State Farm Fire & Casualty Co. v. Eddy

Decision Date13 March 1990
Docket NumberNo. H005255,H005255
Citation218 Cal.App.3d 958,267 Cal.Rptr. 379
CourtCalifornia Court of Appeals Court of Appeals
PartiesSTATE FARM FIRE & CASUALTY CO., Plaintiff and Respondent, v. Mark EDDY, et al., Defendants and Appellants.

Larry J. Ince, Gerald A. Emanuel, and Emanuel & Ince, San Jose, for defendants and appellants.

Michael J. Brady, Stacey L. Pratt, and Ropers, Majeski, Kohn, Bentley, Wagner & Kane, Redwood City, for plaintiff and respondent.

PREMO, Associate Justice.

Appellants Mark Eddy and Carol Greenstreet appeal from a grant of summary judgment to respondent State Farm Fire & Casualty Co. (hereafter, State Farm). State Farm had brought an action for declaratory relief for a determination whether it had the duty to defend or indemnify Eddy for the infliction of genital herpes on Greenstreet by way of voluntary sexual intercourse. We reverse.


Eddy was insured by State Farm under a homeowner's policy in effect on February 14, 1986, when he and Greenstreet met and began dating. Greenstreet alleged in her complaint that before any sexual contact, she told Eddy that she was concerned about sexually transmittable diseases, particularly herpes. On March 14, 1986, they engaged in voluntary sexual intercourse. On March 22, Eddy told Greenstreet that he had a history of herpes, but that he did not believe he was contagious. On March 27, Greenstreet was diagnosed as having herpes.

In 1980, Eddy had dated a woman whom he believed had herpes, and from whom he thought he might have contracted it. He had required medical treatment in 1980. On May 24, 1985, he again sought treatment and was examined at Kaiser Hospital in Santa Clara. The treating physician told Eddy that there was no way of knowing whether he had herpes without a positive viral culture. The culture was taken on June 3, 1985, and Eddy was told it was "negative." Nobody told him he could have the disease even though the culture

was negative. He thereafter believed he did not have herpes.


Greenstreet filed suit against Eddy on November 3, 1986, alleging general negligence, battery, fraud, and intentional or negligent infliction of emotional distress. She also requested punitive damages.

Eddy notified State Farm, which agreed to defend him, although expressly reserving its rights to deny indemnity. Thereafter, State Farm filed an action for declaratory relief, contending that it had neither the duty to defend nor to indemnify because the conduct and damages alleged by Greenstreet were excluded under the insurance policy, or by Insurance Code section 533. The trial court agreed with State Farm and granted summary judgment. This appeal ensued.


Appellants dispute all of the grounds State Farm advanced in support of its contention that it had no duty to defend or indemnify Eddy. State Farm had claimed first, that the insured's transmission of a venereal disease violated Health and Safety Code section 3198 and arose out of his fraud. 1 Second, the transmission of a venereal disease was a peril that was not covered by the policy. Third, liability arising from sexual misconduct fell within the intentional acts exclusion. Fourth, coverage for sexual misconduct was eliminated by Insurance Code section 533 and Civil Code section 1668. 2 And fifth, coverage for sexual misconduct violated public policy.

Additionally, appellants claim that the court erred in excluding evidence of State Farm's modification of certain language in its homeowner's policy, and in ruling that the issue whether Eddy believed in good faith that he did not have herpes was of no consequence to State Farm's duty to defend or indemnify.


Eddy's homeowner's policy included coverage for personal liability (Coverage L). Coverage L provided: "If a claim is made or a suit is brought against an insured for damages because of bodily injury or property damage to which this coverage applies, we will: [p] (1) pay up to our limit of liability for the damages for which the insured is legally liable; and [p] (2) provide a defense at our expense by counsel of our choice.... Our obligation to defend any claim or suit ends when the amount we pay for damages resulting from the occurrence equals our limit of liability." The policy excluded "bodily injury which is expected or intended by an insured[.]" Bodily injury was defined to mean "harm, sickness or disease."


Summary judgment is an appropriate means for determination of coverage under an insurance policy where there is no material issue of fact to be tried and the sole issue is one of law. (Pepper Industries, Inc. v. Home Ins. Co. (1977) 67 Cal.App.3d 1012, 1017, 134 Cal.Rptr. 904.) Even where a factual dispute exists, this will not preclude entry of summary judgment, unless that fact is material. (Hidalgo v. Anderson (1978) 84 Cal.App.3d 378, 381, 148 Cal.Rptr. 557.) A grant of summary judgment is reviewed de novo by the Court of Appeal. (D'Aquisto v. Campbell Industries (1984) 162 Cal.App.3d 1208, 1212, 209 Cal.Rptr. 108.) The interpretation of an insurance policy is a question of

law, and the appellate court has the duty to make an independent determination of the meaning of the language used in the contract under consideration. (Fragomeno v. Insurance Co. of the West (1989) 207 Cal.App.3d 822, 827, 255 Cal.Rptr. 111.)


