In May, we reported on the May 5, 2010 oral argument before the California Supreme Court in Minkler v. Safeco Insurance Co. of America, which involved allegations that a homeowner, Betty Schwartz, negligently failed to stop her adult son, David, who was Minkler’s baseball coach and lived with Betty, from sexually molesting Minkler when he was a teenager. In that entry, we opined that there was a strong possibility that the court would find that the intentional acts exclusion does not bar coverage for the claims that Betty acted negligently by failing to prevent David’s intentional acts against Minkler.
On June 18, 2010, the California Supreme Court issued a unanimous opinion authored by Justice Baxter, holding that the intentional act of one insured does not automatically bar coverage for allegations against another insured, such as negligence, that do not come within the terms of a policy’s intentional acts exclusion. To reach this conclusion, the court analyzed the interplay between two policy provisions: the intentional acts exclusion and the severability provision, which appears in the “Conditions” section of the policy. The severability provision stated that “this insurance applies separately to each insured. This condition will not increase our limit of liability for any one occurrence.” The intentional acts exclusion barred coverage for bodily injury “which is expected by an insured or which is the foreseeable result of an act or omission intended by an insured.”
The court decided that, when a policy includes both an intentional acts exclusion and a severability-of-interests provision, the language is ambiguous and must be construed in favor of coverage. The severability provision creates a reasonable expectation that each insured’s coverage will be analyzed separately, so that the intentional act of one insured would not, in and of itself, bar coverage for the latter’s independent act that is not within the terms of the exclusion. Accordingly, Betty would reasonably have expected Safeco’s policies, which provided coverage for each insured’s legal liability for injury or damage to others, to “cover her separately for her independent acts or omissions causing such injury or damage, so long as her conduct did not fall within the policies’ intentional acts exclusion, even if the acts of another insured contributing to the same injury or damage were intentional.” The reasoning of the opinion follows from Justice Baxter’s 2001 concurring opinion in Safeco Ins. Co. v. Robert S.
The California Supreme Court reached this opinion despite prior decisions holding that an exclusion that bars coverage for the acts of “an” insured is effective to bar coverage for all insureds under the policy if any insured engaged in the excluded conduct. The insertion of the severability clause into the policy distinguished the facts of Minkler from these prior decisions, and requires a separate analysis of coverage for each insured.
The Minkler decision impacts all pending claims that involve multiple insureds and claims involving conduct that is within the terms of an exclusion for some, but not all, insureds. Minkler arose in the classic context of claims alleging intentional and negligent conduct against different insureds, but the decision is not limited to this situation. It is thus essential for all policyholders to review and analyze their pending claims and apply the Minkler decision to the facts and specific policy language. If appropriate, policyholders should ask their carriers to reconsider a prior denial of coverage.
If you have questions about how Minkler applies to a specific claim, please feel free to contact me or another attorney in Farella Braun + Martel’s Insurance Coverage group.