9.7 Owned Premises Exclusion

• Jurisdiction: Arizona

Homeowners policies often contain an "owned premises" exclusion which precludes coverage for "bodily injury or property damage arising out of any act or omission occurring on or in connection with any premises owned - by an insured other than an insured premises."^[80] The purpose of an "owned premises" exclusion is to require the insured to obtain specific liability insurance for each premises owned.^[81] The exclusion allows the insurance company to more accurately assess the risks associated with the insured premises and to set an appropriate premium. If an insured could convert any other "owned premises" into an "insured premises" merely by incidental conduct, there would be no limit to the insurance policy's coverage.^[82] An insured could purchase any number of homes, have incidental contact with them, and claim that these additional homes were being used "in connection with" the insured premises, thereby obtaining insurance for all of the homes for the price of a single premium.^[83] The Arizona Court of Appeals in California Casualty Insurance Co. v. American Family Mutual Insurance Co.^[84] declined to construe the "owned premises" exclusion which provides coverage for "use in connection with" the insured premises so broadly that incidental conduct at other locations would qualify because this would eliminate the "owned premises" exclusion.^[85]

In California Casualty Insurance Co. v. American Family Mutual Insurance Co., Raul and Elvia Lujan (the "Lujans") resided in Phoenix, Arizona, in a home insured by California Casualty under a homeowners insurance policy. Their daughter, Diane, resided in Scottsdale, Arizona, with her roommate, Tracy, who was the named insured on a renter's policy issued by American Family. Diane and Tracy owned a dog and asked the Lujans to dog-sit at the Lujans' house. The dog bit a postman as he delivered mail to the Lujans' home. The postman sued the Lujans and California Casualty settled the claim that was brought for its policy limits of $100,000. California Casualty then sought equitable contribution from American Family for a pro rata share of the defense costs and the $100,000 settlement. In the trial court, American Family conceded for purposes of California Casualty's motion for summary judgment that the Lujans are "insureds" pursuant to American Family's renter's insurance policy. However, American Family argued that coverage for the dog bite was excluded pursuant to the "owned premises" policy exclusion which provided as follows:

Premises Owned Rented or Controlled. We will not cover bodily injury or property damage arising out of any act or omission occurring on or in connection with any premises owned, rented or controlled by any insured other than an insured premises.^[86]

The trial court ruled that the "owned premises" exclusion applied and granted judgment in favor of American Family. On appeal, California Casualty argued that the "owned premises" exclusion did not apply because the Lujans home qualified as an "insured premises" under the policy. The American Family renter's policy defined "insured premises" to include the location described on the Declarations page (the rented apartment), and "any premises you use in connection with" that described location. The policy defined "you" as the "person or people shown as the named insured in the Declarations." Only Tracy was listed on the Declaration page.

California Casualty argued that, when Tracy asked the Lujans to keep the dog at the Lujans' house, she was using the house "in connection with" her own insured apartment, thus...