USLI claims Liberty wrongly denied coverage for a California HOA

By Tez Romero For Insurance Business

A fight between two insurers over who should cover a California HOA in a dog bite lawsuit is now playing out in federal court, raising questions that could ripple across the insurance industry.

On Aug. 29, United States Liability Insurance Company (USLI) filed a complaint against Liberty Insurance Corporation in the Central District of California. At the heart of the case is whether Liberty must defend and reimburse the Palisades Homeowners Association #3 (HOA) after Ludovica “Lulu” Pietroiacovo was allegedly bitten by a pit bull owned by Adam and Amanda Gruen, residents in the HOA community. 

The story starts in July 2021, when Poppy Webster, on her own behalf and as guardian ad litem for Lulu Pietroiacovo and Valentina Pietroiacovo, along with Michael Pietroiacovo, filed a lawsuit in Los Angeles County Superior Court. The suit, titled Poppy Webster et al. v. Adam Gruen et al., names both the Gruens and the HOA as defendants. The underlying action alleges strict liability against the Gruens and negligence, negligent infliction of emotional distress, premises liability, and public/private nuisance against both the Gruens and the HOA. The trial is set for Sept. 2. 

USLI says it provided commercial liability coverage to the HOA, while Liberty issued a homeowners policy to the Gruens. The big question: Should Liberty step in and defend the HOA, or does that job fall to USLI? USLI argues that Liberty’s policy language covers “any person or organization legally responsible for animals owned by” the insureds – in this case, the HOA, since the incident involved a resident’s pet. 

The HOA’s rules, known as CC&Rs, also come into play. These rules state that owners, mortgagees, occupants, and all other persons acquiring any interest in the property are subject to the rights, easements, covenants, conditions, restrictions, and obligations set forth in the CC&Rs. Article VIII, Section 10 of the CC&Rs provides that no animals may be kept which result in an annoyance or are obnoxious to residents in the vicinity, and that any owner shall be absolutely liable to each and all remaining owners, their families, guests, and invitees, and to the association, for any and all damage to person or property caused by any pets brought upon or kept upon the units. 

But Liberty has pushed back. The company denied the HOA’s request for defense and indemnity, stating that the HOA was being sued not due to the dog bite incident itself, but because the HOA did not take appropriate action against the Gruens in response to prior incidents involving their dog. Liberty also claims the HOA does not meet the policy’s definition of an “insured,” so it’s off the hook. 

The back-and-forth didn’t stop there. The HOA kept trying to get Liberty to take responsibility, but Liberty stuck to its position. The most recent denial came in a letter dated Aug. 6, just weeks before the trial. 

Now, USLI is asking the court to declare that the HOA is covered under Liberty’s policy, that Liberty must defend and indemnify the HOA, and that USLI’s own policy only kicks in after Liberty’s is exhausted. USLI also wants Liberty to reimburse any amounts USLI has already paid or may pay in connection with the underlying action. 

For insurance professionals, this case is a real-world example of how policy language and HOA rules can collide, especially when multiple insurers are involved. It’s a reminder to check the fine print and understand how different policies interact – because when a claim hits, the answer isn’t always clear.

As of now, the court hasn’t made any findings on the merits of USLI’s claims or Liberty’s defenses. But with trial dates looming and both insurers holding their ground, the outcome could shape how similar disputes are handled in the future.