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By Barry Zalma, Attorney and Consultant
Insurance is a contract where a person (the insurer) agrees to indemnify another (the insured) against certain defined risks of loss, damage, or liability arising from a contingent or unknown event. Intentional acts can never be "contingent" or "unknown."
Building On Property Without Right is Not an "Occurrence"
In Mississippi the Fifth Circuit was called upon to resolve a dispute between an insured and an insurer whether the acts of the insured were an "occurrence," as defined in the policy in National Builders and Contractors Ins. Co. v. Slocum Construction, L.L.C., 2011 U.S. App. LEXIS 12260 (5th Cir. Miss. June 15, 2011) [Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in 5TH CIR. R. 47.5.4.].
(Lexis.com subscribers can access the Lexis enhanced version of the National Builders and Contractors Ins. Co. v. Slocum Construction, L.L.C., 2011 U.S. App. LEXIS 12260 (5th Cir. Miss. June 15, 2011) decision with summary, headnotes, and Shepard's. Non subscribers can access the free unenhanced version of the National Builders and Contractors Ins. Co. v. Slocum Construction, L.L.C., 2011 U.S. App. LEXIS 12260 (5th Cir. Miss. June 15, 2011) decision available from lexisONE Free Case law.)
The Fifth Circuit Court of Appeals held that an insurer had no duty to defend or indemnify a contractor under applicable Mississippi law with respect to an underlying lawsuit relating to the contractor's mistaken construction of a home on the incorrect property as the same did not constitute an "occurrence" under the CGL policy in question and the only allegations against the insured was that he had intentionally trespassed upon the property of the plaintiff.
Kelvin Anderson contracted with Slocum to build a house. Anderson staked out a parcel of land, but Slocum was unaware that the land was not Anderson's. When Anderson could not pay Slocum for the house, Slocum tried to sell it. During due diligence, Slocum discovered that Youngblood owned the land and offered to purchase it from him. When Youngblood refused, Slocum sued Youngblood and Youngblood counterclaimed for trespass, seeking lost rental profits. Slocum requested that its insurer, NBCI, defend and indemnify Slocum with respect to the Youngblood counterclaim.
The district court entered summary judgment in favor of NBCI. Slocum appealed, and the Fifth Circuit affirmed.
Since Slocum intended to build a house on the land that Anderson staked out its actions were not an accident under the terms of its policy, and NBCI was found to have no duty to defend or indemnify.
Slocum's insurance policy, like nearly all CGL policies, provides coverage only if the damage is caused by an "occurrence," which is synonymous with an "accident." Mississippi looks to the actions of the insured, not the resulting damages, to decide whether there was an accident.
Slocum's appeal turns on the distinction between an inadvertent action and a mistake. The former is an accident, as described above, but the latter is not, because the insured intended the action underlying the mistake, even if he did not intend the results or if he based his action on erroneous information.
The Fifth Circuit looked to the allegations in the complaint to determine whether NBCI has a duty to defend Youngblood's countersuit against Slocum for trespass, an intentional tort under Mississippi law that requires entering another's property, without right, for one's own purpose. To trigger coverage under the policy, therefore, Slocum must have accidentally built a house on Youngblood's land. The court concluded that Slocum intended to build a house on the land that Anderson staked out. It may not have intended to build one on property that did not belong to Anderson, but that is the unintended result of its intentional actions. Therefore, its actions were not an accident under the terms of its policy, and NBCI has no duty to defend or indemnify.
The counterclaim against Slocum does not allege that Slocum "damaged" Youngblood's property by building the house on it. What it does allege is that Slocum has and continues to commit the intentional tort of willful trespass on Youngblood's property. Under Mississippi law, "willful trespass" must be knowing, as one who acts in good faith and with reasonable prudence, under a belief that land in question is his own, is not criminally liable for willful or malicious trespass in going upon land of another. The only claim asserted against Slocum is that it has intentionally and knowingly trespassed and continues to trespass intentionally and knowingly on Youngblood's property. In no way, then, can Slocum's behavior - as alleged by Youngblood within the four corners of his counterclaim - be considered an accident or an "occurrence" within the four corners of NBCI's policy, even if Slocum's act of building the house arguably was an "occurrence."
In sum, Youngblood's one and only allegation - the only claim that NBCI is asked to defend against - is that Slocum committed the intentional and knowing tort of willful trespass. That just can't, by definition, be an accident. As NBCI's insurance policy only covers negligence and does not cover intentional torts such as willful trespass, NBCI does not have a duty to defend Slocum against Youngblood's counterclaim for only an intentional tort. In Mississippi there is no tort of "negligent trespass" and there can never be insurance for an intentional act.
Don't build without checking title. Don't expect insurance for any intentional tort.
Reprinted with Permission from Zalma on Insurance, (c) 2011, Barry Zalma.
Barry Zalma, Esq., CFE, is a California attorney, insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud. Mr. Zalma serves as a consultant and expert, almost equally, for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He recently published the e-books, "Heads I Win, Tails You Lose - 2011," "Zalma on Rescission in California," "Zalma on Diminution in Value Damages," "Arson for Profit" and "Zalma on California Claims Regulations," "Murder and Insurance Fraud Don't Mix" and others that are available at Zalma Books.
Mr. Zalma can be contacted at Barry Zalma, firstname.lastname@example.org and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma's Insurance Fraud Letter.
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