Low, Ball & Lynch’s

WEEKLY LAW RESUME

August 12, 2004 Issue      By: Raymond Coates

Coverage - Property Damage

Janet R. Block v. Golden Eagle Insurance Corporation

Court of Appeal, Second District

(July 30, 2026)

A claim for condemnation of property through eminent domain does not normally give rise to an insurance claim.  In this case, the valuation of the property gave rise to such a claim.

Janet Block owned real property within a redevelopment project.  It consisted of two vacant lots which sat atop an abandoned oil well.  A redevelopment agency sought to acquire the property by eminent domain.  An offer was made to purchase the property based upon an appraised value for both lots, reduced by $67,250, which was the estimated cost to remediate environmental problems associated with the property.  Block refused to accept the offer, and an eminent domain action was filed.  Eventually, it was resolved through a stipulated judgment and order.

Block had insured the property for six years with Blue Ridge Insurance Company, for one year with Clarendon Insurance Company, and for three years with Golden Eagle Insurance Corporation.  She tendered the eminent domain action to the insurers claiming that the reduction of the offer to buy the property amounted to damages for environmental remediation of the property.  All three carriers denied the tender.  Block sued the carriers for bad faith.  Each carrier filed a motion for summary judgment, and the trial court granted the motion.  Block appealed.

The Court of Appeal affirmed.  The Court noted that the word “damages” could include remediation and mitigation of a hazardous waste site.  However, in this case, Block suffered no damages.  Block was not legally obligated to compensate anyone in money as a result of any loss or detriment suffered, nor was she legally obligated to incur any cleanup expense.  Her claim was a diminution in the market value of her property resulting from the condition of the property.  That was not “damages,” as defined by the policies.

The Court further stated the diminution in value of the property because of its environmental condition was not a “constructive expenditure.”  To so hold in this case would provide insurance against diminution in the market value of real property.  Further, the Court was not convinced that the reduction in value constituted a setoff claim.

The Court stated their interpretation was consistent with longstanding California law that holds that the diminution in value of a product by reason of a defective part or faulty workmanship is not “property damage” within the meaning of a standard insuring clause.  The Court felt the loss of market value attributable to the environmental condition of property did not constitute “damages” under any policy at issue.

Further, there was no personal injury coverage.  Block contended it might constitute “wrongful entry.”  The Court stated this case involved no claim made by others, including adjacent landowners, that there had been entry of pollution onto their property.  Thus, there simply was no claim that triggered personal injury coverage.

The judgment was therefore affirmed.

COMMENT

This is another creative attempt to create a claim for property damage where one would not traditionally think it would exist.  The Court rejected that approach, holding that diminution in value of property does not constitute “damages.”

____
To order a printed version of this analysis, or change your subscription information, reply to this transmission.  Information regarding this and other WEEKLY LAW RESUME TM articles is available from Raymond Coates at (650) 366-4000, [email protected] or at WWW.LOWBALL.COM.  The WEEKLY LAW RESUME TM is published fifty-two times a year, and is a complimentary publication of LOW, BALL & LYNCH, Attorneys at Law, a Professional Corporation, with offices in San Francisco, Redwood City and Monterey, California.