Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
San Mateo County Super. Ct. No. CIV452800
Reardon, J.
In a previous order in a related mandamus proceeding (Pacific Specialty Insurance Co. v. Superior Court (No. A115688)), we held as a matter of law that the pathogenic organisms exclusion in a mobilehome owner’s policy defeated coverage for damages for the death of a renter caused by exposure to septic waste bacteria. Accordingly, while expressing no opinion about the validity of the exclusion, we directed the superior court to enter an order granting summary judgment in favor of the insurer in the bad faith action prosecuted by appellant landlords and decedent’s family. Thereafter appellants moved for a new trial, arguing that the applicable exclusions were not conspicuously disclosed and the policy promised coverage that was illusory. Respondent insurer countered, among other points, that there never was coverage to begin with because the bodily injury clause upon which appellants have relied never extended coverage to residents of the mobilehome. This appeal followed denial of appellants’ new trial motion. We conclude that the bodily injury clause precludes coverage in the first instance and accordingly affirm the judgment.
Appellants are Eileen Heaton, individually and as guardian ad litem for her daughter Arianne Heaton, and landlords Hugh Groberman and Miyo Uchida.
I. BACKGROUND
In November 2002 appellants Hugh Groberman and his wife Miyo Uchida purchased a mobilehome on a two-acre lot in Tehachapi. They procured a mobilehome owner’s policy of insurance from respondent Pacific Specialty Insurance Company (Pacific Specialty) through an insurance agent referred to them by their mortgage broker. The application for insurance, dated February 28, 2003, contained an “occupancy” item that included several boxes. The “Owner Occupied Full Time” box was checked as applicable. The application also showed that in addition to the base premium, a surcharge was included for a “Rental Unit.”
Uchida and Groberman resided in Woodland and never intended to use the Tehachapi property as their residence. Prior to applying for insurance, on February 8, 2003, the couple rented their mobilehome to Thomas and Eileen Heaton. Mr. Heaton died on March 10, 2004.
According to allegations in an action for wrongful death and related causes of action filed by Mrs. Heaton individually and on behalf of her daughter (the Heaton complaint), Mr. Heaton’s death was caused by exposure to septic waste bacteria while gardening on the property. Mr. Heaton had informed the landlords that he wanted to plant an organic garden on the property. They told him to locate the garden in the flat area in front of the mobilehome. That area was a leach field for the septic tank. On March 6, 2004, Mr. Heaton worked in the area for five hours. In order to dig in the soil, Mr. Heaton, who was paraplegic, had to lie on his side. Later that evening he became ill, and on March 8, 2004, he was hospitalized with symptoms consistent with sepsis. On March 9, 2004, Mr. Heaton was airlifted to a hospital in Fresno where the diagnosis of sepsis was confirmed. He died the next day.
Mrs. Heaton requested an autopsy. The pathologist who performed the autopsy informed her that Mr. Heaton became exposed to bacteria by working in the contaminated soil and scratching an exposed area of his arm.
The Heaton complaint alleged that the landlords were negligent for leasing a mobilehome with a faulty septic system; failing to inform the Heatons about the location of the leach field; and telling Mr. Heaton that the appropriate place to plant the garden was in the area that in fact was directly over the leach field.
The landlords tendered the lawsuit to Pacific Specialty, but the insurer declined coverage and refused to defend. Among other reasons, the insurer cited the pathogenic organisms exclusion in the policy. Thereafter, the parties entered into a settlement agreement pursuant to which certain claims against Pacific Specialty were conveyed to Mrs. Heaton and her daughter in return for a covenant not to execute on any judgment, and the action was resolved in an uncontested short-cause trial. Judgment was rendered in favor of plaintiffs, with awards of economic damages in the amount of $1,228,043, and noneconomic damages in the amount of $750,000.
This endorsement modifies insurance coverage under the policy by providing that coverage does not apply to “ ‘Bodily Injury,’ ‘Property Damage,’ ‘Personal Injury,’ or ‘Advertising Injury’ arising out of any ‘pathogenic organisms,’ regardless of any other cause or event that contributed concurrently or in any sequence to that injury or damage. [¶] ‘Pathogenic Organisms’ means any bacteria, yeasts, mildew, virus, fungi, mold, or their spores, mycotoxins or other metabolic products.”
