## Facts

- Laurence W. Peters owned a 42-foot yacht insured under a yacht liability policy issued by Firemen’s Insurance Company of Newark, New Jersey.
- Susan L., Peters’s former girlfriend, sued him alleging negligence, battery, intentional transmission of an incurable sexual disease, and fraud based on alleged transmission of genital herpes during their sexual relationship.
- The complaint alleged Peters knew he had herpes and nevertheless engaged in sexual conduct that caused Susan L.’s infection; it did not mention the yacht or any boating activity.
- Peters tendered defense to Firemen’s under policy language covering bodily injury “resulting from the ownership, maintenance or use of the insured boat.”
- Peters asserted the yacht was “used” because it functioned as a status symbol and romantic setting that led to the sexual activity during which the virus was transmitted.
- Firemen’s denied coverage and refused to defend.
- Peters settled the underlying suit for $120,000 and incurred about $20,000 in attorney’s fees, then sued Firemen’s for breach of contract and bad faith.
- The trial court entered judgment for Firemen’s on summary judgment; Peters appealed.

## Issues

1. Whether a yacht liability policy covering bodily injury “resulting from the ownership, maintenance or use of the insured boat” created a potential for coverage (and thus a duty to defend) for a lawsuit alleging herpes transmission through sexual contact when the complaint did not mention the boat.
2. Whether the yacht’s alleged role as a romantic backdrop or inducement to sexual activity constitutes “use” of the boat sufficient to satisfy the policy’s causation requirement.

## Decision

- The Court of Appeal affirmed judgment for Firemen’s.
- The court held Susan L.’s alleged injuries did not result from the ownership, maintenance, or use of the yacht within the meaning of the policy.
- The yacht’s connection to the alleged transmission was too remote and incidental to establish the necessary causal nexus.
- Because there was no potential for coverage on the complaint or proposed extrinsic facts, Firemen’s owed no duty to defend or indemnify, defeating Peters’s contract and bad-faith claims.

## Legal Principles

- An insurer’s duty to defend is broader than the duty to indemnify and arises when the complaint or known extrinsic facts indicate a potential for coverage; if there is no potential for coverage as a matter of law, there is no duty to defend.
- Coverage for bodily injury “resulting from the ownership, maintenance or use” of an insured vessel requires a sufficient causal connection; the vessel must be more than the mere setting for the injury-producing conduct.
- Courts interpret insurance policies according to plain meaning and context and do not extend coverage by rewriting the policy to reach risks outside the coverage grant.

## Conclusion

The court held that alleged herpes transmission through sexual contact was not a bodily injury “resulting from” the ownership, maintenance, or use of the insured yacht, making any yacht-related causal theory too attenuated to create potential coverage and eliminating any duty to defend or indemnify under the policy.


Peters v. Firemen’s Ins. Co. of Newark, N.J., 79 Cal. Rptr. 2d 326 (Cal. Ct. App. 1998)