Defendant insurer appealed a judgment of the Superior Court of San Diego County (California), which, in a jury trial, awarded compensatory and punitive damages to plaintiff insured in a suit for breach of contract and breach of the implied duty of good faith and fair dealing.
The insurer issued a commercial general liability policy containing a loss of use provision. An employee of the insured stole cash from one of the insured's clients, a credit union. The credit union's fidelity bond holder paid the credit union under the bond and brought suit against the insured asserting causes of action for equitable subrogation, breach of contract, negligence, and respondeat superior liability. The insurer concluded that there was no covered property damage. The court held that the insurer had no duty of defense or indemnity because the term "loss of use" in the policy did not include the permanent loss of property through conversion and the underlying action brought by the fidelity bond holder was for the replacement value of the cash. Loss of use of property was different from loss of the property. Although the loss of use provision was not modified by the term "temporary," the impermanent nature of loss of use damages was implicit. Moreover, litigation lawyer California the insurer was not equitably estopped from denying coverage based upon not having explicitly mentioned loss of use in its denial letters. Estoppel could not be used to create coverage that did not originally exist.
The court reversed and remanded with directions to the trial court to enter judgment for the insurer.