The United States District Court for the Eastern District of California, applying California law, has held that a professional liability insurer had no duty to defend its insured in an underlying lawsuit because the suit did not seek “Loss” as defined in the policy. Dollar Point Ass’n, Inc. v. United States Liab. Ins. Co., 2023 WL 3570037 (E.D. Cal., May 18, 2023).

In 2018, a couple sued the insured homeowners’ association. The lawsuit concerned a parcel of land that the couple had allegedly maintained for several years. In their suit, the couple sought a declaratory judgment for an irrevocable license to continue to use the land, or in the alternative, full property rights to the land. The homeowners’ association tendered the suit to its professional liability insurer. After initially acknowledging a duty to defend, the insurer disclaimed coverage.

In the ensuing coverage action, the court focused on whether the underlying suit sought “Loss.” It stated that, based on a plain reading of the policy, the duty to defend only applied to an action seeking “Loss,” which the policy defined to include “damages, settlements, front pay and back pay, pre-judgment and post judgment interest … and punitive or exemplary damages[.]”

In ruling for the insurer, the court emphasized that the underlying suit sought only equitable remedies, i.e., quiet title or an equitable irrevocable license. The court ruled that because the suit did not seek “Loss,” no potential for coverage existed and the insurer was “under no obligation to provide [the insured] with [a] defense.” The court found this issue to be fully dispositive as to coverage and granted summary judgment in favor of the insurer.

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