No Coverage for Delinquent Payments: Mobile Home Park Operator Cannot Recover for “Expected or Intended” Injuries

On May 1, 2023, in West American Insurance Co. v. Del Ray Properties Inc., the U.S. District Court for the Western District of Washington held that general liability insurers owed no coverage obligations to a mobile home park operator in connection with delinquent payments of utility bills that jeopardized its residents’ water and garbage services because the underlying claims were for “expected or intended” injuries.

Del Ray Properties Inc. is a Washington corporation operating two mobile home parks in Longview, Washington. In a consolidated state court action, the city of Longview and residents of the mobile home park sued Del Ray in relation to allegations that Del Ray owed approximately $50,000 for unpaid utility bills at Del Ray’s two mobile home park locations. Longview sought to recover damages in the amounts owed in utility charges, plus pre- and post-judgment interest and attorneys’ fees. The residents requested injunctive relief and damages based on alleged violations of Washington’s Manufactured/Mobile Home Landlord-Tenant and Consumer Protection acts, breach of contract, and infliction of emotional distress due to the potential discontinuation of water and garbage services for mobile home residents.

Del Ray sought coverage for the consolidated state court action from West American Insurance Co. and North Pacific Insurance Co. under their respective general liability policies, which provide coverage for damages because of “bodily injury” or “property damage” caused by an “occurrence.” The insurers agreed to defend Del Ray under a reservation of rights but initiated a declaratory judgment action in federal court.

On the insurers’ motion for summary judgment, the court ruled that the underlying allegations, even when construed liberally, did not fall within the scope of coverage under either policy. Specifically, the court found that the claims set forth by the mobile home resident plaintiff alleged knowing and deliberate misconduct that the court determined would not result in “bodily injury” or “property damage” caused by an “occurrence,” which was defined as “an accident.” Moreover, the court found that even if the resident’s damages were caused by an “occurrence,” the “expected or intended” injury exclusion would preclude coverage given that the alleged conduct was knowingly failing to pay utility bills.

As for Longview’s claims, the court ruled that the city’s complaint could not be construed as constituting “bodily injury” or “property damage” because Longview is a governmental entity and therefore sustained pure monetary damages rather than injury to, or loss of use of, tangible property. Further, the court found coverage was barred for any “personal and advertising injury” under exclusions for the knowing violation of the rights of another and breach of contract.

Accordingly, the court granted summary judgment for declaratory relief in the insurers’ favor. In addition, because the policies explicitly granted the insurers the right to reimbursement of defense costs and because the insurers reserved such rights, the court determined that the insurers were entitled to seek reimbursement of costs incurred defending the insured in the underlying action.