SDV Insights

Whose Lease Is It Anyway: Physical Occupancy Not Required in Landlord-Tenant Dispute

In September 2017, a Texas Federal district judge ruled that that Personal and Advertising Injury coverage in a CGL policy did not require physical occupancy in a landlord-tenant dispute.

In the underlying lawsuit, restaurant owner Ziggy Gruber alleged that John Dunn, the landlord of a Houston shopping center, wrongfully interfered with his right of occupancy at the shopping center by failing to complete the negotiation of a lease and preventing his occupancy of the space. Gruber further alleged that he had acquired a direct interest in the premises and became a rightful tenant but as a result of Dunn’s interference, he was never able to open his restaurant.

Dunn sought defense from his CGL carrier, Western World Insurance Company (“Western World”), under the “personal and advertising” coverage. The policy defined “personal and advertising injury” as “injury arising out of the wrongful eviction from, wrongful entry into, or invasion of the right of private occupancy of a room, dwelling, or promises that a person occupies, committed by or on behalf of its owner, landlord, or lessor.” Based on this definition, Western World argued that Gruber never physically occupied the property and denied coverage.

The court disagreed with Western World’s understanding of the “personal and advertising” coverage. It interpreted the “right of private occupancy” to mean that the premises did not need to be occupied in order to trigger an insurer’s duty to defend and that the term “possession” referred to the right to occupy the premises, not necessarily physical occupancy.

On January 10, 2018, the parties made their appellate arguments before the Fifth Circuit, but a decision has not yet been issued. Upholding the district court’s decision would be a positive development for policyholders in providing promised insurance coverage.

SDV will be on the lookout for further developments.


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