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An "accident" is something that "arises from extrinsic causes," "occurs unexpectedly or by chance" or "happens without intent or through carelessness."  Giddings v. Industrial Indem. Co., 169 Cal. Rptr. 278, 280 (1980).  Collin v. American Empire Ins. Co., 21 Cal.  App.4th 787, 26 Cal. Rptr.2d 391 (1994) ("accident" refers to the nature of the act giving rise to the insured's liability, not to the insured's intent to cause harm). By contrast, there was no "occurrence" where a moratorium on the use of water was imposed by the insured, even though some portion of the resulting harm suffered by affected property owners was unforeseen.  Bolinas Community Public Utility District v. INA, 967 F.2d 584 (9th Cir. 1992)(Table).  Similarly, a District Court has ruled that there is no "accident" if all of the insured's acts are intentional, whether or not the resulting injuries were "expected or intended."  Allstate Ins. Co. v. Salahutdin, 815 F.Supp. 1309 (N.D. Cal. 1992) (insured's deliberate shifting of surveying string).  However, an intentional act may still give rise to a duty to defend if recovery can be had on a theory of negligence.  Yap v. Industrial Indemnity Co., No. A056594 (Cal. App. August 17, 1993)(distinguishing eviction action from claims for wrongful termination).

California appellate rulings have applied a "subjective" standard for "expected or intended."  Aerojet Chemical Corp. v. Transport Ind. Co., 50 Cal. App.4th 354, 53 Cal. Rptr.2d 398 (1st Dept. 1996), aff'd on other grounds, 17 Cal. 4th 38, 70 Cal. Rptr.2d 118, 948 P.2d 909 (1997).  "Expected" is given a slightly broader meaning than "intended."  See  Montrose Chemical Corporation v. Canadian Universal Ins. Co., 6 Cal. 4th 287, 861 P.2d 1153 (1993)(pollution would be "expected" if the insured knew or believed that "its conduct was substantially certain or highly likely to result in that kind of damage").  See also Shell Oil Co. v. Winterthur Swiss Ins. Co., 12 Cal. App. 4th 715, 15 Cal. Rptr.2d 815 (1st District 1993), further review denied (Cal. May 13, 1993). 

In FMC Corp. v. Plaistead & Companies, 72 Cal. Rptr.2d 467, 480 (1998), review denied, No. S045520 (Cal. May 27, 1998), the Court of Appeal ruled that (1) the insured had the burden of proving an “occurrence”; (2) groundwater contamination is not covered merely because the insured only expected soil contamination to occur, since it does not matter that the injury is greater than expected if a portion of it was intended.  Further, the court ruled that the intent of employees must be imputed to the insured corporation.  Finally, the court ruled that evidence of problems at other sites could be probative of the insured’s expectation that pollution would occur at these sites.  Accord,  Pacific Gas and Electric Company v. Lexington Insurance Company, San Francisco No. 948209 (Cal. Super. April 13, 2000).  The same analysis was adopted by the Court of Appeal in a case that was accepted for review by the Supreme Court of California but which settled while pending on appeal.   Syntex Corp.  v.  Lowsley-Williams & Companies, 67 Cal. App. 4th 871, 79 Cal. Rptr.2d 371 (Cal.  App. 1998), appeal granted, 1999 Cal. LEXIS 986 (Cal.  February 24, 1999)(depublished).

Allegations of civil conspiracy were held not to be covered in Fiberboard Corporation v. Hartford Accident & Indemnity Company, 16 Cal. App. 4th 492, 510 (1993).  The California Court of Appeal ruled that “there is a conscious, decision-making element that takes civil conspiracies out of the range of behavior encompassed within the meaning of an ‘occurrence.’...As a matter of law, a civil conspiracy cannot occur by accident; therefore the policies affords no coverage for these claims.”

