A federal district court in Washington recently decided that a claim against the owner of a condominium unit arising from the owner’s installation of a hardwood floor without the necessary permission (as spelled out in the Condo association’s bylaws), did not amount to an “occurrence” under the owner’s insurance policy.1
In April 2009, the condo owner (Mr. Keeley) installed hardwood floors in his condo unit.
In early 2010, Mr. Keeley realized that he had overlooked a provision in the condo bylaws stating that “no Owner shall install hard surface flooring within a Unit except with the prior written consent of the Unit Owner below, if any.” On February 1, 2010, Mr. Keeley alerted the unit owner directly below his unit (Ms. Curcio) that he had installed the flooring without obtaining her consent.
On February 7, 2014, Ms. Curcio sent a letter through her legal counsel making a formal claim against the Keeleys. Ms. Curcio asserted that the Keeleys’ installation of hard surface flooring interfered with her use of her unit and that the condo bylaws gave her “the absolute right to prevent [the Keeleys] from installing hardwood floors in [their] Unit.”
After receiving Ms. Curcio’s letter, the Keeleys submitted a claim to Travelers Home and Marine Insurance Company, which had issued a homeowners’ insurance policy to them. On March 7, 2014, Travelers denied coverage.
On March 26, 2014, Ms. Curcio sued the Keeleys, alleging that they had violated the condo bylaws. Ms. Curcio asserted that she was entitled to an injunction requiring the Keeleys to remove their hard surface flooring and preventing them from future installation of any hard surface flooring without her consent.
The Keeleys negotiated a settlement with Ms. Curcio in which they agreed to remove the hard surface floors and pay her $3,442.49. The total cost to the Keeleys to remove the floors, temporarily vacate their unit, and pay Ms. Curcio was $22,063.06.
The Keeleys sued Travelers to recover for their loss. The insurer moved to dismiss, arguing there was no “occurrence” within the meaning of the Keeleys’ policy.
The Keeleys moved for partial summary judgment, asking the district court to find as a matter of law that Ms. Curcio’s claim was covered by their policy and that Travelers owed them the duty to defend.
The Travelers policy specified that:
If a claim is made or a suit is brought against any “insured” for damages because of “bodily injury,” “personal injury” or “property damage” caused by an “occurrence” to which this coverage applies, we will:
1. Pay up to our limit of liability for the damages for which the “insured” is legally liable. Damages include prejudgment interest awarded against the “insured”; and
2. Provide a defense at our expense by counsel of our choice, even if the suit is groundless, false or fraudulent. We may investigate and settle any claim or suit that we decide is appropriate. Our duty to settle or defend ends when our limit of liability is exhausted by the payment of a judgment or settlement.
It also stated:
“Occurrence” means an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results during the policy period, in:
a. “bodily injury”; or
b. “property damage.”
“Property Damage” means physical injury to, destruction of, or loss of use of tangible property.
The court granted Travelers’ motion to dismiss, finding that the Keeleys’ policy did not cover Ms. Curcio’s claim.
The court decided that there had not been an “occurrence” within the meaning of the policy.
The court said that under Washington law, an accident was “never present” when a deliberate act was performed unless some additional unexpected, independent, and unforeseen happening occurred that produced or brought about the injury. “The means as well as the result must be unforeseen, involuntary, unexpected and unusual,” the court added.
The Keeleys, as members of the condo association, had a duty to abide by the condo bylaws. Although the Keeleys had not been aware that they were in violation, their subjective knowledge did not govern, the court ruled. It said that it had to focus on “what a reasonable person in the Keeleys’ position knew or should have known.”
The court then concluded that the harm resulting from the floor’s installation was “not truly” an “unexpected, independent, and unforeseen happening” and, as such, there was no “occurrence” within the meaning of the policy.
The moral of the story is that in the HOA condo association context, condo owners and home owners associations alike need to review their CC&Rs and similar governing documents and make sure to comply with the rules, regulations, and provisions. Had the Keeleys done so here before installing their hardwood floors, they could have avoided all of the self-inflicted cost and harm that ultimately occurred.