Neumann

MEMORANDUM AND ORDER

Plaintiff sues for declaratory relief and restitution, asking the court to determine its rights and liabilities under a homeowners policy (the policy) issued to defendants Manfred and Helga Neumann. The other defendants, Joseph and Deborah Schell, sued the Neumanns in a state court action charging the Neumanns with misrepresentation and other malfeasance in selling their home to the Schells. Plaintiff here asks the court to declare that there is no coverage under the policy for the damages claimed by the Schells in the state court action, and that plaintiff neither has nor had any obligation to defend the Neu-manns in that action. Since plaintiff did provide counsel who acted on behalf of the Neumanns in the state court action, plaintiff now seeks restitution of those attorneys’ fees and costs expended on the Neu-manns’ behalf.

The policy insures against personal liability for property damage. It also provides for a defense at plaintiff’s expense of suits against the insured for property damage. The policy was cancelled on September 26, 1985, the date escrow closed.

Plaintiff argues that liability coverage is limited because the policy applies only to…