In a unanimous decision, a three-judge panel of the First Appellate District in San Francisco agreed with a lower court that the insurers' duty to defend Monier Inc. was never triggered because the claims against the tile maker are all based on purported misrepresentations, which don't constitute accidental occurrences under the policies.
"[W]e conclude that the trial court correctly determined that the [underlying] suit does not allege facts that could potentially constitute an 'occurrence' within the meaning of the policies so as to trigger a duty to defend," Judge Stuart R. Pollak wrote for the court.
The plaintiffs in the underlying action sued Monier in 2003 for violations of the Consumer Legal Remedies Act and Unfair Competition Law, claiming the company knowingly failed to disclose inherent defects in its tiles that resulted in the wearing away of the “permanent” color glaze, leaving behind bare, uncolored concrete, according to court documents.
A jury in January 2013 awarded the plaintiffs $7.4 million in compensatory damages. However, the trial court later held that expert testimony supporting the class claims had been wrongfully admitted and granted Monier's motions for nonsuit and judgment notwithstanding the verdict. An appeal of that decision remains pending.
Monier and its affiliates were covered between 1983 and 2009 by a slew of commercial general liability policies issued by American Home and Travelers, according to court documents. The insurers declined to defend the underlying class action.
In the insurance coverage suit, the lower court determined that neither American Home nor Travelers had a duty to defend Monier because the tile manufacturer didn't show that any of its losses were possibly caused by a covered occurrence.
According to the appellate panel, a misrepresentation, whether intentional or negligent, is not an accidental occurrence under a CGL policy. The damages asserted by the plaintiffs in the underlying suit stem from Monier's alleged intentional misrepresentations of deficiencies in the roof tiles, which "are purposeful, non-accidental acts outside the scope of potential coverage," the panel said.
There are no allegations that the plaintiffs or class members were harmed by property damage resulting from problems with the tiles' manufacturing or design, according to the opinion. Indeed, Monier opposed class certification based on the argument that the underlying suit was a misrepresentations case rather than a products defect case, the panel noted.
"Here, the record reveals no facts that the insurers knew or should have known when evaluating the request for a defense that suggested a potential basis for recovery based on an accidental occurrence," Judge Pollak wrote.
Attorneys for the parties did not immediately respond to requests for comment Friday.
Judges Stuart R. Pollak, William R. McGuiness and Martin Jenkins sat on the appellate panel.
Monier is represented by Joren S. Ayala-Bass, Robert P. Jacobs and Dennis L. James of Perkins Coie.
American Home is represented by Blaise Stephen Curet of Sinnott Puebla Campagne & Curet and Andrew D. Herold and Joshua Adam Zlotlow of Herold & Sager.
Travelers is represented by Abel Eric Aguilera of The Aguilera Group.
The case is Monier Inc. v. American Home Assurance Co., case number A138976, in the Court of Appeal of the State of California, First Appellate District, Division Three.
Source Law 360 By Jeff Sistrunk