Benchmark Insurance Company v. GL Construction Company et al

Filing 90

ORDER granting 74 Motion for Summary Judgment and granting 77 and 80 Motions for Leave to File Excess Pages. Signed by Judge Robert C. Jones on 4/13/15. (Copies have been distributed pursuant to the NEF - JC)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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BENCHMARK INSURANCE COMPANY,

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Plaintiff,

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3:14-cv-00326-RCJ-VPC

vs.

ORDER

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G.L. CONSTRUCTION COMPANY, et al.,

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Defendants.

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This case arises from a dispute over insurance coverage between Plaintiff Benchmark

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Insurance Company (“Benchmark”) and Defendants G.L. Construction Company (“G.L.”) and

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Gordon Lemich (“Lemich”). Pending before the Court is Benchmark’s Motion for Summary

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Judgment (ECF No. 74). G.L. and Lemich have filed a Response (ECF No. 78), as has

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Defendants Cerberus Holdings, LLC (“Cerberus”) and Northern Nevada Homs, LLC (“NNH”)

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(ECF No. 83). Benchmark submitted a Reply to both (ECF Nos. 85, 86). Also pending are

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Motions for Leave to File Excess Pages (ECF Nos. 77, 80).

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I.

FACTS AND PROCEDURAL HISTORY

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Lemich is the owner and operator of G.L., which is a Nevada licensed contractor that

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engages in excavation work. (Lemich Decl. ¶ 2, ECF No. 78-1). On October 23, 2009, G.L.

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purchased a commercial general liability policy from Benchmark (“the Policy”). The Policy was

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effective from that date thru October 23, 2013, having been renewed each year by G.L. (Id.

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¶¶ 17–25). Pursuant to the Policy, Benchmark agreed to defend G.L. “against any suit seeking

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[tort damages for property damage.]” (Ins. Agreement, ECF No. 4, at 41). The Insurance

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Agreement (“the Agreement”) signed by the parties contained a number of qualifications and

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exceptions, including that the property damage must be caused by an “occurrence” and that the

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“occurrence” “take[] place during the policy period.” (Id.).

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In June 2000, Lemich and his wife purchased a parcel of property in Reno, Nevada

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located at 2605 Comstock Drive commonly referred to as “Comstock Storage.” (Lemich Decl.

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¶ 5). At the time, Lemich was leasing a parcel of land next to Comstock Storage that he used as

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an outdoor storage yard. (Id. ¶ 4). In 2002, that parcel was sold to Truckee Meadows Water

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Authority (“TMWA”) and Lemich entered into a lease agreement with TMWA for continued use

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of the land. (Id. ¶ 6).

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During his ownership of Comstock Storage, Lemich “caused repairs and improvements to

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be made” to his property. (Id. ¶ 10). “These improvements and repairs were not made or caused

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to be made by either [G.L.] or by [Lemich] in [his] capacity as an officer, director or employee

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of G.L.” (Id.). “Simply put, [G.L.] has never been involved in the ownership, maintenance,

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repair or the improvement of the buildings located [at Comstock Storage].” (Id.). In May 2011,

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Lemich lost ownership of Comstock Storage through foreclosure proceedings brought by the

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mortgage provider, Acquired Capital. (Id. ¶ 11).

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Acquired Capital purchased Comstock Storage out of foreclosure and Lemich entered

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into a lease agreement to remain on the property. (Id. ¶ 12). Thereafter, Acquired Capital

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commenced discussions with Cerberus regarding the sell of Comstock Storage. Allegedly,

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Acquired Capital was willing to sell Comstock Storage to Cerberus only on an “as-is” basis, but

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Cerberus was hesitant to make the purchase without assurances from G.L. that the improvements

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Lemich had made were proper and complied with applicable laws. (Cerberus Compl. ¶ 16, ECF

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No. 26-1). Lemich felt that a sell to Cerberus would allow G.L. to continue leasing Comstock

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Storage, and in order to induce the transaction, Cerberus claims that G.L. “affirmatively and

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expressly represented” that the improvements were all up to code. (Id. ¶¶ 15–17). Allegedly

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based on G.L.’s assurances, Cerberus purchased Comstock Storage on December 28, 2012 and

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allowed Lemich to remain as a lessee. (Id. ¶ 18).

