Central District of California Denies Insurer’s MSJ On the Basis That There Was an Issue of Material Fact as to Whether an Alleged Failure to Construct a Home in Accordance With the Residential Community’s CC&Rs Constituted an “Occurrence”
Barks v. Castlepoint Nat’l Ins. Co., 2014 U.S. Dist. LEXIS 43447 (C.D. Cal. Mar. 26, 2014)
In Barks, the district court found that there was an issue of material fact as to whether the general contractor’s alleged failure to construct a home in accordance with the residential community’s Covenants, Conditions and Restrictions (“CC&Rs”) was an “accident” that would be covered as an “occurrence” under the insurance policy at issue.
In this case, Ronald Barks contracted with Carlos Gonzalez, d/b/a Gonzo Construction (“Gonzalez”) to build an investment home. The residential community’s CC&Rs prohibited building a home over 24 feet tall. The final house, however, was 26 feet tall and Gonzalez had to perform additional construction, including lowering the roof, to remedy the problem. After Barks sold the home, he filed a lawsuit against Gonzalez alleging causes of action for negligence and breach of contract. Gonzalez tendered the complaint to its liability insurer. The insurer, however, denied coverage for the underlying action on the basis that the alleged damage was not covered as “bodily injury” or “property damage” arising out of an “occurrence,” and on the basis that several exclusions applied even if the conduct were covered. Gonzalez and Barks entered into a stipulated judgment and Gonzalez assigned his rights against his insurer to Barks in exchange for a covenant not to execute. Barks thereafter filed a lawsuit against the insurer alleging, inter alia, breach of contract.
The insurer moved for summary judgment on the basis that, as a matter of law, the acts alleged by Barks did not constitute an “occurrence” as used in the relevant policy. The insurer argued that Gonzalez intentionally took each step necessary to create the home that exceeded the height requirement and the fact that the result was unintended did not make the actions themselves “accidental.” Barks, on the other hand, argued that the act of constructing a 26-foot house was a mistake and that there were material issues of fact as to what specifically was done to cause that result, rendering summary judgment on this question inappropriate.
The district court agreed with Barks and denied the insurer’s motion for summary judgment because there were material issues of fact as to whether the alleged conduct of Gonzalez in building the 26-foot house qualified as an “occurrence.” In so holding, the district court found that there was mixed evidence in the record regarding why the house was actually over the 24-foot limit, with some evidence suggesting that the parties intended to build a 26-foot home while other evidence suggested that the intent was to build a 24-foot home. The district court also found that none of the exclusions barred coverage as a matter of law because their application also hinged on questions of fact. Accordingly, the court denied the insurer’s motion for summary judgment.
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