Loyola Marymount University v. Hartford Accident & Indemnity Co., B

• Decision Date: 28 March 1990
• Docket Number: No. B,B
• Citation: 219 Cal.App.3d 1217,271 Cal.Rptr. 528
• Court: California Court of Appeals Court of Appeals
• Parties: , 61 Ed. Law Rep. 661 LOYOLA MARYMOUNT UNIVERSITY et al., Plaintiffs and Appellants, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, Defendant and Respondent. 042722.

Page 528

271 Cal.Rptr. 528

219 Cal.App.3d 1217, 61 Ed. Law Rep. 661

LOYOLA MARYMOUNT UNIVERSITY et al., Plaintiffs and Appellants, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, Defendant and Respondent.

No. B 042722.

Court of Appeal, Second District, Division 2, California.

March 28, 1990.

As Modified April 26, 1990.

Burke, Williams & Sorensen, Martin L. Burke and Harold A. Bridges, Los Angeles, for plaintiffs and appellants.

Hawkins, Schnabel & Lindahl, Kelley K. Beck, Los Angeles, for defendant and respondent.

FUKUTO, Associate Justice.

Plaintiffs, Loyola Marymount University and several present and former officers and trustees (hereafter collectively LMU), appeal from a judgment in favor of LMU's liability insurer, Hartford Accident and Indemnity Company (Hartford), in an action seeking declaratory relief and damages on account of Hartford's refusal to defend LMU in three lawsuits brought by two terminated employees. Because these lawsuits were not within the scope of Hartford's duty to defend under its policy, the judgment will be affirmed.

FACTS

The lawsuits underlying the present controversy were brought by Michael Callahan, a former tenured professor at LMU, and Marvin Wood, its erstwhile baseball coach.

Callahan was dismissed by LMU after marrying another faculty member while still a Jesuit priest. In response, he brought two actions. His Los Angeles Superior Court complaint alleged causes of action for breach of employment contract, "wrongful discharge," and violation of the right to privacy of marriage, allegedly secured by Article I, section 1 of the California Constitution. Callahan also sued LMU in United States District Court in Los Angeles, alleging discrimination on the basis of religion and gender, in violation of Title VII of the Civil Rights Act of 1964 (42 U.S.C. § 2000e et seq.). This action sought declaratory and injunctive relief and damages, including compensation for "mental anguish and trauma."

Wood brought a single action, in Los Angeles Superior Court, alleging he was discharged as coach at LMU without good cause and only upon vague charges of "negligence." He pleaded causes of action for "wrongful discharge," breach of the covenant of good faith and fair dealing, intentional infliction of emotional distress, negligence in evaluating his employment, violation of Labor Code section 1050 (which prohibits an employer from attempting to prevent a former employee from obtaining employment "by any misrepresentation") Hartford refused the tendered defense of Wood's and Callahan's actions, on grounds they were not within the scope of the relevant insurance policies. ¹ LMU then commenced this litigation, seeking a declaration of its entitlement to coverage and defense, as well as damages for Hartford's alleged violations of the covenant of good faith and fair dealing and Insurance Code section 790.03, subdivision (h). ²

and conspiracy to publish false accusations of his "negligence."

Both parties filed motions for summary judgment or alternatively for summary adjudication of issues. The motions were based on a stipulation of facts, encompassing the facts recited above, the contents of Hartford's policy and the complaints in the lawsuits against LMU, and an acknowledgement that LMU's damages causes of action depended upon the issue of duty to defend.

Holding that Hartford had no duty to defend, the trial court granted Hartford's summary judgment motion and entered judgment in its favor. ³

DISCUSSION

Determination of LMU's appeal involves interpretation of Hartford's policy, and that presents an issue of law calling for this court's independent review. (Royal Globe Ins. Co. v. Whitaker (1986) 181 Cal.App.3d 532, 536, 226 Cal.Rptr. 435.) Several principles guide that review. Foremost, Hartford's duty to defend lawsuits under the policy exceeds its duty of indemnification, and extends to actions posing the potential of liability within policy coverage. (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 275-277, 54 Cal.Rptr. 104, 419 P.2d 168.) That duty, however, is not unlimited, and it ultimately depends upon the facts of the lawsuit of which the insurer is aware. (Id. at pp. 276-277, 54 Cal.Rptr. 104, 419 P.2d 168.) In construing the terms of policy coverage in this context, "doubts, uncertainties and ambiguities arising out of policy language ordinarily should be resolved in favor of the insured in order to protect [its] reasonable expectation of coverage." (Producers Dairy Delivery Co. v. Sentry Ins. Co. (1986) 41 Cal.3d 903, 912, 226 Cal.Rptr. 558, 718 P.2d 920.) But that principle comes into application only where the policy provision is truly ambiguous, i.e., susceptible to two or more constructions, all of which are reasonable. (Ibid.)

