COURT RULES PACIFIC INSURANCE SPECIALTIES (PSIC) IMPROPERLY ABANDONED ITS INSURED LANDLORD WHEN SUED FOR RETALIATORY EVICTION BY A DISGRUNTLED TENANT

The most important protection a landlord seeks with insurance is from lawsuits – premiums are paid out in hopes that should a tenant sue – for a slip and fall, broken hand rail, retaliatory eviction or habitability – Farmers, Allstate, State Farm or PSIC will step in and defend the case. In Duarte v. Pacific Specialty Insurance, (First District 6/12/17) the landlord was sued for habitability issues relating to a tenancy and the tenant tendered the suit to his insurance company. They denied the claim and sought to rescind the insurance policy, claiming Duarte had not been truthful when he applied for the insurance. In reversing the trial court, the Court of Appeal found the question “Has damage remained unrepaired from previous claims and/or pending claims …” to be reasonably understood as referring to insurance claims in the context of an insurance questionnaire. This rendered the question hopelessly ambiguous and Duarte’s answer that there were none truthful. Another question was “is there any type of business conducted on the premises?” when in fact the tenant kept motorcycle parts in the basement and sold them now and then using eBay. The court found this reasonably susceptible to Duarte’s belief, that the question means “ongoing business” like a store and not a monthly yard sale or occasional eBay buy and sell. Thus – the denial of defense was improper and PSIC has to defend the insured. See the opinion: http://www.courts.ca.gov/opinions/nonpub/A143828.PDF