LASC Grants Summary Judgment in Breach of Contract and Bad Faith Case

October 9, 2012

The Los Angeles Superior Court granted summary judgment to an insurer in a breach of contract and bad faith case handled by Nancy N. Potter. The plaintiffs, apartment owners, sued the insurer after their 100 year-old Los Angeles apartment building suffered a major sewage leak. The insurer retained a mechanical engineer who inspected the pipe and concluded that it was old and completely corroded. The insurer denied coverage for the sewer line repairs and replacement based on the exclusions applicable to underground pipe, excavation, lack of maintenance, wear and tear, and pollution.

The apartment owners sued the insurer, primarily arguing that the loss was “sudden and accidental” and should have been covered. Ms. Potter filed a Motion for Summary Judgment showing that the loss was to non-covered pipes and land, and that pollution was excluded from coverage. She also presented the mechanical engineer's opinion as to the age of the pipe, and excerpts of the deposition of a tenant who had been complaining about the sewer odor for four months, before the plaintiffs claimed the loss occurred, to demonstrate that the issue was caused by an ongoing lack of maintenance.

The court found that the plaintiffs' opposition evidence of a sudden and accidental loss was insufficient, that the loss was not covered and, therefore, the denial of the claim did not breach the insurance contract and was not in bad faith.