Golden Eagle Insurance Corp. v. Cen-Fed Ltd.

Summary

        2nd District California Court of Appeal, Division 3

        Washington Mutual Bank (WMB) was awarded damages in its action against Cen-Fed Ltd. (CF) for breach of lease, as well as its costs and attorney fees. CF's insurer, Golden Eagle Insurance Crop. (GEIC) sought a declaration that it had no duty to defend nor pay the costs of suit in the action against CF. The relevant portions of GEIC's policy limited coverage to accidental "occurrences," injury to tangible property, and invasion of a person's right to occupy a premises. The trial court found that GEIC had no duty to defend CF, but that it was still obligated to pay WMB's cost award.

        Affirmed as modified. First, a leasehold interest is not tangible property. Here, WMB's claim was based on harm to its leasehold interest, which as a nontangible property right, was excluded from coverage under GEIC's policy. Second, a managerial decision that leads to the failure of a party to fulfill its contractual obligations is not an "accident." Thus, CF's breach of lease was not an "occurrence" under GEIC's policy. Third, when an insurance policy distinguishes between persons and organizations, and the policy specifically makes a provision only applicable to persons, it cannot be applied to an organization. Here, GEIC's policy made the premises-based coverage only applicable to persons, and so it was inapplicable to WMB, a corporate lessee. Accordingly, GEIC had no duty to defend CF. Absent a duty to defend, GEIC had no obligation to pay the costs of suit in the action either.

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