The Habitability Exclusion in Commercial Insurance: A California Deep Dive

The habitability exclusion is a surplus-lines endorsement that bars bodily-injury, property-damage, and personal-injury coverage for landlord claims arising out of the implied warranty of habitability. The form most often litigated is Northfield's "EXCLUSION - HABITABILITY OF PREMISES," and in California one published appellate decision controls it: 24th & Hoffman Investors, LLC v. Northfield Ins. Co. (2022) 82 Cal.App.5th 825, which enforced a broad "catch-all" version against an entire tenant suit.

The decision matters because it cuts against California's defining coverage rule. Under Montrose, Gray, and Buss, a bare potential for coverage on even one claim obligates the insurer to defend the whole "mixed" action. 24th & Hoffman held that an insurer can contract around Buss with "also alleges" catch-all language, and two federal district courts (Conway and Saarman) had held it cannot. The result is a genuine split between California state and federal courts that no higher court has resolved.

These broad exclusions exist because surplus-lines insurers sit outside the form-and-rate filing regime that binds admitted carriers. Pair that freedom with California's tenant-friendly habitability law and rising habitational loss severity, and the excess and surplus market becomes the primary home for apartment risk, with the habitability exclusion as a leading denial tool, one that carries real bad-faith exposure when it is misapplied. This piece is written for coverage counsel, underwriters, and claims professionals; it is analysis, not legal advice.

Key findings

1. No ISO standard form; carriers use manuscript or program endorsements: There is no single ISO "habitability exclusion." The leading litigated form is Northfield's "EXCLUSION - HABITABILITY OF PREMISES," which has two operative parts: (1) an exclusion of claims arising out of (a) actual or alleged violation of any law relating to habitability, (b) breach of any lease, warranty, or covenant to maintain habitable premises, or (c) wrongful eviction, entry, or invasion due to failure to maintain habitable premises; and (2) a "catch-all" barring any claim "[a]lleged in any claim or 'suit' that also alleges" any of the (1)(a)-(c) wrongs.

2. California controlling authority is thin but decisive: 24th & Hoffman (1st Dist., Div. 3, 2022) is the only published California appellate decision squarely construing a habitability exclusion (review denied, S276783 (Dec. 14, 2022); the opinion remains published). It is binding on California trial courts and held the catch-all eliminated coverage for an entire 11-cause-of-action tenant suit, including non-habitability claims (retaliation, conversion, trespass to chattels).

3. A genuine state-federal split exists: Two N.D. Cal. decisions held insurers cannot contract around the Buss duty to defend mixed actions: Conway v. Northfield Ins. Co., 399 F. Supp. 3d 950 (N.D. Cal. 2019) (identical Northfield endorsement), and Saarman Construction, Ltd. v. Ironshore Specialty Ins. Co., 230 F. Supp. 3d 1068 (N.D. Cal. 2017) (mold exclusion). 24th & Hoffman expressly disagreed with both.

4. Overlapping exclusions stack: Mold and fungi (ISO CG 21 67), absolute pollution, lead, pest or vermin, and assault and battery exclusions all overlap with habitability conditions. California construes the pollution exclusion narrowly (MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635), limiting it to traditional environmental pollution, so a carrier generally cannot use the pollution exclusion to bar mold, lead, or pesticide habitability claims.

5. Bad-faith exposure is real: Because the duty to defend is broad and turns on potential coverage, a wrongful denial of defense based on a habitability exclusion can support breach of contract and tortious bad faith; the genuine-dispute doctrine offers limited protection in third-party duty-to-defend disputes.

The exclusion itself

Representative language

The actual endorsement at issue in both 24th & Hoffman and Conway was Northfield's "EXCLUSION - HABITABILITY OF PREMISES." Its first subsection excludes coverage for claims arising out of:

• "[a]ctual or alleged violation of any federal, state or local law, code, regulation, ordinance or rule relating to the habitability of any premises";
• "[b]reach of any lease, rental agreement, warranty or covenant to maintain a premises in a habitable condition"; or
• "[w]rongful eviction from, wrongful entry into or invasion of the right of private occupancy of a room, dwelling or premises, whether actual or constructive, due to failure to maintain a premises in a habitable condition."

