READER ALERT: Insurance Coverage for Constructive Eviction

By Randy G. Gerchick* © 2003. All Rights Reserved.

I. INTRODUCTION Several decades later, in Groh v. Kover’s Bull Pen, Inc.,4 the court affirmed a judgment in favor of tenants under a commer- Property owners usually maintain liability insurance that cial lease based upon constructive eviction where a failed requires an insurer to defend and indemnify against, among to repair a leaky roof. The court explained that “[a] constructive other things, lawsuits for wrongful “eviction.” This coverage eviction occurs when the acts or omissions to act of a landlord, or typically is found within the section of a general liability policy any disturbance or interference with the tenant’s possession by insuring against “personal injury” offenses, often defined to the landlord, renders the premises, or a substantial portion there- 1 include “wrongful entry or eviction.” When a residential ten- of, unfit for the purposes for which they were leased, or has the ant files suit alleging that an apartment owner has locked the effect of depriving the tenant for a substantial period of time of tenant out of the rental unit, it is obvious that the tenant has the beneficial enjoyment or use of the premises.”5 alleged an actual eviction, triggering coverage under the liability California cases involving disputes over insurance coverage policy. There are, however, additional scenarios in which an have confirmed that a landlord’s actual or constructive dispos- insurer may have to defend or indemnify a property owner for session of a tenant from leased premises constitutes an “eviction” wrongful “constructive” eviction. within the meaning of a liability policy. In the 1995 case of Consider the situation in which a commercial tenant sues a Legarra v. Federated Mutual Insurance Co.,6 the court noted that landlord based on a failure or refusal to repair a chronically leaky the insurance policy at issue provided coverage for personal roof. The tenant alleges that the leaky roof prevented the tenant injury offenses, including “wrongful entry or eviction or other from using the leased premises for its intended purposes or invasion of the right of private occupancy.” The court then required the tenant to move elsewhere to conduct its operations, explained that of those three terms, “eviction is best understood. resulting in a variety of . Although not claiming that An eviction is the actual or constructive dispossession of a tenant the landlord threw the tenant out of the building or locked the from leased premises by the landlord or one acting under his doors to prevent the tenant from gaining entry, the tenant still authority.”7 has alleged what amounts to an “eviction.” California courts The following year, in General Accident Insurance Co. v. West have recognized for many decades that an eviction may be “con- American Insurance Co.,8 the court explained the meaning of the structive,” as well as actual, as in the case of the leaky roof or a phrase “wrongful entry or eviction” as used in a liability insur- variety of other circumstances in which a tenant claims that the ance policy and confirmed that it includes what would amount landlord has interfered with or disturbed the tenant’s possession to a “constructive” eviction: of the premises. II. CALIFORNIA CASES West American’s policy language . . . provides coverage for injury arising out of “wrongful entry or eviction, or In 1938, the court in Giraud v. Milovich2 explained the wide other invasion of the right of private occupancy” com- range of circumstances that may amount to a “constructive” mitted in the conduct of the insured’s business. This eviction: phrase, adopted by the insurance industry as part of the standard broad form comprehensive general liabil- It is often difficult to determine what acts will consti- ity endorsement, has been construed as applying to tute an eviction. It is settled, however, that there need claims arising out of the interference with an inter- not be actual dispossession of the tenant from the est in . . . . These claims have included leased premises. An eviction may be actual, as where physical invasions of property, such as trespass and nui- there is a physical expulsion, or it may be constructive sance . . . and noninvasive interferences with the use as where, though amounting to an eviction at , the and enjoyment of property. 9 tenant is not deprived of actual occupancy. Any dis- turbance of a tenant’s possession by a landlord or by In a case decided just last year, the California court of appeal someone acting under his authority, whereby the in Cunningham v. Universal Underwriters10 again confirmed that premises are rendered unfit for occupancy for the pur- a “wrongful eviction” within the meaning of an insurance policy pose for which they are demised, or the tenant is may be actual or constructive. The court stated: “[a]n eviction is deprived of the beneficial enjoyment of the premises, actual when a landlord takes direct action to physically expel the amounts to a constructive eviction.3 tenant from the premises. An eviction is constructive if the land-

22 California Real Property Journal • Volume 21 Number 3 lord engages in acts that render the premises unfit for occupan- ENDNOTES cy for the purpose for which it was leased, or deprive the tenant 1. In addition to the “personal injury” coverage section of a of the beneficial enjoyment of the premises.”11 general liability policy, other coverage sections and other III. CONCLUSION types of insurance policies also might require an insurer to defend and indemnify an insured. A variety of factual circumstances may trigger a liability pol- 2. 29 Cal. App. 2d 543 (1938). icy’s coverage for wrongful eviction. Moreover, it is the facts 3. Id. at 547. alleged in the tenant’s complaint, or otherwise known to the 4. 221 Cal. App. 2d 611 (1963). insurer, that may give rise to a potentially covered claim, regard- 5. Id. at 614. 12 less of how the plaintiff denominates its legal cause of action. 6. 35 Cal. App. 4th 1472 (1995). Even if a tenant sues only for “breach of ,” a landlord 7. Id. at 1484. may rightly call on its insurer to defend and indemnify if the 8. 42 Cal. App. 4th 95 (1996). tenant’s claim might amount to an eviction. 9. Id. at 103. 10. 98 Cal. App. 4th 1141 (2002). * Randy G. Gerchick practices insurance coverage and business 11. Id. at 1152. litigation law in the Orange County office of Latham & 12. Barnett v. Fireman’s Fund Ins. Co., 90 Cal. App. 4th 500 (2001). Watkins LLP.

This article is reprinted from Vol. 21, No.3 of the California Real Property Journal, a publication of the Real Section of the State Bar of California.

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