Unreported / Non-Citable
Background
Jie Liu and Wei Xia owned a San Bernardino County rental home insured by Pacific Specialty Insurance Company. They rented it to Wen Yong in 2014. Liu inspected annually until 2018 or 2019, when he stopped visiting because of the COVID-19 pandemic. After Yong stopped paying rent in June 2022, Liu visited the property, heard fans, and saw metal fences around the windows. Police subsequently found marijuana growing inside. Inspections revealed growing trays, holes for lights and ventilation tubes, electrical modifications, chemical stains, flooring damage, and ceiling mold.
Pacific Specialty denied the resulting claim under the policy’s grow-house exclusion and also cited exclusions for continuous or repeated water leakage, wear and tear, and mold. The owners’ public adjuster argued that the damage should instead be covered as vandalism, but the insurer maintained its denial. Liu and Xia sued for breach of contract and breach of the implied covenant of good faith and fair dealing. Pacific Specialty sought summary judgment or summary adjudication and also challenged the evidentiary basis for punitive damages.
The superior court granted summary judgment, concluding that the policy did not cover damage from operating a grow house and that no triable issue existed over whether all the damage resulted from that activity. It also rejected the vandalism characterization and distinguished Mosley because this loss did not involve fire. On appeal, the owners challenged the treatment of Mosley, the court’s vandalism definition, and the failure to apply an innocent-insured doctrine. Because their opening brief challenged only the contract ruling, the appellate court focused on that cause of action.
The Court’s Holding
Reviewing summary judgment de novo, the court explained that Pacific Specialty had to prove that the claim fell within an exclusion. The policy expressly excluded loss resulting from operations engaged in growing plants or processing plant materials. Photographs, the investigator’s declaration, and the owners’ deposition testimony supplied undisputed evidence connecting the damage to the marijuana operation. The owners offered no other physical cause and did not respond in their summary-judgment opposition to the assertion that the plant-growing exclusion precluded coverage. Pacific Specialty therefore made its prima facie showing, and the owners failed to meet the shifted burden of demonstrating a triable factual issue.
The vandalism theory failed for two independent reasons. First, the owners did not establish applicable vandalism coverage. Endorsement PM30, which supplied vandalism or malicious-mischief coverage for vacant homes, was not listed on their declarations page, despite policy language warning that only listed endorsements applied. Their alternative reliance on the perils-insured-against section was unsupported by authority or argument showing that it provided the claimed coverage. Second, calling the creation of the grow house vandalism did not create a separate covered peril. Because a grow operation necessarily involves modifying the house, relabeling those steps did not avoid the exclusion or trigger an efficient-proximate-cause analysis requiring two distinct causes.
The court also confined Mosley and Century-National to their fire-insurance context. Mosley addressed whether fire protection was substantially equivalent to the statutory standard policy after a grow operation caused a fire; this case involved no fire claim. Century-National likewise invalidated an intentional-acts exclusion as applied to innocent insureds because of statutory fire-policy requirements, and expressly cautioned against necessarily extending its analysis elsewhere. Yong was not a coinsured here. The court therefore found no freestanding innocent-insured protection requiring coverage. It declined to reach genuine-dispute and punitive-damages assertions first developed inadequately or in the reply brief, affirmed the judgment, and awarded Pacific Specialty its costs on appeal.
Key Takeaways
- An insurer can obtain summary judgment under a plant-growing exclusion with undisputed evidence tying the property damage to the grow operation, after which the insured must identify evidence creating a triable coverage issue.
- A vandalism endorsement printed in a policy booklet does not necessarily provide coverage when the endorsement is absent from the declarations page.
- Characterizing grow-house modifications as vandalism does not create a distinct covered peril when those modifications are part of the excluded growing operation.
- Mosley and Century-National did not establish innocent-insured coverage independent of the statutory requirements governing fire insurance.
- Coverage arguments raised without adequate record citations, meaningful legal analysis, or timely presentation in an opening brief may be left undecided on appeal.
Why It Matters
The decision illustrates how California’s summary-judgment burdens operate in a property-insurance dispute: the insurer established the exclusion, but the insureds still had to substantiate their asserted route to coverage. It also underscores the practical importance of the declarations page when an insurance booklet contains optional endorsements.
The opinion separates nonfire grow-house losses from the statutory fire-policy concerns addressed in Mosley and Century-National. Its analysis leaves no coverage ruling based on a generalized innocent-insured doctrine here, and it expressly avoids deciding the belated genuine-dispute and punitive-damages arguments.