The second subsection, the "catch-all," extends the exclusion to any cause of action "[a]lleged in any claim or 'suit' that also alleges any violation, breach or wrongful eviction, entry or invasion as set forth in Paragraphs (1)(a)-(c) above."

Other carriers and brokers describe broadly similar manuscript forms. Industry commentary describes exclusions barring "any liability coverage (including all legal defense) from claims arising from alleged or actual violations of any health and safety, civil or federal law as it pertains to habitability," with carriers defining habitability as a "safe living environment and/or fit for occupancy by human beings in a sanitary, healthy, habitable and tenantable condition." Some forms exclude failure "to maintain any premises in a safe, sanitary, healthy or habitable condition."

The "arising out of" standard

California courts construe "arising out of" in exclusions broadly to require only a minimal causal connection or incidental relationship, not proximate cause. In 24th & Hoffman, the court found that retaliation (concerning complaints about habitability), conversion, and trespass to chattels were swept in by the catch-all because they were "alleged in a suit that also alleges habitability claims."

Ambiguity and construction rules

California requires exclusions to be "conspicuous, plain and clear" (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 271); ambiguities are construed against the insurer and in favor of the insured's reasonable expectations. But 24th & Hoffman found the habitability exclusion (including its catch-all) unambiguous and enforceable, holding that a court "may not rewrite the contract for any purpose" and that an insurer "is free to limit the risk it assumes by contract."

California case law

Controlling authority (California Supreme Court):

• Green v. Superior Court (1974) 10 Cal.3d 616 [111 Cal.Rptr. 704, 517 P.2d 1168]: Foundational case recognizing the implied warranty of habitability in all residential leases; the tenant's duty to pay rent is "mutually dependent" on the landlord's warranty; breach may be raised as a defense in unlawful detainer. Substantial compliance with building and housing codes materially affecting health and safety generally satisfies the warranty (id. at 637).
• Knight v. Hallsthammar (1981) 29 Cal.3d 46 [171 Cal.Rptr. 707, 623 P.2d 268]: Breach does not depend on the tenant's knowledge of defects at occupancy or on a "reasonable" time to repair in the affirmative-suit context.
• Peterson v. Superior Court (1995) 10 Cal.4th 1185: Overruling the strict-liability rule of Becker v. IRM Corp., the warranty supports a negligence theory; it extends to conditions of which the landlord knew or should have discovered through reasonable inspection (cited in CACI No. 4320).
• Montrose Chemical Corp. v. Superior Court (1993) 6 Cal.4th 287 [24 Cal.Rptr.2d 467, 861 P.2d 1153]: The duty to defend is broader than the duty to indemnify; a bare "potential" or "possibility" of coverage triggers it; extrinsic evidence can both create and defeat the duty. Built on Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263.
• Buss v. Superior Court (1997) 16 Cal.4th 35 [65 Cal.Rptr.2d 366, 939 P.2d 766]: In a "mixed" action with covered and uncovered claims, the insurer must defend the entire action; reimbursement is available only for costs allocable solely to claims not even potentially covered.
• Hartford Casualty Ins. Co. v. J.R. Marketing, L.L.C. (2015) 61 Cal.4th 988: Reaffirmed that if any claims are even potentially covered, the insurer must provide an "immediate, complete defense" to the entire mixed action.
• MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635 [3 Cal.Rptr.3d 228, 73 P.3d 1205]: The pollution exclusion is limited to traditional environmental pollution; it does not bar coverage for a tenant's death from ordinary negligent pesticide application at an apartment building.
• Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076: The duty to defend extends to claims potentially within coverage even if frivolous.

