DOG CLAIM MERITS DEFENSE

Poonam Dua and Eric Taylor were sued by Simeon and Roslyn Peroff for injuries and property damage caused by Taylor’s dogs. The Peroffs alleged that, while walking their dogs, they were attacked by Taylor’s dogs. The complaint stated that, besides the injuries to their pets, witnessing the incident also caused the Peroffs mental and emotional distress.

Dua submitted a claim to her homeowners insurer and it was denied. Stillwater Insurance Company contended that an animal liability exclusion barred coverage. Further, they advised that the policy precluded any duty to defend the loss. Dua sued for coverage and lost. Upon appeal, Dua argued that the trial court erred in granting summary judgment in favor of Stillwater.

The insurer determined that the exclusion applied because it was alleged that the pit bulls lived at the insured’s home. Therefore, it had no obligation to respond to the claim. The insured denied any ownership or control of the pit bulls. They were owned by her boyfriend, who did not live at her home. The insurer did not conduct any further investigation.

The higher court then considered the case. It recognized that the insurer denied the insured a defense because, if the exclusion applied, the insurer had no obligation to defend. However, it proceeded along the basis that the duty to defend is broader than the duty to indemnify, and the policy specifically included the defense of frivolous, groundless, false, or fraudulent claims that fell within the policy’s coverage.

An insurer can be excused from the duty to defend only if the third-party complaint held no conceivable theory to raise a coverage issue. However, the insurer did nothing to investigate, and concluded there was no possible coverage based only on the animal liability exclusion. The insured was forced to settle to minimize her exposure because of the insurer’s decision to focus on the policy exclusion rather than the insured’s exposure to a lawsuit that could fall within the policy’s coverage.

The court of appeal concluded that the trial court erred in granting summary judgment in favor of Stillwater. It held that Stillwater breached its duty to defend. The court also reversed the trial court’s grant of summary judgment in favor of Stillwater on Dua’s claim for breach of duty of good faith and fair dealing. The case was reversed and remanded for further proceedings.

Dua v. Stillwater Insurance Company—Court of Appeal of the State of California, Second Appellate District, Division Two—May 5, 2023—No. B314780.