The California Court of Appeals recently affirmed a decision granting State Farm's special motion to strike a claim in a case involving alleged misrepresentations during a personal injury case.

Click here to view the unpublished decision.

Appellants were tenants in a home belonging to Jeane and Edward Dunne (the "Dunnes") from September of 2000 through the end of 2003. In March of 2003, the appellants discovered mold in the house and from March to October of 2003, they suffered from a variety of illnesses due to the mold. The appellants filed suit against the Dunnes for having failed to correct a water leak that led to the occurrence of the mold and for having actively concealed the water leak. The Dunnes were insured by State Farm throughout the appellants' tenancy and State Farm hired an attorney to defend the Dunnes.

During discovery in the Dunnes' case, State Farm replied to a interrogatory question relating to insurance coverage by only disclosing information relating to the policy in existence at the time of the injuries (although it was a renewal of prior policies that were in effect throughout the appellants' tenancy). State Farm only disclosed the one policy because State Farm had determined that, based on language in the policy, the appellants' injuries were due to "repeated or continuous exposure to the same general condition" and constituted only one occurrence. State Farm also stated in the interrogatory responses that the total coverage available was $500,000, which represented the coverage available under that policy. State Farm's answers to the interrogatories, however, indicated that there was a coverage dispute. The parties subsequently settled the case for $500,000.

Upon learning that the Dunnes were covered by State Farm policies throughout the appellants' tenancy, the appellants filed suit against State Farm alleging that it had misrepresented material facts regarding the available coverage. State Farm subsequently filed a motion to strike the claim on the grounds that the activity was protected and that appellants had not established a probability of prevailing on the merits of their case. The trial court granted State Farm's motion and the appellants appealed (the appeal only challenged the court's finding that appellants had not established a probability of success on the merits).

The California Court of Appeals upheld the decision of the trial court, finding that the appellants could not prevail at trial for two reasons. First, the appellants did not offer any proof that the ultimate settlement would have been more than $500,000 if they had been given information about additional policies. Second, the appellants failed to prove that State Farm had misrepresented or failed to disclose a material fact because the policy State Farm produced to appellants clearly said that it was a renewal (indicating that there were prior policies) and because State Farm indicated in its interrogatory responses that there was a dispute about coverage that might implicate the appellants' rights.