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Cerberus claims that it subsequently discovered that the improvements to Comstock

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Storage were not properly constructed and an inspection by the City of Reno allegedly

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determined that the primary buildings were “riddled with negligent and defective work and

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uninhabitable.” (Id. ¶ 19). In the end, Cerberus allegedly not only held title to defective

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construction, but it was also fined for noncompliant electrical wiring and it allegedly incurred

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costs in cleaning and removing “[h]azardous waste” that had been stored and spilled at Comstock

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Storage. (Id.).

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Additionally, between 2004 and 2008, G.L. and Lemich “dumped substantial amounts of

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dirt” onto the property adjacent to Comstock Storage that Lemich claims he was leasing from

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TMWA. (Lemich Decl. ¶ 8). On July 11, 2013, G.L. and Lemich discovered that a portion of

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that land did not belong to TMWA but rather it was owned by NNH. (Id. ¶ 27). G.L. and

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Lemich were then sued in the Washoe County District Court by both Cerberus and NNH (“the

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Cerberus Action”).

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The Cerberus Action originally included five claims for relief: (1) negligence, (2)

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negligent misrepresentation, (3) intentional misrepresentation, (4) intentional property damage,

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(5) trespass, and (6) injunctive relief. (Id. ¶¶ 26–57). All of these claims, except that for trespass,

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were alleged to involve only Comstock Storage. The trespass claim alleged that during Lemich’s

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tenancy of Comstock Storage, G.L. had “dumped vast amounts of dirt and other debris onto

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NNH’s property without “authorization or permission.” (Id. ¶¶ 50–53).

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When Lemich received a copy of the Cerberus complaint, he contacted Benchmark’s

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third-party claims administrator requesting that Benchmark provide defense services pursuant to

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the Policy. On August 2, 2013, the claims administrator denied the request, finding that G.L.’s

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actions were not covered by the Policy either because they did not constitute an “occurrence” or

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because they fell within exceptions to coverage as outlined in the Policy. (Westcap Letter 6, ECF

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No. 25-1).

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On February 11, 2014, a first amended complaint (“the Cerberus FAC”) was filed in the

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Cerberus Action in which Cerberus and NNH expanded on the original trespass cause of action

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by asserting two separate trespass claims: negligent trespass and intentional trespass. (Cerberus

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FAC ¶¶ 61–68, ECF No. 26-2). Because the lawsuit in Washoe County was progressing and

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Benchmark refused to defend G.L., Lemich hired counsel to respond to Cerberus and NNH’s

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allegations. On March 4, 2014 and May 5, 2014, Lemich’s counsel made additional demands on

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Benchmark to defend G.L. against the Cerberus Action based particularly on the newly alleged

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“negligent trespass” claim. In his letter to Benchmark’s claims administrator, G.L. and Lemich’s

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counsel stated that G.L. and Lemich “were not responsible for dumping any type of material on

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the subject property after 2008.” (Mar. 4, 2014 Letter, ECF No. 25-3).

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On May 29, 2014, Benchmark again denied G.L.’s claim because it determined that (1)

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the dumping happened prior to the Policy’s inception, (2) the statute of limitations barred NNH’s

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claims, and (3) G.L.’s dumping was not an “occurrence” as defined by the Policy. (Hansard

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Letter 5–7, ECF No. 25-4). Nevertheless, on June 25, 2014, Benchmark agreed to provide G.L.

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with a defense in the Cerberus Action under a reservation of rights. (Letter, ECF No. 25-6).

