California Court Holds Insured’s Activities Not an Occurrence

In its recent decision in Henstooth Ranch LLC v. Burlington Ins. Co., 2018 U.S. Dist. LEXIS 1176 (N.D. Cal. Jan. 3, 2018), the United States District Court for the Northern District of California had occasion to consider whether an insured’s land restoration activities constituted an “occurrence” for the purpose of a general liability policy.

Burlington insured Henstooth, a limited liability corporation organized for the purpose of the ownership of a parcel of property that was encumbered by a conservation easement.  The easement was for the purpose of protecting the property’s natural habitat and specifically prohibited improvements and certain environmentally harmful activities.  Henstooth was sued by the easement holder for its efforts to construct a road and a home.  These efforts, claimed the underlying plaintiff, not only violated the easement, but also resulted into damage to the property requiring restorative efforts.  Prior to suit, and over the other side’s objections, Henstooth attempted to performed its own land restoration efforts.  These efforts not only failed, but allegedly resulted in further damage to the land.

Burlington argued that it had no coverage obligations in connection with the underlying suit because Henstooth’s conduct, as outlined in the underlying complaint, was intentional and thus did not come within the policy’s definition of “occurrence.”  Henstooth countered that at the very least, a defense obligation was triggered by its attempt at restoration efforts, which while performed intentionally, negligently failed, thus resulting in damage it did not intend.

The court sided with Burlington, observing that in undertaking the restoration efforts, Henstooth allegedly ignored the easement holder’s request that Henstooth hire a consultant and prepare a restoration plan for approval prior to implementation.  Henstooth’s failure to do so, and its unilateral actions in performing the restoration efforts, explained the court, was intentional in nature, regardless of whether Henstooth intended to cause additional harm to the property.  As the court reasoned, the term “accident” in the policy definition of “occurrence” refers to the nature of the insured’s conduct, not to its unintended consequences.