LMU's contentions on appeal address three different liability coverages under the policy, together with definitional provisions and exclusions variously applicable to them.

1. Personal Injury Coverage.

The policy's "Personal Injury" coverage extends to injuries arising from a series of intentional as well as negligent torts. They include "the publication or utterance of a libel or slander or of other defamatory or disparaging material, or a publication or utterance in violation of an individual's right of privacy ... or other invasion of an individual's right of privacy." For purposes of this coverage, the triggering "occurrence" includes any one of these "offenses."

LMU contends that this coverage extends to the Callahan and Wood state court actions, because both of them allege or at least potentially encompass claims of defamation and invasion of privacy. Hartford does not directly challenge the premise; instead, it contends that the actions are in any event excluded from coverage and defense by exclusion (q) of the policy, which states: "This insurance does not apply ... [p] (q) to personal injury sustained by any person as a result of an offense directly or indirectly related to the employment or prospective employment of such person by the named insured." Although Hartford has thus directly assumed the burden of proving that the state court claims fall within the asserted exclusion (see Royal Globe Ins. Co. v. Whitaker, supra, 181 Cal.App.3d at p. 537, 226 Cal.Rptr. 435), Hartford has plainly sustained that burden.

The "offenses" alleged in the state court complaints, occurring as part and parcel of allegedly wrongful termination of the plaintiffs' employment, plainly were directly related to LMU's employment of Callahan and Wood, and hence were clearly within the language of exclusion (q). Indeed, a federal court of appeals has already construed this exclusion in a Hartford policy as encompassing employer conduct, incident to an allegedly wrongful discharge, which caused the employee "to be severely emotionally upset, physically shaken and humiliated, and damaged in his reputation." (Interco Inc. v. Mission Ins. Co. (8th Cir.1987) 808 F.2d 682, 683.) As there stated: "Exclusions from insurance coverage are to be strictly construed. [Citation.] Moreover, any ambiguities in insurance contracts are to be resolved against the insurer. Id. The language of exclusion (q) is clear, however. It excludes coverage for personal injuries resulting from offenses relating to employment. The term 'employment' includes not only the initial hiring process, but the continuance of the employment relationship as well. [Citations.] [The former employee's] complaint alleges injuries caused by a breach of an employment contract. These allegations are not susceptible to an interpretation of being within the coverage of the policy." (Id. at p. 685.)

Virtually conceding the cogency of the foregoing, LMU heroically urges that a duty to defend the Callahan and Wood actions yet exists, because they also embrace or at least potentially embrace charges of post-employment defamation, through "compelled republication" of defamatory charges made in the course of the terminations. (See generally McKinney v. County of Santa Clara (1980) 110 Cal.App.3d 787, 795-798, 168 Cal.Rptr. 89.) The asserted distinction is unavailing. Even though post-employment defamations would involve injuries occurring after the employment (cf. Schneider v. United Airlines, Inc. (1989) 208 Cal.App.3d 71, 77, 256 Cal.Rptr. 71), the offenses would still fall clearly within the policy exclusion, as either "directly or indirectly related to the employment...." LMU's contention, that this language can (or must) be read as limited to injuries sustained when the employee is still employed, is semantically unreasonable and unacceptable. "[D]irectly or indirectly related to the employment" does not mean, and cannot reasonably be construed to mean, "committed during the employment." The policy language clearly is broader than LMU contends, and it covers all "personal injuries" alleged or potentially at issue in the state court actions, because all of them arise from or derive from, and hence are "related to," Callahan and Wood's employment and termination.

Accordingly, LMU cannot here claim the benefit of the rules that exclusionary provisions be interpreted and their ambiguities resolved against the insurer, for Hartford's exclusion (q) is clear as applied to this case. (Cf. Blumberg v. Guarantee Ins. Co. (1987) 192 Cal.App.3d 1286, 1295, 238 Cal.Rptr. 36; see Producers Dairy Delivery Co. v. Sentry Ins. Co., supra, 41 Cal.3d 903, 912, 226 Cal.Rptr. 558, 718 P.2d 920.) The "Personal Injury" coverage is unavailable as to the Callahan and Wood state court actions.

2. Bodily Injury Coverage.

LMU looks to a different coverage for entitlement to defense of Callahan's federal, Title VII action: the policy coverage of "damages because of bodily injury ... caused by an occurrence...." For purposes of this coverage, "bodily injury" is defined in relevant part as "bodily injury, sickness or disease," and " 'occurrence' means an accident, including continuous or repeated exposure to conditions,...