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Benchmark also filed the present action seeking a declaratory judgment that the Policy

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does not cover property damage caused by G.L.’s intentional dumping. G.L. and Lemich

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responded by filing a counterclaim against Benchmark alleging that the denial of G.L.’s

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insurance claim was done in bad faith. On August 20, 2014, G.L. and Lemich moved for

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summary judgment on the issue of whether Benchmark had a duty to provide G.L. with a defense

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in the Cerberus Action. (ECF No. 20). The Court denied the motion, initially finding that a

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genuine dispute of material fact existed as to whether G.L.’s dumping on NNH’s property was

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the result of an honest and good faith mistaken belief on Lemich’s part. (ECF No. 36).

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Dissatisfied with the result, and claiming that the Court had clearly gotten it wrong, G.L.

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and Lemich moved the Court to reconsider its decision. (ECF No. 38). Acknowledging the

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standard proposed by G.L. and Lemich, the Court proceeded to determine whether the previous

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Order should be set aside. (Jan. 9, 2015 Order, ECF No. 56). Further evaluation convinced the

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Court that the factual dispute upon which its previous decision rested was immaterial given the

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fact that G.L. and Lemich began dumping dirt and other material on the property now owned by

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NNH as early as 2004. (Id. at 5–6). The Court found that the Policy did not apply to G.L.’s

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alleged negligent trespass either because the dumping concluded prior to the Policy’s inception

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or because the dumping would be deemed to have first taken place before the Policy’s issuance.

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(Id.). In any event, the motion for reconsideration was denied and the Court’s prior decision to

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deny G.L. and Lemich’s motion for summary judgment was reaffirmed.

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Again claiming that the Court’s conclusion was “both factually and legally flawed,” G.L.

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and Lemich once more filed a motion for reconsideration on the Court’s denial of summary

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judgment in their favor. (ECF No. 59). Exasperated with what they perceived to be the Court’s

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inability to grasp the difference between an insurer’s duty to indemnify and its duty to defend,

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G.L. and Lemich reiterated many of the arguments previously raised in their first motion for

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reconsideration. The Court, again finding no reason to set aside its October 29, 2014 Order,

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denied the motion in brief fashion on February 11, 2015. (ECF No. 69).

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On February 20, 2015, Benchmark filed the instant Motion for Summary Judgment. The

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parties’ arguments both for and against summary judgment are quite similar to those included in

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the various pleadings and motions already considered by the Court. Benchmark maintains that

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G.L.’s actions as alleged in the Cerberus FAC raise absolutely no potential for coverage under

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the Policy. G.L. and Lemich, however, argue that the possibility for coverage is plain from the

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face of the Cerberus FAC and that Benchmark’s denial of coverage amounts to bad faith worthy

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of punitive damages.

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II.

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LEGAL STANDARD
A principal purpose of the summary judgment rule is to “isolate and dispose of factually

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unsupported claims or defenses.” Celotex Corp. v. Catrett, 477 U.S. 317, 323–24 (1986). A

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court grants summary judgment only if “the movant shows that there is no genuine issue as to

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any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.

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56(a). In making this determination, the court “must draw all reasonable inferences supported by

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the evidence in favor of the non-moving party.” Villiarimo v. Aloha Island Air, Inc., 281 F.3d

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1054, 1061 (9th Cir. 2002). “[T]his standard provides that the mere existence of some alleged

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factual dispute between the parties will not defeat an otherwise properly supported motion for

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summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48 (1986). Rather,

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only genuine issues of material facts are relevant to the summary judgment analysis. A fact is

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material if it “might affect the outcome of the suit under the governing law.” Id. at 248. “The

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moving party bears the initial burden of establishing the absence of a genuine issue of material

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fact.” Fairbank v. Wunderman Cato Johnson, 212 F.3d 528, 531 (9th Cir. 2000). The burden is

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met by demonstrating to the court “that there is an absence of evidence to support the nonmoving

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party’s case.” Celotex Corp., 477 U.S. at 325. This is done by citing to depositions, documents,

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electronically stored information, affidavits or declarations, stipulations, admissions,

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interrogatory answers, or other materials. Fed. R. Civ. P. 56(c)(1)(A). Once the initial burden is

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met, however, “Rule 56(e) requires the nonmoving party to go beyond the pleadings and identify

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facts which show a genuine issue for trial.” Fairbank, 212 F.3d at 531.
Moreover, where reasonable minds could differ on the facts proffered in support of a

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claim, summary judgment should not be granted. Petzak v. Nevada ex rel. Dep’t of Corr., 579 F.