The Court of Appeals has ruled that an insurer had no obligation to indemnify a property owner based on trial evidence that the insured had intentionally discharged pollutants onto the soil to a gradual process of contamination so as to preclude any possibility that an "accident" had occurred during the period of these policies. IMCERA Group, Inc. v. Liberty Mutual Ins. Co., 47 Cal. App.4th 699, 50 Cal. Rptr.2d 583 (2d Dept. 1996), review granted, 917 P.2d 1164 (Cal. May 22, 1996), appeal dismissed (Cal. 1997).  Further, the court found that the fact that some "incidental" accidents may have contributed to the contamination did not change the result since an insured that engages in systematic pollution as a concomitant of its normal business practices cannot claim that such pollution was accidental.

An intent to injure may be inferred as a matter of law from certain types of conduct.  Thus, California courts have ruled that "an accident...is never present when the insured performs a deliberate act unless some additional, unexpected and independent unforeseen happening occurs that produces the damage."  Morton v. Safeco Ins. Co., 905 F.2d 1208 (9th Cir. 1990), citing Merced Mut. Ins. Co. v. Mendez, 213 Cal. App.3d 41, 50, 261 Cal. Rptr. 273, 279 (1989).  See also  Friedland v. Liberty Mutual Ins. Co., 15 F.3d 1084 (9th Cir. 1994)(no coverage for wrongful termination).

The California Court of Appeal has rejected efforts to create coverage through theories such as “negligent stalking” “negligent harassment” or “unintentional child molestation.”  Northland Insurance Company v. Briones, E02 4437 (Cal. App. June 19, 2000).

California courts have refused to find coverage for claims arising out of negligent misrepresentations in home sales or claims for breach of contract. Chamberlain v. Allstate Ins. Co., 931 F.2d 1361 (9th Cir. 1991); Allstate Ins. Co. v. Miller, 743 F.Supp. 723 (N.D. Cal. 1990) and Allstate Ins. Co. v. Chaney, 804 F.Supp. 1219 (M.D. Cal. 1992).  Even claims for negligent misrepresentation are excluded since "fraud" is the essence of such claims. 

In American International Bank v. Fidelity & Deposit Co. of Maryland, 49 Cal. App.4th 1558, 57 Cal Rptr.2d 567 (1996) the Court of Appeal refused to find a loss is accidental merely because the insured acted negligently.  The court held that "negligent" and "accidental" are not synonymous and that claims involving negligent misrepresentations in the sale of real property were not unintended or unexpected as they would be in the case of a true "accident."

An insured's delusional state may preclude a formation of an intent to cause injury and thus will require coverage even if the acts were objectively intentional.  Merced Mutual Ins. Co. v. Mendes, 213 Cal. App.3d at 48.

The insured’s intentional conversion of property was held not to constitute an “accident” in Colin v. American Empire Insurance Company, 21 Cal. App. 4th 787, 804 (1994). 

Although there is a general statutory presumption that a person intends the ordinary consequences of his deliberate acts, California courts have refused to extend this principle to insurance disputes.  Meyer v. PEIC, 43 Cal. Rptr. 542, 233 Cal. App.2d 321 (2d Dist. 1965).

Any analysis of this issue must include Section 533 of the California Insurance Code which provides that "an insurer is not liable for a loss caused by a willful act of the insured..."  Similarly, California Civil Code Section 1668 provides that contracts, including insurance policies, are void as being against public policy if they are intended "to exempt anyone from responsibility for his own fraud or willful injury to the person or property of another, or violation of law, whether willful or negligent." 

As Section 533 functions as an exclusion, insurers have been held to bear the burden of proving its application.  Klemer v. Hartford Insurance Company, 22 Cal. 3d 865, 879 (1978). 

The California Supreme Court has ruled that the term "willful" should be interpreted somewhat differently from the "occurrence" requirement and will bar coverage where the insured's actions were "inherently harmful" whether or not the insured had any preconceived design or intent to cause injury.  J.C. Penney Cas. Ins. Co. v. M.K., 52 Cal.3d 1009, 1023, 804 P.2d 689 (1991)(sexual molestation of minor).

