Commercial Union Ins. Co. v. Superior Court
| Decision Date | 10 December 1987 |
| Docket Number | No. A036334,A036334 |
| Citation | 196 Cal.App.3d 1205,242 Cal.Rptr. 454 |
| Court | California Court of Appeals Court of Appeals |
| Parties | COMMERCIAL UNION INSURANCE COMPANY, Petitioner, v. The SUPERIOR COURT of Humboldt County, Respondent; Francis WALKER, Real Party in Interest. |
Law Offices of Graham & Knight, Mendocino, for petitioner.
No appearance for respondent.
Thomas Becker, Geri Anne Johnson, Harland & Gromalo, Eureka, for real party in interest.
Petitioner, an insurance company defending a coverage action, challenges denial of its motion for summary judgment. Petitioner sought to show that its general business policy did not cover an intentional firing by the insured of one of his employees. We conclude that the court erred in interpreting the policy and in denying the motion.
Real party in interest is a licensed insurance agent, doing business as a sole proprietorship. He was sued for wrongful discharge by a former employee and the employee's wife. He tendered the defense to petitioner, but petitioner denied coverage and refused to defend. Real party eventually settled the wrongful discharge action for $7,200 and brought this action against petitioner to recover the settlement cost and attorney fees and other defense costs.
Real party claims coverage under petitioner's "office package policy." Under that policy, petitioner will pay damages which are the result of "1. bodily injury, or [p] 2. property damage, [p] caused by an occurrence, insured by this policy, and: ... [p] (b) arising from your business operations conducted at or from the insured premises." Petitioner has the right and duty to defend the insured against any suit seeking damages payable under the policy. (Ibid.) "Occurrence" is defined by the policy to mean
The parties to this proceeding agree that for coverage to exist, termination of the employee must be an "occurrence" within the meaning of the policy. They also agree that termination of the employee was intentional. Their dispute centers on the definition of "occurrence." Petitioner contends that an intentional firing is not an occurrence. Real party argues that it is an occurrence within the meaning of the policy whenever the damages are not expected. He asserts that he did not expect the employee to experience severe emotional distress as a result of the termination.
In a lengthy written decision, analyzing the three key cases, the trial court agreed with real party. It found triable issues of fact because it concluded that while real party may have intended the act of termination, the resultant injury or damage might be the result of an accident arising from "extrinsic causes, occurring unexpectedly or by [chance], or happening without intent or through carelessness." Our analysis of these cases leads us to a different conclusion.
Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 54 Cal.Rptr. 104, 419 P.2d 168, was the first of these three cases. The policy there required the insurer to pay damages and defend "any suit against the insured alleging such bodily injury or property damage." The policy had an exclusion for "bodily injury or property damages caused intentionally by or at the direction of the insured." The suit which the insured asked Zurich to defend was an action alleging assault by the insured. The insurer refused to defend on the ground that the complaint alleged an intentional tort. After considerable discussion, the Gray court concluded that the insurer was obliged to pay the insured's judgment and should have defended the action.
The Gray court's conclusion was based in part upon the fact that the policy broadly promised to defend and did not conspicuously or clearly condition the promise on a nonintentional bodily injury. The court concluded that the policy "led plaintiff reasonably to expect such defense" and that the exclusionary clause did not exonerate the insurer. (Id., at p. 275, 54 Cal.Rptr. 104, 419 P.2d 168.) The court restated the rule that a carrier "must defend a suit which potentially seeks damages within the coverage of the policy." The action against the insured in Gray "presented the potentiality of a judgment based upon nonintentional conduct." Therefore, the duty to defend "became manifest at the outset." (Id., at pp. 275, 276, 54 Cal.Rptr. 104, 419 P.2d 168.)
Here, unlike the situation in Gray, there is no suggestion that the third party plaintiffs may have been overstating their case by alleging intentional rather than negligence-based torts.
In St. Paul Fire & Marine Ins. Co. v. Superior Court (1984) 161 Cal.App.3d 1199, 208 Cal.Rptr. 5, the second of the key cases, the exception for intentional acts was not stated as an "exclusion" but was built into the coverage definition. Yuba County's general liability policy covered the county against claims for "bodily injury or damage to tangible property resulting from an accidental event" and defined an "accidental event" as something the insured "didn't expect or intend to happen." There, as in the present case, the suit was for wrongful termination of employment. The St. Paul Fire & Marine Ins. Co. court concluded that the employee's termination was not an "unintentional, unexpected, chance occurrence" and that there was no potential liability under the policy. Therefore, the insured had no obligation to defend. (Id., at pp. 1201, 1202, 208 Cal.Rptr. 5.)
The court in the present case noted that there was a distinction between the language in St. Paul Fire & Marine Ins. Co. and the language in petitioner's policy. There, an accidental event was something the insured "didn't expect or intend to happen." Here, an occurrence is an accident The lower court here used that distinction as a justification for failing to follow St. Paul Fire & Marine Ins. Co. Though we acknowledge a slight distinction in the wording, we fail to see a material difference between the policies. The trial court here erred in...
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