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Supp. 2d 1330, 1333 (D. Nev. 2008). “Summary judgment is inappropriate if reasonable jurors .

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. . could return a verdict in the nonmoving party’s favor.” Diaz v. Eagle Produce Ltd. P’ship, 521

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F.3d 1201, 1207 (9th Cir. 2008).

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III.

DISCUSSION

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A. Insurer’s Duty to Insured

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As the Court has previously explained, Nevada law recognizes “the special relationship

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between the insurer and its insured.” Powers v. United Servs. Auto. Ass’n, 962 P.2d 596, 603

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(Nev. 1998). Indeed, “[t]he relationship of an insured to an insurer is one of special confidence.”

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Ainsworth v. Combined Ins. Co. of Am., 763 P.2d 673, 676 (Nev. 1988). The contours of the

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relationship are shaped by both the insurance contract and the law. Allstate Ins. Co. v. Miller,

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212 P.3d 318, 330 (Nev. 2009).

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When an insured is sued and tenders an insurance claim to the insurer, the insurer has two

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latent duties to the insured. The first is the duty to defend the insured against the pending action.

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The duty to defend an insured against liability “attaches when the insured tenders defense of the

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lawsuit to the insurer.” Id. The second is the duty to indemnify the insured for any judgment of

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damages resulting from the lawsuit. The duty to indemnify attaches only if the insured is

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actually found liable of the alleged harm. United Nat’l Ins. Co. v. Frontier Ins. Co., 99 P.3d

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1153, 1158 (Nev. 2004).
“The duty to defend [the insured] is broader than the duty to indemnify.” Id. While the

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duty to indemnify arises only once liability is proven, id. at 1157, the duty to defend is triggered

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if the claim “potentially seeks damages within the coverage of the policy,” Rockwood Ins. Co. v.

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Federated Capital Corp., 694 F. Supp. 772, 776 (D. Nev. 1988). “This means only that if facts

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are alleged which if proved would give rise to the duty to indemnify, the insurer must defend.”

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Id. Once the duty to defend arises, it “continues throughout the course of the litigation.” United

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Nat’l Ins. Co., 99 P.3d at 1158 (citing Home Sav. Ass’n v. Aetna Cas. & Surety, 854 P.2d 851,

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855 (1993)). And where there is any doubt whether the duty to defend applies, “this doubt must

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be resolved in favor of the insured.” Id.

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However, “the duty to defend is not absolute.” Id. (citing Aetna Cas. & Sur. Co. v.

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Centennial Ins. Co., 838 F.2d 346, 350 (9th Cir. 1988)). “The potentiality of covered liability is

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the test.” Rockwood Ins. Co., 694 F. Supp. at 776 (citing Cont’l Cas. Co. v. City of Richmond,

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763 F.2d 1076 (9th Cir. 1985)). “A potential for coverage only exists when there is arguable or

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possible coverage.” United Nat’l Ins. Co., 99 P.3d at 1158. To determine whether the insured’s

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claim gives rise to arguable or possible coverage, the court must compare “the allegations of the

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complaint and the facts known to the insurer” with the terms of the policy. Gary G. Day Constr.

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Co. v. Clarendon Am. Ins. Co., 459 F. Supp. 2d 1039, 1050 (D. Nev. 2006) (citing United Nat’l

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Ins. Co., 99 P.3d at 1158).

