Court Talk
by Clifford E. Fried
Combs v. State Farm
Some attorneys and professional property managers recommend that their landlord clients obtain liability insurance in the event of tenant lawsuits. Many property insurance policies, but not all, provide coverage for bodily injury, property damage and personal injuries. While these policies protect against liability based upon negligence of the landlord, they provide little protection against intentional wrongdoing.
Landlord Jack Combs sued State Farm Insurance for breach of insurance contract for refusing to reimburse him for the attorneys’ fees he was ordered to pay the prevailing party in an earlier action against him for housing discrimination. Combs was insured by a State Farm Apartment Policy that provided comprehensive business liability coverage. The policy also contained a supplementary payments provision that required State Farm to pay for all costs imposed against the insured in the event of an adverse judgment.
The State Farm policy, as with similar policies issued by competing insurers, imposed a duty on State Farm to defend any claim or suit seeking damages, even if groundless. State Farm provided Combs with a defense, under a reservation of rights, to a complaint filed by Fair Housing of Marin charging Combs with racial discrimination.
At various times during the lawsuit, Combs demanded that State Farm settle but State Farm refused on the basis that it wasn’t obligated to provide indemnity for numerous reasons. While an insurer’s duty to defend is quite broad, the duty to indemnify is limited by the insurance policy language.
The trial court ultimately found racial animus on Combs’s part and awarded the plaintiff compensatory and punitive damages. As the prevailing party at trial, Fair Housing of Marin was awarded $508,000 in attorneys’ fees and an additional $131,000 for having to respond to Combs’s appeals. State Farm refused to reimburse Combs for the fees totaling $639,000.
Combs sued State Farm for refusing to reimburse him. The trial court ruled in favor of State Farm. On appeal, the court discussed how an insurer isn’t liable for a loss caused by the willful act of the insured. Combs was previously found liable for intentional discrimination and, as a result, Combs couldn’t contract for coverage. The law prohibits coverage for any loss, including attorneys’ fees, caused by the willful misconduct of the insured.
If the law permitted a wrongdoer to insure against the consequences of his intentional acts, public policy would be undercut by allowing the offender to avoid what could be the significant consequences of the wrongdoing.
There are two important lessons to be learned from this case. First, local fair housing organizations know how to bill large amounts of money to enforce the anti-discrimination laws. These fees will be passed on to landlords. Second, although an insurer may have a duty to defend a landlord for wrongful eviction or some other claim, there may not be a duty to settle claims of intentional wrongdoing. Landlords should discuss coverage issues with private legal counsel immediately and before sending a claim to the insurer.
Hernandez v. Hillsides
Video surveillance equipment can be useful to show who actually resides in a rental unit or whether a tenant is engaging in improper activities. But is it legal?
In Hernandez v. Hillsides, Inc., an employer had learned that a computer in the office had been used to access pornographic websites. Two employees filed a lawsuit for damages after discovering that the employer (a residential facility for abused children) had placed a motion-activated video camera in the office they shared. The employees
The office had a locking door and a window with shades that could be drawn for privacy. One employee used the office to change her clothes. The second employee used the office to show the first employee how her figure was recovering after giving birth by raising her shirt.
The trial court ruled that the employees could not prevail because they were never actually recorded or viewed by the surveillance equipment and they had a diminished expectation of privacy that was overcome by the employer’s need to protect the children at the facility. An appeal followed.
One who intentionally intrudes upon the solitude or seclusion of another or his private affairs is subject to liability to the other for invasion of privacy if the intrusion would be highly offensive to a reasonable person. Wrongful intrusions include unwarranted sensory intrusions such as eavesdropping, wiretapping and visual or photographic spying. Intrusion cases are fact specific and there are no bright line rules for identifying the outer boundaries of intrusion.
The employer had argued that since there never was any actual videotape of the employees, there could be no invasion of privacy. The employer only had tape of an empty office. Many landlords have collections of hours of tape showing nothing.
