Atain Specialty Insurance Comp v. Dignity Housing West, Inc.

• Court: Court of Appeals for the Ninth Circuit
• Decided: December 3, 2021
• Docket: 21-15127
• Status: Unpublished

Opinion

NOT FOR PUBLICATION FILED UNITED STATES COURT OF APPEALS DEC 3 2021 MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS FOR THE NINTH CIRCUIT

ATAIN SPECIALTY INSURANCE No. 21-15127 COMPANY, D.C. No. 3:19-cv-07296-LB Plaintiff-Appellee,

v. MEMORANDUM*

DIGNITY HOUSING WEST, INC., a California nonprofit corporation,

Defendant-Appellant.

Appeal from the United States District Court for the Northern District of California Laurel D. Beeler, Magistrate Judge, Presiding

Argued and Submitted November 18, 2021 San Francisco, California

Before: SCHROEDER, W. FLETCHER, and MILLER, Circuit Judges.

Dignity Housing West is a California nonprofit corporation that provides

low-income housing. Describing itself as a housing developer and listing its only

premises as 200 square feet of office space, it applied for and received a

commercial general liability insurance policy from Atain Specialty Insurance.

* This disposition is not appropriate for publication and is not precedent except as provided by Ninth Circuit Rule 36-3. Though the application asked whether Dignity conducted any “lodging operations

including apartments,” Dignity did not disclose the three apartment buildings it

owned or maintained.

After a deadly fire broke out at Dignity’s apartment building on San Pablo

Avenue in Oakland, Dignity was named in several lawsuits by former tenants.

Atain initially tendered defense to Dignity in those actions, but it subsequently

withdrew. Invoking the district court’s jurisdiction under 28 U.S.C. § 1332, Atain

filed a complaint seeking a declaration that the policy did not cover the San Pablo

building. The district court granted summary judgment in Atain’s favor,

concluding that the policy did not cover the apartment building and that even if it

did, omissions in Dignity’s application entitled Atain to rescind the policy. Dignity

appeals. We have jurisdiction under 28 U.S.C. § 1291, and we affirm. Because we

agree with the district court’s interpretation of the scope of the policy, we do not

consider whether Atain was entitled to rescission.

1. On Dignity’s insurance application, it disclosed only 200 square feet

of office space and represented it was a tenant. The Commercial General Liability

Supplemental Declarations page of the policy lists that space as the only premises

that Dignity owns, rents, or occupies. In a deposition, however, a Dignity officer

stated that Dignity actually owned the building where the office was located.

Information in policy declarations controls the scope of insurance coverage, so if

2 the declarations indicate that the policy does not provide coverage, “no further

review of the policy is necessary.” Fidelity & Deposit Co. v. Charter Oak Fire Ins.

Co., 78 Cal. Rptr. 2d 429, 432 (Cal. Ct. App. 1998). Because nothing in the

Declaration supports the view that the policy applied to any of Dignity’s three

undisclosed apartment buildings, the policy did not cover the San Pablo building.

The premium Dignity paid further supports the conclusion that coverage is

limited to its office. Dignity paid $360 to receive commercial general liability

coverage for a year. A $360 yearly premium could not reasonably be expected to

pay for general liability insurance for dozens of apartments in three separate

buildings. See Herzog v. National Am. Ins. Co., 465 P.2d 841, 843 (Cal. 1970)

(noting that the parties’ “reasonable expectations” suggested by “relatively small

premiums” did not contemplate extended coverage).

2. Dignity also argues that Atain acted in bad faith when it refused to

accept the tort plaintiffs’ settlement offer. But if there is no potential for coverage,

“there can be no action for breach of the implied covenant of good faith and fair

dealing.” Waller v. Truck Ins. Exch., Inc., 900 P.2d 619, 639 (Cal. 1995). Because

the policy did not cover the San Pablo building, Atain did not act in bad faith when

it did not accept the settlement offer.

AFFIRMED.