Controlling authority (California Courts of Appeal):

• 24th & Hoffman Investors, LLC v. Northfield Ins. Co. (2022) 82 Cal.App.5th 825 [298 Cal.Rptr.3d 816] (1st Dist., Div. 3): The pivotal habitability-exclusion case. Tenants (Lee and Osada) sued the apartment owner and developer over substandard conditions tied to a buy-out and renovation, asserting 11 causes of action including breach of the implied warranty of habitability, statutory violations (Civ. Code, §§ 1941, 1941.1; Health & Saf. Code, § 17920.10) and lead hazards, plus retaliation, conversion, and trespass to chattels. The court held the catch-all clause barred coverage for the entire action and reversed a defense judgment for the insured, expressly disagreeing with Saarman and Conway and following S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co. (2010) 186 Cal.App.4th 383, Northfield Ins. Co. v. Hudani, 2021 WL 3556672 (C.D. Cal.), and Pinnacle Brokers Ins. Solutions, LLC v. Sentinel Ins. Co., 2015 WL 5159532 (N.D. Cal.). The California Supreme Court denied review (S276783) on December 14, 2022, and did not depublish the opinion; it remains binding on California trial courts under Auto Equity Sales, and no California appellate court has since disagreed with it.
• S.B.C.C., Inc. v. St. Paul Fire & Marine Ins. Co. (2010) 186 Cal.App.4th 383, 397 [112 Cal.Rptr.3d 40] (6th Dist.): Enforced an intellectual-property exclusion with a "catch-all" or "also alleges" clause; the principal pre-existing California authority validating catch-all exclusionary clauses, relied on as binding precedent in 24th & Hoffman.
• Erlach v. Sierra Asset Servicing, LLC (2014) 226 Cal.App.4th 1281 [173 Cal.Rptr.3d 159] (6th Dist.): Confirms tenants may bring tort claims (negligence, IIED and NIED, negligence per se via Evid. Code, § 669) for breach of habitability, not merely contract; sets the elements of a habitability cause of action (material defective condition; notice; reasonable time to repair; damages). Builds on Stoiber v. Honeychuck (1980) 101 Cal.App.3d 903.

Persuasive authority (federal courts applying California law, pro-coverage):

• Conway v. Northfield Ins. Co., 399 F. Supp. 3d 950 (N.D. Cal. 2019): Construing the identical Northfield habitability endorsement, held the catch-all did not bar a defense where claims related to commercial premises (not just residential); "[t]he mere fact that a habitability issue may exist in a complaint is insufficient to satisfy the exclusion." After settlement the parties stipulated to vacate, but the court refused, finding the public interest in the developing-law ruling outweighed the settlement.
• Saarman Construction, Ltd. v. Ironshore Specialty Ins. Co., 230 F. Supp. 3d 1068 (N.D. Cal. 2017): Held a mold exclusion's "any claim ... alleging" language could not defeat the Buss duty to defend a mixed action with a covered water-damage claim, reasoning the defense obligation is "imposed by law" and not fully subject to contractual limitation.
• Associated Industries Ins. Co. v. Ategrity Specialty Ins. Co., No. 22-CV-04008-HSG, 2023 WL 3874021 (N.D. Cal. June 6, 2023): In a tenant-harassment and habitability suit against Veritas Investments, granted partial summary judgment that the insurer (Ategrity) owed a duty to defend because the underlying suit alleged bodily injury and property damage not precluded by any applicable exclusion; reaffirmed the broad California duty to defend "merely potentially covered" claims.

Note on the split: Because 24th & Hoffman is a published state appellate decision, it binds California trial courts under Auto Equity Sales and supersedes the contrary federal district court reasoning in California state court; federal courts sitting in diversity must follow California's highest court and, absent that, may follow 24th & Hoffman as the best evidence of state law. The California Supreme Court denied review of 24th & Hoffman (S276783, Dec. 14, 2022) without depublishing it, so the catch-all and Buss question remains unresolved at the supreme-court level. The issue is plausibly ripe for California Supreme Court review or Ninth Circuit certification, but no such ruling has resolved it as of mid-2026.