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B. The Policy

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The relevant portions of the Policy are as follows:

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SECTION I – COVERAGES

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COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE
LIABILITY

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...
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This insurance applies to bodily injury and property damage only if:
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(1) The bodily injury or property damage is caused by an occurrence . . .
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(2) The bodily injury or property damage is caused by an occurrence which
takes place during the policy period regardless of whether or not such
occurrence is known or apparent to anyone; and

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(3) The bodily injury or property damage resulting from such occurrence first
takes place during the policy period, regardless of when the bodily injury or
property damage becomes known or apparent to anyone.

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c. All bodily injury or property damage arising from an occurrence, or series
of related occurrences, will be deemed to first take place at the time of the first
such bodily injury or property damage, even though the occurrence giving rise
to such bodily injury or property damage may be continuous or repeated
exposure to the same generally harmful conditions . . . .

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...
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EXCLUSIONS: COVERAGES A AND B
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...
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J. DAMAGE TO PROPERTY
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Property damage to:
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(1) Property any insured owns, rents, or occupies, including any costs or
expenses incurred by any insured, or any other person, organization or entity, for
repair, replacement, enhancement, restoration or maintenance of such property for
any reason, including prevention of injury to a person or damage to another’s
property;

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...
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SECTION V – DEFINITIONS
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15. OCCURRENCE
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Occurrence means an accident, including a continuous or repeated exposure to
substantially the same generally harmful condition.

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...

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(Ins. Agreement, ECF No. 4, at 30–156).

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C. Analysis

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Benchmark argues that by comparing the facts alleged in the Cerberus FAC to the terms

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of the Policy it is clear that there is no potential for coverage in this case. First, Benchmark

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contends that the various acts alleged in the Cerberus FAC were committed by Lemich in his

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personal capacity rather than within his duties as an agent for Benchmark, which would preclude

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coverage. Second, Benchmark argues that the property damage suffered by NNH first occurred

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prior to the inception of the Policy, which would prevent coverage under the Policy’s “deemer”

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provision. Third, Benchmark maintains that G.L. and Lemich’s actions do not constitute an

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“occurrence” under the Policy since they were done intentionally. Fourth, Benchmark asserts

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that the Policy’s “pollution” exclusion precludes coverage as well.

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The Court finds that the second reason offered by Benchmark is dispositive in this case.

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Benchmark has no duty to provide G.L. with a defense in the Cerberus Action because

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(1) coverage for the causes of action arising from Lemich’s alleged improper modification of

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Comstock Storage is precluded by the Policy, and (2) the alleged damage to NNH’s property first

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occurred prior to the Policy’s issuance in October 2009.

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1. The Policy precludes coverage for damage done to property the insured
owns, rents, or occupies

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The Policy explicitly excludes coverage for damage caused by the insured to property
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that the insured “owns, rents, or occupies.” (Id. at 44). At the time Benchmark denied G.L.’s
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tender, the only information available to the claims administrator were the allegations in the
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Cerberus FAC and the statements made by G.L. and Lemich’s counsel in the demand letter. The
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Cerberus FAC alleged that G.L. “and/or” Lemich “owned, constructed, repaired and remodeled”
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Comstock Storage and that G.L. “and/or” Lemich represented that the improvements on
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[Comstock Storage] were properly permitted, constructed, repaired, and remodeled and
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otherwise complied with all applicable laws and building code provisions.” (Cerberus FAC
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¶¶ 7–8, ECF No. 26-2).
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The harm alleged in the Cerberus Action includes damages for improper construction of
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the primary building at Comstock Storage as well as fines imposed on Cerberus for
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noncompliant wiring. (Id. ¶ 19). The Cerberus FAC also complains that G.L. “and/or” Lemich
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caused Cerberus lost rents and additional costs and expenses relating to “vandalizing” and
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“tearing down” other improvements to Comstock Storage.
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Indeed, the first four causes of action in the Cerberus FAC—negligence, negligent
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misrepresentation, intentional misrepresentation, and intentional damage to property—all claim
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that G.L. engaged in behavior during its occupancy of Comstock Storage that resulted in damage
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to Cerberus. It appears on the face of the Cerberus FAC that G.L. was a possible owner of
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Comstock Storage, or at the very least that G.L. occupied the property. Regardless of the fact
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that Lemich actually owned and leased the property during the relevant time period, the parties
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cannot dispute that G.L. jointly used and occupied Comstock Storage as G.L. equipment was
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stored there. (See Lemich Decl. ¶ 15).
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Furthermore, Lemich claims in an unqualified manner that any improvements that were

