Lowell v. Maryland Cas. Co.

• Decision Date: 25 October 1966
• Citation: 419 P.2d 180,54 Cal.Rptr. 116,65 Cal.2d 298
• Court: California Supreme Court
• Parties: , 419 P.2d 180 George LOWELL, Plaintiff and Appellant, v. MARYLAND CASUALTY COMPANY, Defendant and Respondent. L.A. 29131. In Bank

Page 116

54 Cal.Rptr. 116

65 Cal.2d 298, 419 P.2d 180

George LOWELL, Plaintiff and Appellant, v. MARYLAND CASUALTY COMPANY, Defendant and Respondent.

L.A. 29131.

Supreme Court of California,

In Bank.

Oct. 25, 1966.

Munger, Tolles, Hills & Olson, Lester E. Olson, Los Angeles, Fendler, Gershon & Warner, Harold A. Fendler, Beverly Hills, for plaintiff and appellant. and Ronald A. Dwyer, Los Angeles, for and Ronald A. Dwyer, Los Angeles, for defendant and respondent.

TOBRINER, Justice.

This action by an insured against his insurer for breach of its duty to defend a suit against the insured for assault and battery under a comprehensive personal liability policy involves the same problem which we have analyzed in our opinion in Gray v. Zurich Insurance Co., 54 Cal.Rptr. 104, 419 P.2d 168. We believe that here, as in Gray, the insurer bore the obligation to defend the third party suit.

Plaintiff entered into a 'Comprehensive Liability Policy' with defendant to insure the buildings and automobiles which he owned in three major cities. The insurer, according to the policy, undertook 'to pay * * * all sums which the insured shall become legally obligated to pay as damages because of bodily injury * * * sustained by any person and caused by accident.' (Coverage I.) In addition, 'with respect to such insurance as is afforded by this policy the company shall (a) defend any suit against the insured alleging such injury * * * and seeking damages on account thereof, even if such suit is groundless, false or fraudulent.' (Coverage II(a).)

According to the findings of the trial court, 'while said policy * * * was still in force and effect a complaint was filed in the Superior Court for the County of Los Angeles * * * by one Ronot Gonzales which alleged 'That on or about the 7th day of September, 1959, at or about the hour of 2:55 P.M., defendant George Lowell * * * did unlawfully and maliciously assault, beat, strike and batter plaintiff, Ronot Gonzales about the back, arms, head and body with great force and violence and without cause or provocation.''

The plaintiff insured immediately 'made written demand upon defendant to defend said action on his behalf, in that the alleged assault and battery had never taken place and the suit was groundless.' The insurer refused such defense because 'the allegations contained in the complaint filed by Gonzales against Lowell did not allege facts within the coverage of the policy.' After obtaining a judgment in the Gonzales action two and one-half years later, plaintiff demanded that the insurer pay attorneys' fees and costs incurred in the Gonzales action. When the insurer again rejected any claim of liability, plaintiff filed the instant action, including a prayer for attorneys' fees in this case.

As we shall point out, the insurer in the instant case was obligated to defend the insured in the Gonzales action for both of the basic reasons set forth in Gray. There we posited the duty to defend on the fundamental ground that 'Since the policy sets forth the duty to defend as a primary one and since the insurer attempts to avoid it only by an unclear exclusionary clause, the insured would reasonably expect, and is legally entitled to, such protection.' (p. 107 of 54 Cal.Rptr., p. 171 of 419 P.2d). We there set forth as an alternative secondary ground for our ruling that, even accepting the proposition 'that the duty to defend arises only if the third party suit involves a liability for which the insurer would be required to indemnify the insured' (p. 107 of 54 Cal.Rptr., p. 171 of 419 P.2d), the insured should still prevail. We pointed out that 'Since modern procedural rules focus on the facts of a case rather than the theory of recovery in the complaint, the duty to defend should be fixed by the facts which the insurer learns from the complaint, the insured, or other sources. An insurer, therefore, bears a duty to defend its insured whenever it ascertains facts which give rise to the potential of liability under the policy.' (p. 112 of 54 Cal.Rptr., p. 176 of 419 P.2d).

Turning, first, to the fundamental ground set forth in Gray, we find that the instant insurance policy in leading the insured reasonably to expect coverage was at least as ambiguous as the policy in Gray. Like the policy in Gray, the contract in the instant case held out the general promise to defend suits for bodily injury 'even if such suit is groundless, false or fraudulent.' The policy contained the primary promise of the insurer to defend the third party suit; it asserted such obligation 'even if such suit is groundless. * * *' The insured could reasonably expect a defense as to such a suit, which, like that of the instant case, was groundless.

The exclusionary clause, which defendant offers as the bulwark of its defense, is not "conspicuous, plain and clear" (Gray v. Zurich Insurance Co., 54 Cal.Rptr., p. 110, 419 P.2d, p. 174). It is placed far toward the end of the voluminous The insured could reasonably expect that the insurer would furnish him a defense against the 'groundless' charge that the insured had committed an assault and battery against the third party. The insured would not expect that the insurer could avoid the obligation of defense on the ground that such obligation covered only 'accidents' which were indemnifiable under the policy and that an assault and battery was not such an indemnifiable 'accident.' The policy promised a defense 'even if (the third party) suit is groundless.' The policy even states, 'Assault and battery shall be...