Preston v. Goldman

In Preston v. Goldman (1986) 42 Cal.3d 108, the Supreme Court addressed a nearly identical exclusion precluding coverage for property damages "'arising out of any premises, other than an insured premises, owned, rented or controlled by any Insured.'" (Id. at p. 120.) At issue was whether a couple who sold a home several years earlier was liable for injuries to a child who fell into a pond constructed during the couple's ownership of the property. The plaintiff asserted that the insurance policy in effect at the time of the child's injury provided liability coverage to the couple. The court concluded otherwise, explaining that the exclusion applied not only to property owned by the insured when the damage-causing accident occurred, but also to "any property over which the insured may have at any time had control." (Id. at pp. 120-121.) The court reasoned that "as a matter of 'accepted popular, as well as legal definition,' . . . a renter or homeowner, and his insurer, would not ordinarily intend or reasonably expect coverage for the accident such as the one involved here under policy terms similar to those relied upon here." (Id. at p. 121.) The Supreme Court held that former property owners, allegedly negligent in constructing an improvement on their property, are not subject to liability for injuries sustained on that property long after they have relinquished all ownership and control. In Preston the property owners designed and constructed the allegedly defective pond and sold the property a year later. A child visiting the property several years after it was sold fell into the pond and suffered serious injury. In refusing to hold the former owners liable, the court emphasized the significance of possession and control as a basis for tortious liability for conditions on the land. (Id. at p. 125.) The court also was concerned that the potential that the liability of a former homeowner would otherwise be "temporally unlimited. So long as the improvement existed, the landowner could be held liable no matter how much time had elapsed since he had done the work and transferred the property; the potential cloud of liability over the head of any do-it-yourself owner would be farreaching." (Id. at p. 126.)