The statutes behind the exclusion

Implied warranty of habitability and tenantability:

• Civ. Code, § 1941: A landlord of a building intended for human occupancy must put and keep it in a condition fit for occupation and repair dilapidations.
• Civ. Code, § 1941.1: Lists affirmative standard characteristics (effective waterproofing; plumbing in good working order; hot and cold running water; heating; electrical; clean and sanitary premises; adequate trash receptacles; floors, stairs, and railings in good repair) that, if substantially lacking, render a dwelling untenantable.
• Civ. Code, § 1942: Repair-and-deduct remedy (cost capped at one month's rent; usable no more than twice in 12 months; 30-day presumption of reasonable time).
• Civ. Code, § 1942.1: A waiver of section 1941 or 1942 rights is void as against public policy for conditions rendering premises untenantable.
• Civ. Code, § 1942.3: A rebuttable presumption of breach where a code enforcement officer has cited the property and conditions remain unabated 60 days beyond notice.
• Civ. Code, § 1942.4: Prohibits a landlord from demanding or collecting rent, raising rent, or serving a 3-day pay-or-quit notice where (1) the dwelling substantially lacks the section 1941.1 characteristics or violates Health & Saf. Code section 17920.10, or is substandard under Health & Saf. Code section 17920.3 to a degree endangering health or safety; (2) a public officer has notified the landlord in writing after inspection; (3) conditions persist 35 days without good cause; and (4) the tenant did not cause them. It provides for actual damages, special damages of $100 to $5,000, and attorney's fees.
• Civ. Code, § 1942.5: Anti-retaliation protection for tenants exercising habitability rights.
• Civ. Code, § 1714: General duty of ordinary care (the premises-liability foundation).

Health and Safety Code:

• § 17920.3: Defines a "substandard building" by enumerated conditions endangering life, limb, health, property, safety, or welfare (inadequate sanitation; structural hazards; faulty weather protection; infestation of insects, vermin, or rodents; and others).
• § 17920.10: Addresses lead hazards and conditions related to lead.

Surplus lines, and why broad exclusions appear:

• Admitted insurers face affirmative policy-form filing and approval duties, for example Ins. Code, § 11658 (workers' compensation forms must be filed and not disapproved before issuance) and the rate regulation chapter (Ins. Code, §§ 1850 et seq.; section 1851 scope; Prop. 103, §§ 1861.01 et seq.).
• Surplus-lines (nonadmitted) insurers are not subject to the form-and-rate approval regime because those requirements attach to admitted or licensed status, which surplus-lines insurers lack by definition (Ins. Code, § 1760.1(n) defines a nonadmitted insurer as "an insurer not licensed or admitted to engage in the business of insurance in this state"). Per the NAIC, surplus lines companies are generally not subject to rate and policy form regulation, and their policyholders are not covered by state guaranty funds. The surplus-lines chapter, Ins. Code, §§ 1760-1780 (Chapter 6, Surplus Line Brokers), contains no form-approval requirement; it regulates broker conduct: diligent search (§ 1763), eligibility (§§ 1765.1, 1765.2; the LASLI list maintained by the CDI), the Export List (§ 1763.1), and a mandatory consumer disclosure in 16-point boldface that the insurer "is not subject to the financial solvency regulation and enforcement that apply to California licensed insurers" (§ 1764.1). The Surplus Line Association of California (SLA) is the statutory surplus-line advisory organization (§§ 1780.50 et seq.). This regulatory freedom is precisely why excess and surplus apartment programs can deploy manuscript habitability and uninhabitable-conditions exclusions that would face scrutiny in the admitted market.