Appellants pursued an action against Pacific Specialty for breach of the implied covenant of good faith and fair dealing, among other claims. After the trial court denied Pacific Specialty’s motion for summary judgment, based in part on the pathogenic organisms exclusion, the insurer petitioned this court for mandamus. We issued an alternative writ, determining that the pathogenic organisms exclusion “precludes coverage for injury arising out of exposure to bacteria. The language of the exclusion is similar to other policy exclusions that focus on the type of injury, not the conduct of the insured. [Citations.] The fact that the lawsuit advanced alternative legal theories . . . to recover for injuries caused by bacteria is irrelevant—there would be no coverage under either theory.” (Pacific Specialty Insurance Co. v. Superior Court, supra, A115688, fn. omitted.)
Vacating its prior order, the trial court entered a new order granting summary judgment in favor of Pacific Specialty on the basis of the pathogenic organisms exclusion. Appellants moved for a new trial, arguing that the trial court committed legal error in that exclusion (1) was not conspicuously disclosed and (2) along with the pollution exclusion, effectively negated the grant of coverage for “ ‘sickness or disease’ ” and hence the policy was ambiguous. Opposing the motion, Pacific Specialty argued in part that on its face the grant of coverage did not apply to the Heaton tragedy. This was so, it maintained, because coverage for “bodily injury” excluded any resident of the mobilehome and it was undisputed that Mr. Heaton was a resident of the mobilehome.
II. DISCUSSION
The Policy Never Provided Bodily Injury Coverage for the Resident-Heatons.
The insuring agreement defines “YOU, YOUR, YOURS” as “the person named on Declaration Page and that person’s spouse or other family members who reside in the mobile home described on Declaration Page.” The declarations list the named insured as Miyo Uchida and her address as the Tehachapi address. The declarations also indicate that the “program” is “Tier6 Rent,” identifies the “covered properties” as one unit that is occupied and used by one tenant, and indicates that the policy is “SUBJECT TO FORM NO (S): THE APPLICATION AND ITS STATEMENTS AND REPRESENTATIONS.” A string of alphanumeric codes that relate to endorsement numbers in the appended endorsement booklet follow.
The “Liability” section of the policy defines “Bodily injury” as “bodily injury, sickness, disease or death of any person, except YOU or any resident of YOUR mobile home.” (Italics added.) Because the term “YOU” is defined to include the named insured and resident family members, by logic and common sense the phrase “any resident” must refer to nonrelative residents. Appellants have admitted that Mr. Heaton lived in the mobilehome. Since he was a resident of the mobilehome, the unambiguous “bodily injury” provision of the policy did not extend coverage for his sickness and death. “ ‘[W]here the policy is clear and unequivocal, the only thing the insured may “reasonably expect” is the coverage afforded by the plain language of the mutually agreed-upon terms.’ ” (TIG Ins. Co. of Michigan v. Homestore, Inc. (2006) 137 Cal.App.4th 749, 755, quoting Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2005) ¶ 4.9, p. 4-3.)
Appellants take issue with this analysis, asserting that the landlords purchased additional coverage “which acknowledges that the mobile home was a rental unit occupied by tenants. This additional coverage was inherently at odds with various provisions [of] the base policy.”
Appellants do not explain what “additional coverage” was procured. The application for insurance specifies that a surcharge of 213 percent, or $594, was added to the base premium for “Rental Unit.” A “surcharge” is “a charge in excess of the usual or normal amount: an additional tax, cost, or impost . . . .” (Webster’s Third New Internat. Dict. (1961) p. 2299.) Two of the endorsements applicable to the policy pertained specifically to tenants and in fact restricted coverage due to a tenancy: (1) endorsement No. NYM4, entitled “Increased Deductible for Loss or Damage Caused by Tenants,” increased to $2,500 the deductible for a loss due to an insured peril caused by a deliberate act or abuse of the property by a tenant; and (2) endorsement No. NJ06, entitled “Rental Endorsement,” eliminated certain additional coverages set forth in the policy, including “additional living expense coverage credit card and depositor’s forgery coverage.”
The only reasonable conclusion from these facts is that a surcharge was imposed because of a tenancy, resulting in two endorsements that restricted coverage because of a tenancy. Absent from the applicable endorsements is one called “Owner Landlord Liability,” which explicitly replaces the “Personal Liability Coverage” with “Owner Landlord Liability Coverage.” In the summary judgment proceedings, Pacific Specialty submitted the declaration of Jeffrey Owen, senior counsel for the insurer, stating that had the insurer been “advised that the property would not be owner-occupied full time, [it] would have required that plaintiffs purchase for an increased premium the Owner Landlord Liability endorsement, which would have modified the policy to meet the specific risks posed by ownership of a rental property.”
