Owned property exclusion means no duty to defend
In Panico v. State Farm Fire & Casualty Co., the Panicos (insureds) sued State Farm for failing to defend them in an action brought when the property they sold to a third party was not as the third party expected. The Panicos sought a defense under their homeowners’ policy. State Farm refused since the claims did not come within coverage of the policy. Summary judgment to State Farm was affirmed.
Colorado uses the four corner rule to determine whether there is a duty to defend. If any of the allegations of the complaint come within coverage, there is a duty to defend. State Farm had no duty to defend because the third party did not bring bodily injury claims, and the property damage claims are subject to the owned property exclusion.
There was no bodily injury claim because the underlying complaint, while mentioning some bodily injuries, did not not seek damages, or any other relief, for bodily injuries. The underlying complaint does not seek relief for bodily injury. Rather, the complaint clearly seeks recovery for the economic damages incurred in the purchase of the Property: the cost to bring the Property up to its warranted condition, or the difference between what was paid for the Property and what was received. Because the underlying complaint cannot reasonably be read as an attempt to hold the Panicos liable for bodily injury, State Farm’s duty to defend is not triggered.
All of the property damage claimed, whether based on the Panicos’ alleged misrepresentations concerning the Property, their alleged negligent construction of the Property, or their alleged negligent maintenance of the Property would have taken place while the Panicos owned the property and is thus subject to the owned property exclusion.
The court notes that other courts have held that an owned property exclusion bars coverage of a home purchaser’s negligence claims against the insured (discussing cases). The court also notes that the policy only covers property damage caused by an occurrence; and that the misrepresentation did not cause the property damage.