Bad faith and unfair claims practices:

• Ins. Code, § 790.03(h) (Unfair Insurance Practices Act) enumerates unfair claims settlement practices; while Moradi-Shalal bars a private right of action under the statute itself, its standards and the Fair Claims Settlement Practices Regulations (10 Cal. Code Regs., § 2695 et seq.) inform the common-law implied covenant of good faith and fair dealing.
• The genuine-dispute doctrine shields insurers only where their position is reasonable and based on a thorough investigation (Wilson v. 21st Century Ins. Co. (2007) 42 Cal.4th 713; Chateau Chamberay Homeowners Assn. v. Associated Int'l Ins. Co. (2001) 90 Cal.App.4th 335). California courts have doubted the doctrine's application in third-party duty-to-defend disputes (Mt. Hawley Ins. Co. v. Lopez (2013) 215 Cal.App.4th 1385).

How it stacks with other exclusions

• Pollution exclusion: Under MacKinnon, the absolute or total pollution exclusion is limited to traditional environmental pollution and generally does not bar mold, lead, sewage, or pesticide habitability claims, so a habitability or fungi exclusion, not the pollution exclusion, is the carrier's better tool for those conditions.
• Mold and fungi: ISO's CG 21 67 (Fungi or Bacteria Exclusion, effective May 1, 2002) broadly excludes bodily injury and property damage that "would not have occurred, in whole or in part, but for the actual, alleged or threatened inhalation of, ingestion of, contact with, exposure to, existence of, or presence of, any 'fungi' or bacteria," with anti-concurrent-causation language ("regardless of whether any other cause ... contributed concurrently or in any sequence"). CG 24 25 (Limited Fungi or Bacteria Coverage) provides a capped sublimit alternative. Saarman shows California courts may still find a defense where covered non-mold claims coexist absent catch-all language.
• Lead: Separate lead and lead-paint exclusions are common; lead hazards also feed habitability claims (Health & Saf. Code, § 17920.10; Civ. Code, § 1941.1).
• Pest and vermin: Bed bug, rodent, and cockroach exclusions target a leading habitability loss driver.
• Stacking strategy: A carrier facing a multi-condition tenant suit typically leads with the broadest applicable exclusion. After 24th & Hoffman, a habitability exclusion with a catch-all is the most powerful because it can reach the entire suit; absent a catch-all, the carrier must defend the mixed action and rely on condition-specific exclusions (mold, lead, pest) at the indemnity stage.

The national picture

The implied warranty of habitability is recognized in nearly every state (California's Green followed Wisconsin, Hawaii, New Jersey, New Hampshire, Illinois, Iowa, Massachusetts, and the D.C. Circuit). Excess and surplus apartment programs deploy habitability and uninhabitable-conditions exclusions nationwide. Surplus-lines regulation is state-by-state but uniformly light-touch on forms. The NAIC notes surplus-lines carriers are generally not subject to rate and policy form regulation, and the federal Nonadmitted and Reinsurance Reform Act (NRRA, 2010) standardized eligibility and home-state taxation while leaving form deregulation intact. Courts in other jurisdictions have enforced broad habitability and negligence-pleaded exclusions to defeat the duty to defend. For example, in Atain Specialty Ins. Co. v. Eagle's Pointe, LLC, No. 24-3199 (10th Cir. Sept. 29, 2025) (nonprecedential), the court, applying Kansas law, held that a broadly worded habitability exclusion reaching any matter pertaining to habitability, including common-law claims, barred the duty to defend a wrongful-death negligence suit arising from a tenant's death in an unheated apartment. Because it is nonprecedential and turns on Kansas habitability law, it is persuasive context only, not authority on the California question.

Underwriting and claims practice

Why the E&S market writes these risks

Habitational casualty has deteriorated due to social inflation, third-party litigation funding, large verdicts, and California's tenant-friendly law and high awards. Carriers report large per-plaintiff exposure: CRC Group reports that "California juries have been handing down larger awards, sometimes seven figures, in habitability cases," prompting insurers to add exclusions (per Heffernan Insurance Brokers); a Nevada jury awarded $6.6 million to three tenants (a mother and her two children) against the property manager over toxic mold (Multifamily Dive, Dec. 2024). Settlements can be large even pre-verdict: in the Bracha Investments LLC matter, nearly 100 tenants reached a $2.18 million settlement four days into a Los Angeles Superior Court trial over a 26-unit building with broken heaters, exposed wiring, and cockroach infestation, alleging breach of the implied warranty of habitability (ABA Journal, May 4, 2015). Four-year limitations windows can trigger multiple policy periods.

