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Kazi v. State Farm Fire & Cas. Co.

ELR Citation: 31 ELR 20411
Nos. No. S078962, 15 P.3d 223/(Cal., 01/18/2001)

The court holds that an insurer providing a liability policy that covers damage to tangible property on the insureds' premises has no duty to defend the insureds in an easement dispute. The dispute arose after the insureds graded an access road on their property that allegedly interfered with their neighbors' implied easement and right-of-way over the insureds' property. After the parties settled, the insureds filed a bad-faith action against their insurers for failing to indemnify and defend them in the underlying dispute. The court first holds that an easement is a nonpossessory right to use another's property and is not tangible property. Therefore, any damages the neighbors claimed were for economic loss due to loss of use of the easement. The court next holds that the insurance policies, which covered tangible property losses only, provided the insureds with no potential coverage and, therefore, no duty to defend the neighbors' claim for intangible losses. The court further holds that an appellate court, which held in favor of the insured, misconstrued the controlling case law. Allegations of physical damage to land burdened by an easement do not give rise to a duty to defend or indemnify for loss of use or obstruction of the easement.

Counsel for Plaintiffs
Alice M. Graham
Law Offices of Smolker & Graham
4720 Lincoln Blvd., Ste. 280, Marina Del Rey CA 90292
(310) 574-9880

Counsel for Defendants
Pamela E. Dunn
Robie & Matthai
500 S. Grand Ave., 15th Fl., Los Angeles CA 90071
(213) 624-3062

Before George, Mosk, Kennard, Baxter, Werdegar, and Brown, JJ.