Century–nat'l Ins. Co. v. Garcia, S179252.
| Decision Date | 17 February 2011 |
| Docket Number | No. S179252.,S179252. |
| Citation | 11 Cal. Daily Op. Serv. 2194,246 P.3d 621,2011 Daily Journal D.A.R. 2619,51 Cal.4th 564,120 Cal.Rptr.3d 541 |
| Court | California Supreme Court |
| Parties | CENTURY–NATIONAL INSURANCE CO., Plaintiff and Respondent,v.Jesus GARCIA et al., Defendants and Appellants. |
OPINION TEXT STARTS HERE Beverly Hills Law Associates, Stephen M. Losh and Angelica M. Leon, Beverly Hills, for Defendants and Appellants.Haight Brown & Bonesteel, Valerie A. Moore and Christopher Kendrick, Los Angeles, for Plaintiff and Respondent.BAXTER, J.
[246 P.3d 622 , 51 Cal.4th 566]
At issue in this case is a fire insurance policy that contains clauses excluding coverage for losses caused by the intentional act or criminal conduct of “any insured.” The question is whether, based on these exclusion clauses, the insurer properly prevailed on a demurrer to the cross-complaint of two allegedly innocent insureds who suffered losses when their son, a coinsured under the policy, intentionally set fire to their home. We conclude the answer is no, because the clauses impermissibly reduce coverage that is statutorily mandated. We therefore reverse the judgment of the Court of Appeal, which found otherwise.
Jesus Garcia, Sr., and his wife Theodora Garcia (the Garcias) suffered substantial damage to their home when their adult son set fire to his bedroom. At the time of the fire, the home was covered under a homeowner's policy issued by Century–National Insurance Company (Century–National). Under this policy, Jesus Garcia, Sr., was the named insured, and Theodora Garcia and their son also qualified as insureds. The Garcias filed an insurance claim for the damage, which Century–National investigated and denied.
Century–National filed a complaint seeking a declaration that it has no duty to pay for the Garcias' loss because its insurance policy contains clauses excluding coverage for the intentional act or criminal conduct of “any insured” (collectively, the intentional acts exclusion). The Garcias filed a cross-complaint alleging causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and reformation.
As relevant here, Century–National demurred to the cross-complaint, contending the intentional acts exclusion bars any recovery by the Garcias because their son intentionally set fire to their home. The Garcias opposed the demurrer, asserting the policy's intentional acts exclusion impermissibly conflicts with provisions of the Insurance Code that would not bar so-called “innocent insureds” from recovering despite a coinsured's intentional or criminal conduct.1
The trial court agreed with Century–National, determining that (1) the Century–National policy defines the term “any insured,” as contained in the intentional acts exclusion, to include relatives of the insured who lived at the insured property, i.e., the Garcias' adult son, (2) courts generally interpret policy exclusions for intentional or criminal acts to exclude coverage for innocent coinsureds, and (3) Insurance Code section 533 expressly sets forth California's public policy of denying coverage for willful wrongs. The court sustained the demurrer without leave to amend and entered a judgment dismissing the cross-complaint. The Court of Appeal affirmed.
In California, fire insurance policies are regulated by the Insurance Code.2 Section 2070 provides: (Italics added.) Provisions of the standard form fire policy are set forth in section 2071. Thus, a policy that does not conform to section 2071's standard provisions must provide total fire coverage that is at least “substantially equivalent” to coverage provided by the standard form. (§ 2070; see Julian v. Hartford Underwriters Ins. Co. (2005) 35 Cal.4th 747, 754, 27 Cal.Rptr.3d 648, 110 P.3d 903 [].)
As the pleadings reflect, the Century–National policy is a package policy divided into two sections: Section I pertains to property coverage, while Section II pertains to liability coverage. There is no dispute the Section I property coverage is in effect a fire policy subject to the requirements of sections 2070 and 2071. Accordingly, we examine the coverage terms and exclusions applicable to that section.