The Court of Appeal ruled that the tort of invasion of privacy based upon intrusion doesn’t require that private information be disclosed to a third party. A plaintiff is harmed when her privacy is invaded in an offensive manner without consent, not when information is disclosed or presented to others.
The employer also argued that the plaintiffs didn’t have a reasonable expectation of privacy in their office because it was a shared office. The court ruled that a claim of intrusion couldn’t fail merely because the events or conversations, which the defendant intruded upon, weren’t completely private. The reasonableness of a person’s expectation of privacy depends on the identity of the claimed intruder and the means of intrusion. The court held that it was reasonable for the employees to expect that images of them in their office with the door closed would not be transmitted to others.
In the landlord-tenant context, video surveillance shouldn’t be a problem if the camera is located in a common area of the building and information is collected about what goes on in the common areas only. As video cameras become more common in apartment buildings, it will be difficult for tenants to argue that the cameras are offensive.
To be on the safe side, landlords should disclose to their tenants the existence of surveillance equipment in the building. The disclosure can be made either in a written rental agreement or on signs posted in the common areas of the building.
Dubois v. Assoc. of Apt. Owners of 2987 Kalakaua
It has become quite the rage for tenants to request permission to have pets as a reasonable accommodation for the tenant’s disability. How is a landlord to know if the need for a service animal, or the disability itself, is legitimate? Does the landlord have a right to investigate and question the request?
In Dubois v. Assoc. of Apt. Owners of 2987 Kalakaua, the owner of a condominium unit and his roommate sued their condominium association for refusing to permit them to keep a dog in the unit. The basic claim was that the association discriminated against the unit owner’s roommate in violation of the federal Fair Housing Act (FHA) by failing to make a reasonable accommodation for the roommate’s disability.
The association by-laws prohibited animals on the premises; however, individuals with disabilities could have assistance animals. A disabled resident was required to provide appropriate medical documentation justifying the need for the animal before bringing it onto the premises.
The unit owner brought a dog onto the premises and provided the condominium association with doctors’ letters recommending the dog for medical reasons with little explanation. Eventually a behavioral medical specialist and two doctors said that the owner’s roommate suffered from depression and would benefit from animal-assisted therapy and that separation from the dog would exacerbate his condition.
The association gave temporary permission to the unit owner and his roommate to keep the dog pending its review of the medical evidence. But before the association could make a determination, the owner and his roommate filed a lawsuit claiming a violation of the FHA.
The FHA makes it unlawful to discriminate against any person in the provision of services or facilities in connection with his dwelling because of a handicap. Discrimination includes a refusal to make reasonable accommodations in rules when such accommodations may be necessary to afford a disabled person equal opportunity to enjoy a dwelling.
To prevail on a discrimination claim based upon a failure to accommodate, the plaintiff must prove 1) a handicap, 2) that the defendant knew or should reasonably be expected to know of the handicap, 3) that an accommodation may be necessary to afford an equal opportunity to use and enjoy the dwelling, 4) that the accommodation requested is reasonable, and 5) that the defendant refused to make the accommodation.
In this case the court found that the association never required the dog to leave and therefore never refused to make the requested accommodation. Since one of the essential elements of an FHA claim was missing, the lawsuit was without merit.
This case and other recent cases like it make it clear that landlords and property managers are permitted to investigate requests for accommodations of disabilities. An investigation necessarily means obtaining information about the disability claimed and how the accommodation is necessary to provide the resident with an equal opportunity to use and enjoy the dwelling. Letters and other documents from qualified medical professionals are required to substantiate the legitimacy of a request for an accommodation.
Where more time is needed to investigate and act upon a request, a landlord should consider granting temporary permission. If there are any doubts about the legitimacy of the request, a lawyer familiar with housing discrimination law should be consulted before action is taken on the request.
The opinions expressed in this article are those of the author and do not necessarily reflect the viewpoint of SFAA or SF Apartment Magazine. The information within this article is general in nature. Consult an attorney for any specific problem. Clifford E. Fried is a partner with Wiegel & Fried, LLP, 415-552-8230. Copyright © 2007, Wiegel & Fried, LLP. All rights reserved.