Subsequent cases have ruled that a variety of intentional torts fall within Section 533's prohibition against insurance for “willful acts.” Barbara B. v. Horace Mann Ins. Co., 1998 WL 31793 (Cal. App. January 29, 1998)(sexual harassment);   Century-National Ins. Co. v. Glenn, No. C028573 (Cal. App. February 9, 2001)(criminal conviction for willful assault);  Fire Ins. Exchange v. Altieri, 1 Cal. Rptr.2d 360, 364 (1991)(assault and battery claim); Aetna Cas. &  Sur. Co. v. Sheft, 989 F.2d 1105 (9th Cir. 1993)(high risk sex); Allstate Ins. Co. v. Tankovich, 776 F.Supp. 1394, 1398 (N.D. Cal. 1991)(racially motivated hate crimes); State Farm Fire & Cas. Co. v. Ezrin, 764 F.Supp. 153, 156 (N.D. Cal. 1991)(non-consensual sexual assault); Coit Drapery Cleaners v. Sequoia Ins. Co., 14 Cal. App. 4th 1595 (1993)(sexual harassment); Michaeliean v. State Comp Ins. Fund (Cal. App, 5th Dist. November 13, 1996)(employment discrimination); Interinsurance Exchange of the Automobile Club of Southern California v. Flores,  45 Cal. App. 4th 661, 53 Cal. Rptr. 2d 18 (1996) (intentional shooting by getaway driver during armed robbery);  Moore v. Continental Ins. Co., 51 Cal. Rptr. 2d 176 (Cal. App. 1996)(employment discrimination caused by insured’s creation of hostile working environment) and B&E Convalescent Center v. State Compensation Ins. Fund, 8 Cal. App. 4th 78, 9 Cal. Rptr. 2d 894 (1992) (no coverage for wrongful termination claim).

Section 533 does not preclude an insurer from undertaking the defense of a lawsuit, even if no indemnity obligation exists because of the statute’s prohibition against willful acts.  Horace Mann, 4 Cal.  4th at 1087  and  Quan v.  Truck Ins.  Exchange,  67 Cal. App.4th 583, 79 Cal. Rptr.2d 134 (2nd Dist.1998)(insured’s assertion that he did not commit crime does not create coverage for intentional criminal act). 

A federal district court has ruled that federal anti-trust claims are "willful acts" that cannot be insured due to Section 533.  Trailer Marine Transport Corp. v. Chicago Ins. Co., 791 F.Supp. 809 (N.D. Cal. 1992).  Patent infringement has also been held to be uninsurable since it is premised on a claim of wilful conduct. Aetna Casualty & Surety Co. v. Watercloud Bed Company, Inc., 19 Cal. App.4th 320, 23 Cal. Rptr.2d 442 (1993).

Whereas a legally insane individual does not have the capacity to commit a "willful act," The Court of Appeals ruled in Jacobs v. Fire Ins. Exchange, 36 Cal. App.4th 1258, 42 Cal. Rptr.2d 906 (1995) that an individual who shot someone while claiming to act under an "irresistible impulse" appreciate the nature and consequences of his actions and could not therefore obtain coverage.  Similarly, an exclusion for intentional or criminal acts was held to preclude coverage for injuries arising out of a game of "Russian Roulette" even though the insured was acting under the influence of drugs and alcohol at the time of the shooting.  Twentieth Century Ins. Co. v. Stewart, 1998 WL 242420 (Cal. App. April 23, 1998). 

The Second Appellate District ruled in Safeco Ins.  Co.  of America v.  Robert S., 70 Cal. App.4th 757, 82 Cal. Rptr.2d 880 (1999), review granted, 1999 Cal. LEXIS 3352 (Cal. May 26, 1999) that an exclusion for “illegal acts” in a homeowners policy is unambiguous and plainly precluded coverage for wrongful death claims against the insured whether or not the insured had actually intended to shoot the plaintiff.   The Second District ruled that limiting the scope of the exclusion to “intentional illegal acts” would render the “occurrence” requirement superfluous and redundant.  The court also ruled that the exclusion bars coverage for allegations against innocent co-insureds who had been sued on theories of negligent supervision. 

