469_C332
AIR CONDITIONER
TRIGGERS COVERAGE DISPUTE
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Homeowners |
Intentional Loss |
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Condominiums |
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John Hanratty
and Mary Blake Newman owned adjacent residential units in a small condominium
complex. Hanratty's unit had an air-conditioning unit
that projected into a yard area to which Newman held an exclusive easement.
Newman complained that noise, hot air, and vibrations from the air conditioner
were interfering with her enjoyment of her property. When Hanratty
ignored her complaints, she sealed the air conditioner with duct tape so that
it could not be used. In June 2007, Hanratty filed a
complaint against Newman, asking the court to keep her from interfering with
his right to use the air conditioner. Newman filed a counterclaim and asked the
court to order Hanratty to remove the air
conditioner.
Hanratty was insured under a homeowners policy issued by Citation Insurance Company.
Citation agreed to defend Hanratty in the action,
subject to a reservation of rights. Then, in May 2008, Citation filed a declaratory
judgment action seeking a determination that it was not obligated to provide
coverage for the claims asserted by Newman. Hanratty
objected, alleging that Citation had breached its contract and the implied
covenant of good faith and fair dealing. By the following fall, Newman and Hanratty reached an accord in the underlying lawsuit. Hanratty assigned his counterclaim against Citation to
Newman. In June 2009, a judge found that Citation was not obligated to defend Hanratty. The court also dismissed Hanratty's
counterclaim. Newman appealed.
On appeal, Newman argued
that Citation had a duty to defend Hanratty and that,
as Hanratty's assignee, she was entitled to
attorney's fees and costs incurred by her and Hanratty.
Specifically, Newman argued that Citation had a duty to defend Hanratty against her allegations of trespass and nuisance.
She also argued that Hanratty's counterclaim should
not have been dismissed.
The language of the policy
provided, in relevant part, that Citation would defend and indemnify claims
"brought against an 'insured' for damages because of…'property damage'
caused by an 'occurrence' to which [the] coverage applie[d]."
This coverage was subject to an exclusion for property
damage "[w]hich [was] expected or intended by
the 'insured.'” The policy defined "occurrence" as "an accident,
including continuous or repeated exposure to substantially the same general
harmful conditions, which results, during the policy period, in… '[p]roperty damage.'"
"Property damage" was defined as "physical injury to,
destruction of or loss of use of tangible property."
Citation argued that
Newman's claims did not allege "property damage" as defined by the
policy because any physical damage or loss of use affected only an easement,
which is an "intangible" interest. The Appeals Court of
Massachusetts, Middlesex, disagreed. In reaching its decision, it stated that
the nature of Newman's interest in the yard did not make any difference.
According to the court, "For purposes of deciding whether there has been
injury to or loss of use of tangible property, it makes no meaningful
difference which abstract legal concept has given rise to the claimant's rights
in real property. Whether the claimant owns, rents, or holds an easement to it,
the real property in question remains tangible property." The court
concluded that the lower court should not have ruled in favor of Citation.
The decision of the lower
court was vacated and the matter was remanded for further proceedings.
Citation
Insurance Company vs. Newman-No. 10-P-0331-Appeals Court of Massachusetts,
Middlesex-August 18, 2011-2011 WL 3595410 (