No Duty to Defend under Homeowner’s Policy Where No Occurrence, No Property Damage
The federal district court for the district of Hawaii granted the insurer’s motion for summary judgment determining there was not duty to defend and no duty to indemnify the insured under a homeowner’s policy. Allstate Ins. Co. v. Rosfeld, 2022 U.S. Dist. LEXIS 139123 (D. Haw. Aug. 4, 2022).
The insured homeowners were sued in the underlying case for alleged failure to disclose poor flooding and plumbing issues during a December 2016 sale of the residence on Kauai. The disclosure statement purportedly made false representations and omitted material facts regarding various issues with the residence. The disclosure statement noted no sewage, drainage, water-related, or grading problems on the property, no damage to structures from flooding or leaks, no defects in the foundations or slabs, and no defects in the interior walls, baseboards or trim despite the insureds having experienced such issues during their ownership. The underlying complaint further alleged that the property had a history of drainage problems dating to 2006 and 2007, which the insureds knew about, or should have known about, when completing the disclosure statement. The insureds made a claim with Allstate in 2014 under their flood and homeowners policies for flooding or seepage into the basement of the house.
The insured tendered the underlying lawsuit to Allstate, who defended under a reservation of rights. Allstate then filed this suit in federal district court for a declaration that it had no duty to defend or indemnify the insureds. Allstate moved for summary judgment.
The court determined there was no property damage alleged in the underlying suit. The complaint alleged that after they moved in, the plaintiffs discovered “numerous cracks in the concrete slab (many of which appeared to be covered with concrete caulk or liquid filler.” The negligence claims in the underlying case were based on the insureds’ failure to disclose the repairs, not that the repairs were negligent and caused further property damage.
There was also no “occurrence” alleged in the underlying case. The underlying complaint alleged that the insureds’ actions or omissions were entirely intentional, not accidental. The underlying complaint alleged that the insureds knew about flooding and plumbing defects – for example, having warned a neighbor about them and having made an insurance claim for certain damages – prior to selling the property, and yet failed to disclose those material conditions. Accordingly, Allstate owed no duties.
The insureds’ cross-claim for bad faith was also dismissed. The insureds produced no evidence of bad faith to create an issue of fact at the summary judgment state.