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made to Comstock Storage were made by Lemich himself and not in his capacity as an officer or

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employee of G.L. (See Lemich Decl. ¶ 10). It is undisputed that G.L. is the only party insured

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under the Policy and that Lemich is covered only in his capacity as a G.L. officer or as a G.L.

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employee. (Ins. Agreement, ECF No. 4, at 31, 52). Since the modifications made to Comstock

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Storage were performed by Lemich in a personal capacity, the negligence and intentional

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damage to property claims could not be covered by the Policy. Moreover, the misrepresentation

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claims do not allege any property damage or bodily injury and would likewise not be covered by

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the Policy. There is therefore no potential coverage under the Policy as to the first four causes of

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action as alleged in the Cerberus FAC.

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2. The harm to NNH’s property might constitute an “occurrence” under
the Policy

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The seventh cause of action1 alleged in the Cerberus FAC states that during their
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ownership and tenancy of Comstock Storage, G.L. and Lemich “negligently dump[ed] vast
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amounts of dirt and other debris onto [NNH’s property] . . . causing physical harm . . . .”
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(Cerberus FAC ¶ 63). The eighth cause of action2 alleges that G.L. and Lemich “intentionally
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and in violation of NNH’s right of exclusive possession dumped vast amounts of dirt and other
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debris onto [NNH’s property].” (Id. ¶ 68). The question arising from these causes of action is
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whether they allege an “occurrence” such that G.L.’s actions are potentially covered.
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“Occurrence” is defined by the Policy as “an accident, including a continuous or repeated
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exposure to substantially the same generally harmful condition.” (Ins. Agreement at 59). The
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Policy does not define “accident,” but the Nevada Supreme Court has held that an “accident” is
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In the Cerberus FAC, the negligent trespass claim is mislabeled as the fifth claim for relief, but it is clear from the
sequential order that it should be titled the “Seventh Claim for Relief.” (See Cerberus FAC 11, ECF No. 26-2).
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In the Cerberus FAC, the intentional trespass claim is mislabeled as the fifth claim for relief, but it is clear from
the sequential order that it should be titled the “Eighth Claim for Relief.” (Id.).

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“a happening that is not expected, foreseen, or intended.” Beckwith v. State Farm Fire & Cas.

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Co., 83 P.3d 275, 276 (Nev. 2004). A non-accidental intentional act has been excluded as an

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accident even where the resulting harm was unintended. Id. And “the Nevada Supreme Court

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has indicated that a negligent act that allows damage to occur does not fall under the commonly

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understood meaning of an accident in some circumstances.” Big-D Constr. Corp. v. Take It For

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Granite Too, 917 F. Supp. 2d 1096, 1108 (D. Nev. 2013) (citing Fire Ins. Exch. v. Cornell, 90

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P.3d 978, 980 (Nev. 2004)).

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G.L.’s dumping onto NNH’s property, therefore, would likely not be considered an
“occurrence” under Nevada law because the dumping constituted an intentional act.

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Nevertheless, even though the act of dumping itself may not be an “occurrence” due to its

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intentional nature, the harmful consequences that resulted therefrom might still be considered an

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accident if the damage was “unexpected, unforeseen, and unintended.” Id. The focus under

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Nevada law to determine whether an “accident” has occurred “is on the insured’s intentions

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and/or expectations with respect to the resulting harm.” Am. Family Mut. Ins. Co. v. Newman,

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No. 3:06-cv-00464-BES-VPC, 2008 WL 706630, at *3 (D. Nev. Mar. 14, 2008) (Sandoval, J.)