The Supreme Court has ruled that a liability insurer must defend a sexual molestation claim to the extent that there are specific allegations or claims or negligence that involve conduct "apart from, and not integral to, the molestation."  Horace Mann Ins. Co. v. Barbara B., 4 Cal. 4th 1076, 846 P.2d 792, 798 (1993).  The court rejected The Court of Appeal's characterization of these other claims as "parasexual" as being inextricably intertwined with intentional acts that are inherently harmful under the J.C. Penney standard.  But see, Fire Ins. Exchange v. Jennifer O., 17 Cal. App.4th 901, 22 Cal. Rptr.2d 299 (1993), appeal dismissed (Cal. 1994) (holding that damages resulting from insured's post-molestation conduct of insured in refusing to abide by restraining order was integral to and "inextricably linked" with the earlier excluded acts. 

On remand, the Court of Appeal ruled in Barbara B. v. Horace Mann Ins. Co., 1998 WL 31793 (Cal. App. January 29, 1998) that the actual facts made clear that the teacher's "parasexual" conduct was so inextricably related to the teacher's actual sexual contact with the plaintiff as to bar coverage, whether on the basis of Section 533 of the Insurance Code or the definition of "occurrence."  Whereas the Supreme Court had found a duty to defend, since the factual record was then inadequate to determine whether there were separate damages and injuries attributable to the "parasexual" allegations, the Fourth District held following a trial of the claims that the actual facts barred any separation between sexual and non-sexual conduct.  Justice Crosby dissented, accusing the majority of reviving the very analysis that had already been rejected by the Supreme Court.

Indeed, such theories of “para-sexual” coverage have been narrowed in subsequent cases such as Northland Insurance Company v. Briones, E02 4437 (Cal. App. June 19, 2000).   In Briones,  the Fourth District ruled  that even such creative theories of liability as “negligent stalking” were not a factual basis for finding a duty to defend in light of the “sexual abuse” exclusion in the policy and the absence of any accident or occurrence within the meaning of the policy or Insurance Code Section 533.  A dissenting judge contended that summary judgment should not have been granted in light of the “para-sexual” claims set forth in the underlying suit. 

The California Supreme Court has ruled that sexual harassment claims against a county sheriff were not covered under a liability policy owing to the fact that such conduct was clearly outside the scope of the insured's employment.  Farmers Ins. Group v. County of Santa Clara, 47 Cal. Rptr.2d 478 (1995). 

The victims of an intentional assault have been held to be collaterally estopped from pursuing an assignment of a policyholder's claim against his insurer for claims arising out a shooting incident where the insured had already been criminally convicted of felony.  State Farm Mut. Automobile Ins. Co. v. Davis, 7 F.3d 180 (9th Cir. 1993). 

The Court of Appeal has ruled that older "accident" policies do not cover gradually occurring events and require a "sudden" event to trigger coverage.  Amoco Chemical Co. v. Certain Underwriters at Lloyds, London, B083904 (Cal. App. June 4, 1996); IMCERA Group, Inc. v. Liberty Mutual Ins. Co.,  47 Cal. App.4th 699, 50 Cal. Rptr.2d 583 (2d Dept. 1996), review granted, 917 P.2d  1164 (Cal. May 22, 1996), appeal dismissed (Cal. 1997); Armstrong World Industries, Inc. v. Aetna Cas. & Sur. Co., 45 Cal. App.4th 1, 52 Cal. Rptr.2d 690 (1st Dist. 1996). See also United Pacific Ins. Co. v. Rohr Industries (Cal. Super. April 4, 1994)(discharges that begin quickly or abruptly are sudden for purpose of 1959 "accident" policy) and  Pacific Scientific Co. v. General Acc. Ins. Co., No. CV 94 2755 (C.D. Cal. August 2, 1996)(gradual pollution not covered under older "accident" policies).

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