Appellants contend that although a determination on the merits might show that there was intentional conduct for which State Farm need not indemnify Eddy, the complaint alleged both negligent and intentional torts; therefore, State Farm must defend since potentially it could be required to indemnify for Eddy's negligence. We agree.

"An insurer's duty to defend is separate from its duty to indemnify. [Citation.] The fact that an insurer may ultimately not be liable as the indemnifier of the insured does not establish that it has no duty to defend. The duty to defend is broader than the duty to indemnify and is measured by the reasonable expectations of the insured. [Citations.] Accordingly, '[a]n insurer is not absolved from its duty to defend the lawsuit merely because it is forbidden by law or contract to indemnify the liability-causing action.' [Citation.] [p] 'An insurer, bound to defend an action against its insured, must defend against all of the claims involved in that action, even though some ... of them ultimately result in recovery for damages not covered by the policy.' [Citation.]" (Ohio Casualty Ins. Co. v. Hubbard (1984) 162 Cal.App.3d 939, 943-944, 208 Cal.Rptr. 806.) "An insurer ... bears a duty to defend its insured whenever it ascertains facts which give rise to the potential of liability under the policy." (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 276-277, 54 Cal.Rptr. 104, 419 P.2d 168, emphasis added.)

The language of the policy must be interpreted "according to the layman's reasonable expectations...." (Gray v. Zurich Insurance Co., supra, 65 Cal.2d at p. 274, 54 Cal.Rptr. 104, 419 P.2d 168, fn. omitted.)

In the instant case, the language of the policy declared that State Farm would provide a defense if a suit was brought against Eddy for damages because of bodily injury "to which the coverage applies." "Bodily injury" included disease; the claim was for damages for harm resulting from a disease. (Kathleen K. v. Robert B. (1984) 150 Cal.App.3d 992, 996-997, fn. 3, 198 Cal.Rptr. 273.) Furthermore, the only limit on the duty to defend that the policy stated arose when damages to the limit of liability were paid out. No damages had been paid out by State Farm on Greenstreet's claim. Clearly these promises, without further clarification, would lead the insured reasonably to expect the insurer to defend him against this suit. (See Gray v. Zurich Insurance Co., supra, 65 Cal.2d at p. 272, 54 Cal.Rptr. 104, 419 P.2d 168.)

Moreover, although State Farm argued that the policy excluded coverage for bodily injury which was "expected or intended" by an insured, Eddy's declaration in opposition to the motion for summary judgment indicated that the infliction of the disease was not expected or intended, even though the intercourse was. The tort is the transmission of disease, not the consensual sexual relations. (See discussion, infra.) "[N]otice of noncoverage of the policy, in a situation in which the public may reasonably expect coverage, must be conspicuous, plain and clear.' [Citation.]" (Gray v. Zurich Insurance Co., supra, 65 Cal.2d at p. 271, 54 Cal.Rptr. 104, 419 P.2d 168.)

Therefore, it was error for the court to rule there was no duty to defend.

1. Violation of Law

Next, appellants contend that Eddy's conduct did not amount to violation of law or fraud so as to defeat coverage.

State Farm had argued to the trial court that Eddy fraudulently induced Greenstreet to consent to intercourse, and that he committed the misdemeanor of infecting Greenstreet with a venereal disease in violation of Health and Safety Code section 3198. (See ante, fn. 1.) Because of this, the insurance contract was made unenforceable Appellants took the approach that since genital herpes is not one of the diseases listed in Health and Safety Code section 3001, 4 its transmission is not made a crime by Health and Safety Code section 3198 and, therefore, section 1668 does not apply.

by Civil Code section 1668 (ante, fn. 2), which declares that all contracts which have for their object to exempt a person from responsibility for certain conduct, including fraud and violation of law, are against the policy of the law. 3

We need not decide whether the Legislature intended to make criminal the transmission of venereal diseases which are not listed in Health and Safety Code section 3001. The crux of the matter lies in the distinction between "an exemption (§ 1668) whereby a person seeks to avoid liability to a victim who has suffered due to that...

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