(Article from Insurance Law Alert, May 2023)
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Holding
Reversing a trial court decision, a California appellate court ruled that an animal liability exclusion did not relieve the insurer of its duty to defend an underlying suit arising out of dog bite injuries. Dua v. Stillwater Ins. Co., 2023 Cal. App. LEXIS 342 (Cal. Ct. App. May 5, 2023).
Background
The underlying claimants sued Dua and her boyfriend Taylor for property damage and injuries allegedly arising out of an attack by Taylor’s pit bulls that occurred on a public street. Dua was not present at the time of the incident, but the complaint alleged that Taylor and his dogs lived at Dua’s home and that she knew that the dogs were dangerous. Dua’s homeowner’s insurer denied coverage on the basis of an animal liability exclusion, which applied to “any occurrence or damages caused by any animal, at any time, at any premises insured hereunder, or caused by, arising out of, or in any way related to any animal owned by or in the care, custody, or control of the insured, or any member of the insured’s family or household.”
Dua sued the insurer, alleging breach of contract and bad faith and seeking punitive damages. A trial court granted the insurer’s summary judgment motion, concluding that the exclusion eliminated any possibility of coverage and therefore that the insurer had no duty to defend. The appellate court reversed and remanded for further proceedings.
Decision
The appellate court noted that when Dua sought the insurer’s defense, she informed the insurer that the dogs were not in her care, custody, or control, as required by the exclusion. Further, the appellate court found there was no evidence that the insurer had investigated the veracity of this allegation. The court explained that such extrinsic facts, whether “disputed or undisputed,” give rise to a duty to defend if they create potential liability under the policy. The court concluded that the insurer improperly denied a defense without investigating facts alleged by the insured that would negate application of the exclusion.
Comments
The decision illustrates the breadth of an insurer’s duty to defend, particularly where an insurer’s denial is based on a policy exclusion. In reversing the trial court decision, the appellate court emphasized that even if the policyholder cannot be found legally liable under the facts pled in the underlying complaint (and therefore not entitled to coverage under the policy), the insurer may still be obligated to defend the suit based on disputed extrinsic facts. In granting the insurer’s summary judgment motion, the trial court had reasoned that if Dua lacked ownership, care, custody, or control of the dogs, then she could not be held liable for the underlying injuries (in which case, insurance coverage would not be an issue), whereas if she did have ownership, care, custody, or control, the exclusion would bar coverage. The appellate court rejected this reasoning, emphasizing that the contract required the insurer to defend “even if the suit is groundless, false, or fraudulent.” Even if Dua could not be held liable, the insurer may still be required to defend her in the lawsuit.