Section I provides in relevant part that Century–National does (Italics added.) 3
That this intentional acts exclusion uses the term “any insured” is significant. As we recently explained, “[a]bsent contrary evidence, in a policy with multiple insureds, exclusions from coverage described with reference to the acts of ‘an’ or ‘any,’ as opposed to ‘the,’ insured are deemed under California law to apply collectively, so that if one insured has committed acts for which coverage is excluded, the exclusion applies to all insureds with respect to the same occurrence.” ( Minkler v. Safeco Ins. Co. of America (2010) 49 Cal.4th 315, 318, 110 Cal.Rptr.3d 612, 232 P.3d 612 [citing cases]; see Western Mutual Ins. Co. v. Yamamoto (1994) 29 Cal.App.4th 1474, 1486–1487, 35 Cal.Rptr.2d 698.) Consequently, under the policy as written, the Garcias may not recover against Century–National because, even if they were innocent of wrongdoing, their fire losses were caused by another insured, who acted intentionally and criminally.
Although the Century–National policy purports to exclude coverage of the Garcias' losses, section 2070 requires a comparison of the policy with the standard form fire policy set forth in section 2071. The question is whether the Century–National policy provides coverage that is at least as favorable to the insureds as the coverage provided in the standard form. If application of the intentional acts exclusion in the former results in coverage that is not at least substantially equivalent to the level of protection available in the latter, the exclusion is to that extent invalid. (§ 2070; Julian v. Hartford Underwriters Ins. Co., supra, 35 Cal.4th at p. 754, 27 Cal.Rptr.3d 648, 110 P.3d 903.)
Notably, the statutory standard form contains no express exclusion for losses caused by intentional acts or criminal conduct. (See § 2071.) By virtue of section 533, however, “[a]n insurer is not liable for a loss caused by the wilful act of the insured.” Because section 533 represents “ ‘an implied exclusionary clause which by statute is to be read into all insurance policies' ” ( J.C. Penney Casualty Ins. Co. v. M.K. (1991) 52 Cal.3d 1009, 1019, 278 Cal.Rptr. 64, 804 P.2d 689 [citing cases] ), the standard form fire policy is properly read as excluding coverage for losses caused by “the wilful act of the insured.” (§ 533, italics added.)
Section 533's use of the term “the insured” bears directly on the instant coverage issue: unlike policy exclusions that refer to “an” insured or “any” insured, exclusions based on acts of “the” insured are construed as not barring coverage for innocent coinsureds. (See Arenson v. Nat. Automobile & Cas. Ins. Co. (1955) 45 Cal.2d 81, 83, 286 P.2d 816 ( Arenson ) []; Watts v. Farmers Ins. Exchange (2002) 98 Cal.App.4th 1246, 1260–1261, 120 Cal.Rptr.2d 694; cf. Minkler v. Safeco Ins. Co. of America, supra, 49 Cal.4th at p. 318, 110 Cal.Rptr.3d 612, 232 P.3d 612; Western Mutual Ins. Co. v. Yamamoto, supra, 29 Cal.App.4th at pp. 1486–1487, 35 Cal.Rptr.2d 698.) Given the settled meaning of the language used in section 533, the standard form fire policy must be construed as including a willful acts exclusion that is protective of innocent insureds.
Viewed as a whole, the standard form reinforces this conclusion. Section 2071 contains no clause providing that exclusions are to operate on a joint or collective basis. To the contrary, the provisions set forth in section 2071 uniformly indicate that provisions barring insurer liability or excluding coverage are to operate severally. For example, the standard form states that an insurer “shall not be liable for loss by fire or other perils insured against in this policy caused, directly or indirectly, by: ... (i) neglect of the insured to use all reasonable means to save and preserve the property at and after a loss, or when the property is endangered by fire in neighboring premises.” (§ 2071 [italics added].) 4 The standard form also contains an “increase in hazard” clause specifying that, unless otherwise provided in writing, the insurer “shall not be liable for loss occurring (a) while the hazard is increased by any means within the control or knowledge of the insured.” ( Ibid. [italics added].) 5 Finally, the form contains a so-called “fraud exclusion” stating: “This entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning...
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