Ford Motor Co. v. Home Ins. Co.

• Citation: 172 Cal.Rptr. 59,116 Cal.App.3d 374
• Court: California Court of Appeals
• Decision Date: 02 February 1981
• Parties: FORD MOTOR COMPANY, Plaintiff and Appellant, v. The HOME INSURANCE COMPANY et al., Defendants and Respondents. Civ. 58333.

Page 59

172 Cal.Rptr. 59

116 Cal.App.3d 374

FORD MOTOR COMPANY, Plaintiff and Appellant, v. The HOME INSURANCE COMPANY et al., Defendants and Respondents.

Civ. 58333.

Court of Appeal, Second District, Division 1, California.

Feb. 2, 1981.

Hearing Denied April 1, 1981.

McCutchen, Black, Verleger & Shea and Howard J. Privett, David S. MacCuish and Nancy A. Newhouse, Los Angeles, for plaintiff and appellant.

La Follette, Johnson, Schroeter & DeHaas and Daren T. Johnson, Los Angeles, Alfred W. Gerisch, Jr., Woodland Hills; and Dennis K. Ames, Los Angeles, for defendants and respondents Aetna Casualty & Surety Co.; American Employers Ins. Co.; American Reinsurance Co.; Affiliated FM Ins. Co.; Appalachian Ins. Co.; Columbia Casualty Co.; Northbrook Ins. Co; Prudential Reinsurance Co.; Puritan Ins. Co.; Mutual Fire, Marine and Inland Ins. Co.; and American Bankers Ins. Co. of Florida.

Mendes & Mount, Beverly Hills, and Morris, Polich & Purdy and Landon Morris, John K. Morris and Robert S. Wolfe, Los Angeles, for defendants and respondents Lawler, Felix & Hall and Erwin E. Adler and William S. Davis, Los Angeles, for defendants & respondents First State Ins. Co.; and First State Underwriters Agency of New England Reinsurance Corp.

Underwriters at Lloyd's London; The Institute of London Underwriters; Accident & Casualty Ins. Co. of Winterthur, Switzerland; Accident & Casualty Ins. Co.; Andrew Weir Ins. Co., Ltd.; Argonaut Northwest Ins. Co.; Assicurazioni Generali de Trieste e Venezia S.P.A.; Bellefourte Ins. Co.; Bermuda Fire & Marine Ins. Co., Ltd.; British Northwestern Ins. Co., Ltd.; Delta-Lloyd Non Life; Dominion Ins. Co., Ltd.; Excess Ins. Co.; Hawk Ins. Co., Ltd.; Helvetia Accident Swiss Ins. Co.; London & Edinburgh General Ins. Co., Ltd.; Mentor Ins. Co., Ltd. (U.K.); National Casualty Co.; National Casualty Co. of America, Ltd.; Nederlandsche Lloyd, N. V.; North Atlantic Ins. Co., Ltd.; River Thames Ins. Co., Ltd.; Royal Belge Incendie Reassurance Society Anonyme D'Assurances; Scan Reinsurance Co.; Slater, Walker Ins. Co., Ltd.; South American Ins. Co.; Stronghold Ins. Co., Ltd.; Swiss Union General Ins. Co., Ltd.; Turegum Ins. Co.; Yasuda Fire & Marine Ins. Co., Ltd. (U.K.); and American Motorists Ins. Co.

Crosby, Heafey, Roach & May and Edwin A. Heafey, Jr. and Peter W. Davis, Oakland, for defendants & respondents Continental Casualty Co.; and The Home Ins. Co.

Hillsinger & Constanzo and John J. Constanzo and Brian F. Zimmerman, Los Angeles, for defendants and respondents Midland Ins. Co.

Vletas & Greer and Robert Greer, Beverly Hills, for defendants and respondents Highland Ins. Co.

Hall, Henry, Oliver & McReavy and Steven McReavy, San Francisco, for defendants and respondents American Ins. Co.; and Federal Ins. Co.

Lewis, D'Amato, Brisbois & Bisgaard and Robert F. Lewis and R. Gaylord Smith, Los Angeles, for defendants and respondents International Surplus Lines Ins. Co.

Overton, Lyman & Prince and Carl J. Schuck and Kelley K. Beck, Los Angeles, for defendants and respondents Hartford Accident and Indemnity Co.

Kadison, Pfaelzer, Woodard, Quinn & Rossi and John Michael McCormick, Ellen B. Friedman and Laurence J. Hutt, Los Angeles, for defendants and respondents Granite State Ins. Co.; Lexington Ins. Co.; National Union Fire Ins. Co.; and Ins. Co. of the State of Pennsylvania.

Herzfield & Rubin and Michael A. Zuk, Los Angeles, for defendants and respondents Drake Ins. Co. of New York.

SPENCER, Presiding Justice.