Subject to certain exclusions, the “Owner Landlord Liability” coverage is described as follows: “This coverage provides protection against accidents that happen to somebody else, but that YOU are legally responsible for due to YOUR ownership, maintenance or use of the property described on Page One. [¶] If a claim is made or a suit is brought against YOU for damage because of Bodily Injury or Property Damage, WE will: [¶] - Pay up to OUR Limit of Liability for the damages for which YOU are legally liable; and [¶] - Provide a defense at OUR expense by counsel of OUR choice.”
The landlords, for their part, have averred that they purchased the Tehachapi property as investment property and planned to use it as a residential rental property. After one telephone conversation with an insurance agent describing the circumstances and requesting insurance for a mobilehome covering risks arising from rental of that home, they never heard from him again, were never asked to fill out an application for insurance, and never received or saw the policy until after litigation commenced. Of course, the application for insurance lists the Tehachapi address as the insured’s address, and that address was carried over to the policy. The landlords also maintain that the signature on the application page was not the signature of either Uchida or Groberman.
Appellants contend nonetheless that other limitations are “nonsensical” in light of the rental endorsements that did pertain to the policy, specifically the definition of “premises,” which means “your mobile home as long as it is not for rental . . . use.” In other words, according to appellants, Pacific Specialty could “just as easily argue that there is no coverage because there was no insured ‘premises,’ ” the argument being that neither the definition of “premises” or “bodily injury” jibes with a policy issued for rental premises. Appellants must realize, however, that the definition of “premises” has never been at issue and never been litigated in these proceedings.
Moreover, to reiterate, the policy was not issued solely for rental premises. Rather, it appears that the insurance policy and endorsements that Pacific Specialty provided to the landlords resulted in a type of hybrid coverage, taking into account the fact that the application indicated the premises would be owner occupied on a full-time basis, and that coverage for a rental unit was also requested. Indeed, in Pacific Specialty’s reply to appellants’ response to its statement of undisputed material facts, the insurer explained that the renter-related endorsements that pertained to the policy in question “apply where a property is ‘owner occupied full time’ and also functions as a partial rental.” In short, the landlords did not receive, and Pacific Specialty did not receive an application for, landlord/owner insurance for a pure rental, i.e., where the mobilehome was not also owner occupied on a full-time basis. We repeat that the policy is specifically subject to the application, its representations and statements. The limitation on bodily injury makes sense in light of the hybrid nature of the policy that was drawn up in response to that application.
This is just a statement in the pleadings, not part of a declaration.
Appellants also argue that the limitation on coverage for bodily injury claims made by residents of the mobilehome “is a variant of the ‘family’ or ‘household exclusion that is frequently included in homeowner’s policies,” noting that the purpose of such exclusion is “ ‘to prevent suspect inter-family legal actions which may not be truly adversary and over which the insurer has little or no control.’ ” (Citing Farmers Ins. Exchange v. Cocking (1981) 29 Cal.3d 383, 389.) Here it is apparent that the bodily injury provision excludes coverage for (1) “YOU”—which has been clearly defined as the insured, the insured’s spouse and other family members who reside in the mobilehome—as well as (2) “any resident” of the mobilehome. (Italics added.) As stated above, the provision excludes coverage for nonrelative residents. Again, the standard mobilehome owner’s policy definition of “bodily injury” was not incongruent with the scenario that matched the information on the application, i.e., the representation that the mobilehome would be “Owner Occupied Full Time” and that a surcharge for “Rental Unit” coverage was also requested.
Appellants assert that the “need for such an exclusion is greatly attenuated in the landlord-tenant situation. . . . [T]here is a clear need for a landlord to obtain liability protection against claims by the tenant for personal injuries . . . .” First, the issue here is not need, but the nature of the coverage purchased. The landlords paid $1,066 for a mobilehome owner’s policy that included a couple of endorsements triggered by the fact that although the application indicated the home would be owner occupied full-time, a surcharge was also assessed for “Rental Unit.” While the landlords attested they never intended to live on the premises and always intended to rent, they did not purchase the endorsement for “Owner Landlord Liability,” which would have supplanted the personal liability coverage afforded under the policy. Second, there is logic to the applicability of an exclusion for nonrelative residents who rent space in an owner-occupied dwelling because the proximity of renter and owner could likewise spur a collusive assertion of liability.
III. DISPOSITION
Under the hybrid nature of the policy at issue in this case, the Heatons never had a claim against the landlords for bodily injury. Accordingly, the summary judgment in favor of Pacific Specialty is affirmed.
We concur: Ruvolo, P.J., Rivera, J.