ACCIDENTS OR OCCURRENCES
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
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
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
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
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
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).