INTRODUCTION

Plaintiff Ford Motor Company appeals from various judgments dismissing its request for a declaration that plaintiff is entitled to indemnity from defendants insurers (respondents herein) for punitive damages assessed against plaintiff as defendant in actions arising from defects in Ford automobiles or other automotive products. The trial court granted judgments in favor of the various insurers on the basis that insurance coverage of punitive damages is against public policy and is barred as a matter of law under the authority of City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 151 Cal.Rptr. 494, petition for hearing denied, February 28, 1979.

FACTS

Appellant filed a complaint for declaratory relief in June 1978. The complaint sets forth the factual background and basis for the declaratory relief action. Appellant has excess liability policies with each of the respondents. The policies explicitly cover all sums which appellant becomes legally obligated to pay as damages for products liability. None of the policies specifically excludes coverage for punitive or exemplary damages.

The complaint further states that in recent legal actions against appellant, both Respondents whose excess liability policies covered the occurrence in Grimshaw refused to indemnify appellant for the punitive damages award. They further informed appellant that they would not pay any damages awarded as a result of a deliberate act and that they reserved their rights to decline to indemnify appellant for any judgment awarding punitive or exemplary damages.

compensatory and punitive damages have been sought for personal injuries and property damage resulting from defects or faulty design of appellant's automobiles or automotive products. One of the actions, Richard B. Grimshaw, Minor by Guardian ad Litem Iris J. Tracchia v. Ford Motor Company (Orange County Superior Court, No. 19-77-61), had been fully litigated at the time the complaint was filed. The jury in Grimshaw awarded punitive damages on the basis of its finding that appellant had performed an intentional act in conscious disregard of its possible results. Appellant contended in Grimshaw that punitive damages could not be awarded because there was no evidence of willful intent to inflict injury.

As a result of respondents' refusal to indemnify in Grimshaw and in view of the possibility of punitive damage awards in pending and future products liability actions, appellant requested a declaration that respondents are obligated to pay all punitive or exemplary damages assessed against appellant in a products liability action excepting, on public policy grounds, any injury resulting from deliberate intent to inflict such injury.

Respondents, defendants below, demurred to the complaint for failure to state a cause of action on the ground that public policy precludes insurance coverage for punitive and exemplary damages. Some defendants also made motions in opposition to the complaint. In December 1978, the trial judge overruled all demurrers and denied all motions. The order of the court does not state a reason for the ruling. At the hearing on the demurrers, the judge indicated that, absent appellate authority, he was unwilling to rule that punitive damages were uninsurable as a matter of public policy because a trial court does not lightly make decisions based on public policy. Further, in his opinion, the complaint presented a difficult question which deserved a full hearing.

Shortly after the trial court made its ruling, Division Three of this court issued an opinion which had application in the appellant's action: City Products Corp. v. Globe Indemnity Co., supra, 88 Cal.App.3d 31, 151 Cal.Rptr. 494. Refusing to allow insurance coverage for punitive damages awarded for the tort of malicious prosecution, City Products held that indemnity against liability for punitive damages is against public policy.

On January 10, 1979, citing the City Products opinion as direct support for their position, respondents filed petitions for a writ of mandate in this court, seeking to compel a reversal of the trial court's rulings. The petitions were denied.

Respondents then renewed motions for judgment on the pleadings in the trial court. The motions were based primarily on the City Products holding and stated that as a matter of law, appellant is not entitled to indemnity for punitive damages. Some respondents not previously in the action demurred on the same ground.

A hearing on the motions was held on February 9, 1979. At its conclusion, the superior court judge stated that he was bound by the City Products decision. Accordingly, he granted judgment on the pleadings without leave to amend for respondents seeking that remedy, and sustained demurrers without leave to amend for the remaining respondents.

Judgments consistent with those entered in February were also entered as to respondents presenting similar motions and demurrers at later dates. The action was dismissed with prejudice on the ground that appellant is not entitled to the declaration sought in the complaint as a matter of law.

CONTENTIONS

Appellant states that the issue on appeal is whether the trial court erred in its determination that as a matter of law, all punitive damage awards are uninsurable.

Appellant contends that broad application of the City Products declaration that an award for punitive damages is uninsurable on public policy grounds conflicts with the long-standing public policy stated in Insurance Code section 250, ¹ that all liabilities are insurable except, as stated in Insurance Code section 533, ² losses caused by intentional acts. For that reason, appellant asserts that punitive damages assessed for unintentional acts in a products liability action are not precluded from insurance coverage.

For the reasons set forth below, we disagree with appellant's contention and affirm the judgments.

DISCUSSION

Under the principle enunciated in City Products Corp. v. Globe Indemnity Co., supra, 88 Cal.App.3d 31, 151 Cal.Rptr. 494, punitive damages are uninsurable as a matter of public policy. At issue in City Products was the indemnification of a punitive damage award for an intentional tort, malicious prosecution. Appellant contends that public policy does not bar indemnification in products liability actions because liability can result from nonintentional conduct and punitive damages can be awarded for conscious disregard of the safety of...