also contains an intentional-acts exclusion, which excludes from coverage claims for “personal injury” when the injury is “expected or intended” by the insured. The plain and unambiguous language of the “occurrence” requirement and the intentional-acts exclusion requires a wrongful eviction to be accidental and the resulting injury to be unintended for coverage to apply.
Neither definition of wrongful eviction requires intent. It is possible for a landlord to accidentally dispossess the wrong tenant or to make another mistake that unintentionally results in a wrongful eviction and, in such a case, coverage would apply.
The questions of whether an injury is the result of an accident and whether coverage is excluded because the injury is the result of an intentional act are for all practical purposes, identical issues. On May 18, 2012, the Ottens provided notice to the Brauns to vacate the home by May 31, just 13 days later. There was, as a result, no genuine issue of material fact that the Ottens intentionally provided inadequate notice to the Brauns.
In her deposition, Kristen Otten testified that the Ottens knew that the Brauns would incur costs associated with moving and finding a new place to live. This undisputed evidence supports the conclusion that the Ottens intended “some harm.”
Because there is no genuine issue of material fact that the Ottens knew that the notice given was inadequate and that the Brauns would suffer financial losses, the trial court properly concluded that the insurance policy does not cover the Ottens’ intentional and wrongful eviction of the Brauns as a matter of law. State Farm therefore was not required to indemnify the Ottens, and the district court did not err by granting summary judgment to State Farm.
For insurance to cover a claim of damages the injury causing event must be fortuitous. Since the landlords intentionally, without proper notice, and with an intent to cause damage to the tenant, wrongfully evicted them there could be no coverage. The plaintiff was damaged again, when their lawyers agreed to take an assignment against the insurer who owed nothing instead of collecting against the assets of the landlord who caused them damage and get nothing for their effort.
Barry Zalma, Esq., CFE, practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 49 years in the insurance business. He now limits his practice to service as an insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes.
He founded Zalma Insurance Consultants in 2001 and serves as its only consultant.
Look to National Underwriter Company for the new Zalma Insurance Claims Library, at www.nationalunderwriter.com/ZalmaLibrary The new books are Insurance Law, Mold Claims Coverage Guide, Construction Defects Coverage Guide and Insurance Claims: A Comprehensive Guide
The American Bar Association, Tort & Insurance Practice Section has published Mr. Zalma’s book “The Insurance Fraud Deskbook” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=214624, or 800-285-2221 which is presently available and “Diminution of Value Damages” available at http://shop.americanbar.org/eBus/Store/ProductDetails.aspx?productId=203226972
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