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(quotations and citation omitted).

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In this case, G.L. and Lemich claim that they did not intend to harm the property now

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owned by NNH when G.L. dumped substantial amounts of dirt and debris onto the land. Lemich

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maintains that he was under a mistaken yet good faith belief that the land onto which G.L. was

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dumping belonged to TMWA, from whom Lemich claims to have received permission. This

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mistake, G.L. and Lemich argue, demonstrates that G.L. did not intend to damage NNH’s

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property and any harm that did arise was accidental and therefore an “occurrence” under the

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Policy. Benchmark disputes these assertions and contests Lemich’s good faith belief, citing the

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deposition of NNH’s principal, Robert Fitzgerald, that it believes shows that Lemich knew that

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he did not have permission to dispose of the dirt where G.L. trucks were dumping the materials.

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(See Fitzgerald Dep. 77:16–78:15, ECF No. 25-8).

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This factual dispute is material to whether G.L.’s actions constitute an “accident” and

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thus an “occurrence” under the Policy, and it would preclude summary judgment if the issue

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were controlling in this case. However, even if the damage alleged in the Cerberus FAC were

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accidental in that G.L. did not expect or foresee any harm to NNH’s property, Defendants have

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failed to demonstrate that coverage could otherwise potentially be triggered given the Policy’s

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“deemer” provision.

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3. The Policy’s “deemer” provision precludes coverage for the damage
allegedly caused to NNH’s property

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Despite the factual dispute regarding Lemich’s intentions and mistaken belief regarding
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G.L.’s dumping site, the Court finds that summary judgment in Benchmark’s favor is
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nonetheless warranted because the property damage alleged in the Cerberus FAC is deemed to
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have first taken place prior to the Policy’s issuance pursuant to its terms.
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The Cerberus FAC itself does not contain any allegations as to when the dumping first
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began or when NNH last noticed G.L. trucks dumping dirt and debris on its property.
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Presumably, the alleged dumping occurred sometime between December 28, 2012 and April 16,
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2013 as these dates appear to be the time period relevant to the Cerberus Action. In G.L.’s
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demand letter to Benchmark’s administrator, G.L. and Lemich explained that they “were not
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responsible for dumping any type of material on the subject property after 2008,” (Mar. 4, 2014
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Letter, ECF No. 25-3), implying that dumping did occur prior to 2008.
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Based on this information, Benchmark determined that it had no duty to defend against

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the trespass claims since at least some of the dumping giving rise to the alleged property damage

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had occurred before the Policy’s issuance. The Court agrees with this position.

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The Policy unambiguously states that coverage exists only if the property damage at issue

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was caused by an “occurrence” that takes place during the policy period and if the property

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damage at issue “first takes place during the policy period.” (Id. at 41). The Policy goes on to

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state that all “property damage arising from an occurrence, or series of related occurrences, will

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be deemed to first take place at the time of the first such . . . property damage . . . .” (Id.).

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The Cerberus FAC along with the information available to Benchmark at the time

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coverage was denied indicated that G.L. and Lemich dumped dirt and debris on the property now

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owned by NNH prior to the Policy’s inception in October 2009. Accordingly, the property

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damage first took place before the “policy period,” (Ins. Agreement at 41), and the alleged harm

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is not covered by the Policy.

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The Court notes that Benchmark did not conduct an investigation to determine whether

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the Policy’s coverage was triggered before it declined to defend G.L. in the Cerberus Action.

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Rather, Benchmark simply took the terms of the Policy and compared it to the Cerberus FAC in

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light of the information provided by G.L. and Lemich in the demand letter to determine whether

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there was any potential for coverage. The demand letter stated that no dumping had occurred

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after 2008, a position that Lemich has maintained throughout the current litigation, (see Lemich

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Decl. ¶¶ 8, 31–34). Certainly Benchmark was not required to simply turn a blind eye towards

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facts offered to it by G.L. and Lemich that negated a potential for coverage. Neither should the

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Court now pretend that G.L. never informed Benchmark that the dumping occurred prior to the

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Policy’s issuance.

