A Video Explaining That Damage to Tangible Property Required for Defense or Indemnity Under a CGL

What is Tangible Property?

A standard general liability insurer has a duty to defend and indemnify for a loss to tangible property only. The property loss section of these policies provides coverage for physical injury, loss, or destruction of tangible property, and the focus of the property damage coverage is the property itself. (Waller v. Truck Ins. Exchange, Inc., 11 Cal. 4th 1, 17 (1995) (Waller). For our purposes, it is important to note that the policies are not intended to cover intangible property losses, including loss of an investment, loss of goodwill or loss of intangible property use. (Id. at pp. 17-18; Gunderson, supra, 37 Cal. App. 4th at p. 1109.)

The court found that an easement is intangible, so there was no obligation to defend or indemnify an insured for such intangible losses. The Kazis had purchased land (Parcel A) adjacent to Parcel B, which was purchased by the Tollaksons. Sale documents indicated that the two parcels shared a common driveway 20 feet in width that straddled the boundary line. The Tollaksons assumed the existence of an implied easement. The Kazis subsequently graded an access road on Parcel A near the boundary line. The Tollaksons filed suit, alleging that the Kazis’ access road obstructed the Tollaksons’ implied easement over Parcel A.

There were two policies at issue. One policy defined property damage as “physical injury to or destruction of tangible property, including loss of its use.” The second policy defined property damage as “physical damage to or destruction of tangible property, including loss of use of this property.”

It is a settled rule that the insurer must look to the facts of the complaint and extrinsic evidence, if available, to determine whether there is a potential for coverage under the policy and a corresponding duty to defend.  (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 25.)

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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 52 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

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