Market conditions

Habitational remains one of the most distressed excess and surplus classes even as the broader market softened in 2025. As RPS's Matt Lynch (president of binding) put it, "If you think about habitational, it's still a distressed situation"; RPS describes habitational as a "$22 billion segment that represents 7% of the $300 billion+ commercial lines market," with rate-per-door rising from $40 to $50 in 2020 to closer to $100 today. Capacity has collapsed: one habitational general-liability renewal had "only five general liability markets willing to entertain it" (Bill Wilkinson, RPS National Casualty Brokerage), and RPS's Adam Mazan notes "we're starting to see claims in new places." Carriers demand property condition reports, roof, electrical, and plumbing documentation, loss runs, and crime scores; many decline older frame construction or deferred-maintenance accounts, and some have exited or imposed moratoria. The cost pressure is structural: average multifamily property insurance cost rose from $39 per unit per month in 2019 to $68 per unit per month in 2024 in real terms, an increase of more than 75%, per Federal Reserve FEDS Notes (Hughes and Molloy, "Rising Property Insurance Costs and Pass-Through to Rents for Apartment Buildings," Sept. 19, 2025). Total U.S. surplus-lines direct premiums written reached $129.8 billion in 2024, up 12.3%, the seventh consecutive year of double-digit growth, per AM Best's Sept. 9, 2025 Market Segment Report (commissioned by the WSIA Education Foundation).

Source: Federal Reserve FEDS Notes, Hughes and Molloy (Sept. 19, 2025).

Claims handling

Carriers invoke the habitability exclusion at tender, often denying defense outright where a catch-all exists. Best practice for a carrier in a mixed action without a catch-all is to defend under a reservation of rights (and, where a Gray conflict situation exists, fund independent Cumis counsel), then seek Buss reimbursement for solely-uncovered claims. Denying a defense based on a habitability exclusion in a mixed action without clear catch-all language risks breach of the duty to defend and tortious bad faith, with exposure to the insured's defense costs, the settlement, Brandt fees, and potentially punitive damages.

What to do

For underwriters:

1. If the goal is to exclude the entire habitability exposure including defense, use a manuscript endorsement with an explicit "also alleges" catch-all modeled on the Northfield form upheld in 24th & Hoffman; a bare condition-specific exclusion (mold-only, pest-only) will not defeat the duty to defend a mixed action under Saarman and Buss.
2. Pair the habitability exclusion with discrete mold (CG 21 67), lead, pest, and assault and battery exclusions for indemnity-stage backstops; do not rely on the pollution exclusion for mold, lead, or sewage given MacKinnon.
3. Document property condition (roof age, plumbing and electrical updates, loss runs, crime scores) and decline or surcharge deferred-maintenance and older frame risks.

For claims adjusters:

1. Before denying a defense, confirm whether the endorsement contains a true catch-all ("also alleges") clause. If it does and the suit alleges any habitability wrong, 24th & Hoffman supports denial of the entire action in California state court. If it does not, default to defending the mixed action under a reservation of rights.
2. Conduct and document a thorough investigation of every potentially covered claim; the genuine-dispute doctrine will not reliably protect a denial in a third-party duty-to-defend dispute, and bad-faith exposure attaches to an unreasonable denial.
3. Where coverage is doubtful but potential exists, defend and pursue Buss reimbursement rather than deny.