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G.L. and Lemich argue that the actual facts surrounding G.L.’s dumping are irrelevant to

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Benchmark’s duty to provide a defense in the Cerberus Action because the Cerberus FAC

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alleges that at least some dumping occurred during the policy period, between December 2012

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and April 2013. This argument ignores the unambiguous terms of the Policy. There is a

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potential for coverage only if the property damage alleged in the underlying lawsuit first takes

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place during the policy period. In their demand letter, G.L. and Lemich made it clear that at least

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some dumping took place before 2008, which means that at least some of the property damage

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alleged by NNH in the Cerberus Action took place before 2008. Since any property damage that

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arises from an “occurrence” or “series of related occurrences” is deemed to first take place when

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the property damage first occurs, the damage to NNH’s property necessarily falls outside the

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scope of coverage.

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Defendants find this conclusion unsound because they disagree that repeated dumping in

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the same general location over the course of four years constitutes “related occurrences.” (Resp.

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36–37, ECF No. 78). G.L. and Lemich argue that in order for G.L.’s alleged dumping in 2012

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and 2013 to be related to the dumping that occurred prior to 2008, there must be “either a logical

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or causal connection.” (Id. at 37). If G.L. did dump dirt onto NNH’s property as the Cerberus

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FAC alleges, Defendants fail to persuade the Court that the span of time between when the

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dumping first began and when it allegedly ended in 2013 disrupted what otherwise appears to be

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a series of related occurrences.

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Each time G.L. dumped dirt and debris onto the property now owned by NNH, there was

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exposure to a harmful condition that presumably caused property damage. The damage that

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would have arisen from the alleged dumping in 2012 and 2013 would have resulted in NNH’s

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property being exposed to the same general harmful condition to which the property was

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subjected before 2008, namely substantial amounts of dirt and debris. The Court finds that

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property damage resulting from G.L.’s alleged trespasses in 2012 and 2013 would be related to

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the damage that occurred prior to 2008 since it would have arisen from the same party engaged

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in the same action to dispose of the same material in the same location that produced the same

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form of property damage giving rise to NNH’s claim.
Accordingly, even if NNH were able to prove that G.L. negligently trespassed on its

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property in 2012 and 2013, the property damage caused by G.L.’s alleged actions would, under

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the Policy, be deemed to have occurred when the property damage first took place. It is

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undisputed that at least some of the dumping occurred before the Policy’s inception in 2008.

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Thus, the property damage alleged in the Cerberus FAC first took place before the policy period

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and is not covered by the Policy itself.
Benchmark is not obligated to defend or indemnify G.L. in the Cerberus Action.3 There

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is therefore also no basis for G.L. and Lemich’s counterclaim for bad faith and punitive damages.

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Benchmark’s Motion is granted.

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3

There are two additional causes of action raised in the Cerberus FAC—breach of contract and quantum meruit.
(See Cerberus FAC ¶¶ 49–60, ECF No. 26-2). These claims allege that G.L. and Lemich breached the lease
agreement with Cerberus by remaining on Comstock Storage while failing to make rent payments. Since these
claims do not allege either property damage or bodily injury, they are not covered by the Policy and Benchmark has
no obligation to defend G.L. as to these claims.

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CONCLUSION
IT IS HEREBY ORDERED that Benchmark’s Motion for Summary Judgment (ECF
No. 74) is GRANTED.
IT IS FURTHER ORDERED that the Motions to File Excess Pages (ECF No. 77, 80) are
GRANTED.
IT IS SO ORDERED.

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DATED_______________________
Dated: this 13th day of April, 2015.

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_____________________________________
ROBERT C. JONES
United States District Judge

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