For policyholder and landlord counsel:

1. Audit policies at placement for habitability, wrongful-eviction, mold, lead, pest, assault and battery, and punitive or attorney-fee exclusions; negotiate removal or buy-back of habitability and wrongful-eviction coverage where available.
2. In coverage litigation, attack the catch-all on ambiguity and reasonable-expectations grounds and argue Conway and Saarman in federal court; preserve the issue for possible California Supreme Court review.
3. Maintain rigorous maintenance and tenant-communication records to defeat the underlying habitability claim and reduce the conditions that trigger the exclusion.

Benchmarks that change the analysis: A California Supreme Court decision or Ninth Circuit certified-question ruling on catch-all enforceability; a published Court of Appeal decision from another District disagreeing with 24th & Hoffman (creating an intra-state split); or new legislation or Department of Insurance action restricting surplus-lines habitability exclusions.

Caveats

• 24th & Hoffman is the only published California appellate decision directly on point; the California Supreme Court denied review (S276783, Dec. 14, 2022) without depublishing it. The law on catch-all habitability exclusions is therefore settled at the trial-court level in California but unsettled as between state and federal courts, and no California Supreme Court decision resolves it on the merits.
• The federal district court decisions (Conway, Saarman, Associated Industries and Ategrity, Hudani, Pinnacle) are persuasive only; Conway and Saarman conflict with 24th & Hoffman.
• Exclusion wording varies widely carrier-to-carrier in the excess and surplus market; the specific language controls, and the representative quotes here come from litigated Northfield and ISO forms, not a universal standard.
• Market and loss-trend figures derive from broker and industry market reports, an AM Best and WSIA report, and a Federal Reserve FEDS Note; the verdict and settlement examples (Bracha, the Nevada mold verdict) are illustrative, not exhaustive.
• No California statute or Department of Insurance bulletin currently targets habitability exclusions specifically; this analysis rests on the general duty-to-defend and surplus-lines framework, which future legislation or regulatory action could change. Separately, in California FAIR Plan Assn. v. Lara (2025) 116 Cal.App.5th 869, the Second District held the Insurance Commissioner lacks authority to mandate that the FAIR Plan offer liability coverage; the California Supreme Court granted review on March 11, 2026 (S294806), so that decision is now under review and not binding precedent. It is noted here only as context on the limits of regulatory intervention in liability-coverage availability, not as settled law and not directly about habitability exclusions.

Sources

Cases

1. 24th & Hoffman Investors, LLC v. Northfield Ins. Co., 82 Cal.App.5th 825 (2022) (Justia)
2. Conway v. Northfield Ins. Co., 399 F. Supp. 3d 950 (N.D. Cal. 2019) (Leagle)
3. Saarman Construction, Ltd. v. Ironshore Specialty Ins. Co., 230 F. Supp. 3d 1068 (N.D. Cal. 2017) (CourtListener)

Statutes, regulations, and forms

1. Cal. Civ. Code § 1941.1 (untenantability standards) (California Legislative Information)
2. Cal. Civ. Code § 1942.4 (rent bar for substandard conditions)
3. Cal. Health & Saf. Code § 17920.3 (substandard building)
4. Cal. Ins. Code § 1760.1 (nonadmitted insurer definition)
5. Cal. Ins. Code § 1764.1 (surplus-line consumer disclosure)
6. ISO Form CG 21 67, Fungi or Bacteria Exclusion (PDF)
7. NAIC State Licensing Handbook, Chapter 10: Surplus Lines Producer Licenses (PDF)

Market and loss data

1. AM Best, Best's Market Segment Report on U.S. surplus lines (Sept. 9, 2025)
2. Federal Reserve FEDS Notes, "Rising Property Insurance Costs and Pass-Through to Rents for Apartment Buildings" (Sept. 19, 2025)
3. RPS, "A Casualty Insurance Perspective on the Habitational Market"
4. ABA Journal, tenants' $2.18M mid-trial habitability settlement (May 4, 2015)
5. Multifamily Dive, Nevada jury's $6.6M toxic-mold verdict (Dec. 2024)