September 3, 2009
Previously published on August 14, 2009
Delgado v. Interinsurance Exchange of the Automobile Club of So. Cal., ___ Cal.4th ___ (2009).
In Delgado, the California Supreme Court reversed the Second District Court of Appeal and held that under a homeowner’s "occurrence"-based policy defining "occurrence" in relevant part as an "accident," the insurer had no duty to defend an insured alleged to have inflicted bodily injury relating to excessive self-defense because such injuries, as a matter of law, did not arise from an "accidental" act.
BACKGROUND FACTS
The progress of this case was originally reported in our June 21, 2007, June 30, 2007, and October 21, 2007 Coverage Alerts. In this case, Reid (the insured) had kicked Delgado and struck him on the nose while the two were standing on the sidewalk across the street from Reid’s residence. Delgado sustained physical injuries and filed suit against Reid, alleging intentional battery and negligence. Reid’s insurer denied coverage on grounds that there was no "occurrence" and that the conduct arose out of Reid’s intentional acts. Reid and Delgado reached a settlement and stipulated that Reid’s use of force was negligent. Reid assigned all his claims against his insurer to Delgado who subsequently filed suit against the insurer. The trial court ruled in favor of the insurer and Delgado appealed.
PRIOR RULINGS BY THE COURT OF APPEAL
The Court of Appeal reversed, determining that there was a question of fact as to whether Reid had acted intentionally. The court went on to determine with respect to the cause of action for bad faith that in the situation where there is a factual dispute relating to coverage, the potential for coverage establishes a duty to defend and an insurer faced with such a dispute would have no reasonable basis for denying a defense. Thus, the court determined that in refusing to offer a defense to Reid, the insurer had acted unreasonably and without proper cause as a matter of law.
In a subsequent opinion, the Court of Appeal tempered and modified its prior holding (that the refusal to offer a defense in such a situation would be without proper cause as a matter of law), stating, instead, that the factual dispute established the duty to defend and that Delgado’s allegations were therefore sufficient to state a cause of action for the bad faith refusal to defend.
On September 25, 2007, the California Supreme Court granted review of the decision.
THE CALIFORNIA SUPREME COURT’S RULING
In reversing the Court of Appeal, the Supreme Court noted that the term "occurrence," defined in relevent part as an "accident," had been judicially construed in the context of liability policies to mean "an unexpected, unforeseen, or undesigned happening or consequence from either a known or an unknown cause." As a result, this common-law definition of "accident" would be applied to subsequent, similarly worded "occurrence" definitions so that the term "occurrence" is not ambiguous. Additionally, the Supreme Court indicated that the "accident" requirement in "occurrence"-based liability policies "refers to the conduct of the insured for which liability is sought to be imposed on the insured" and does not refer to whether or not the injured party found the injury "unexpected, unforeseen, or undesigned[.]" Also, the Supreme Court held that an unreasonable, subjective belief in the need for self-defense does not transform an otherwise intentional, purposeful act into an "accident" because actions are not "accidental" when "all of the acts, the manner in which they were done, and the objective accomplished occurred as intended by the actor." Therefore, because the insured’s alleged assault and battery "were. . .done with the intent to cause injury" and there were no allegations that the actions were "merely shielding" or were performed as "a reflex action," the resulting alleged injuries were not "accidental," no potential for coverage was created and, as a result, the insurer’s duty to defend was not triggered. Moreover, the Supreme Court noted that in a number of past insurance cases the courts of appeal have "rejected the notion that an insured’s mistake of fact or law transforms a knowingly and purposefully inflicted harm into an accidental injury."
The Supreme Court then considered and rejected two additional arguments raised on appeal. First, the Court disagreed that language from Gray v. Zurich Insurance Co., 65 Cal.2d 263 (1966) supports the conclusion that unreasonable use of force and/or self-defense could result in "accidental" injuries. Rather, the Delgado court emphasized that the Gray decision dealt with whether unreasonable use of force and/or self-defense would result in "willful" injuries precluded from coverage by operation of Insurance Code §533 or older intentional act exclusions which were identical in scope to §533. Additionally, the language in Gray indicated the focus in that case was on the reason or motivation for an act which, according to the Delgado court, was not relevant to the "accident" analysis.
The Court also disagreed that mistaken or unreasonable self-defense could result in "accidental" injury because the insured could be responding to "unforeseen and unexpected" provocative acts by the injured party. Rather, the Delgado court emphasized that the insured’s own actions "must be considered the starting point of the causal series of events, not the injured party’s acts that purportedly provoked the insured into committing assault and battery" because "[t]he term ‘accident’ in the policy’s coverage clause refers to the injury-producing acts of the insured, not those of the injured party."
THE EFFECT OF THE COURT’S RULING
The Supreme Court’s ruling in Delgado clarifies California law regarding several aspects of "occurrence"-based liability policies which define an "occurence" as an "accident." First, the decision holds that the common-law definition of "accident" as "an unexpected, unforeseen, or undesigned happening or consequence from either a known or an unknown cause" is read into such liability coverages by operation of law and thereby eliminates or restricts the argument that the "accident" requirement is "ambiguous" and subject to construction against the insurer. Next, the Delgado opinion supports the reasoning of multiple California Court of Appeal decisions which have held that "occurrence"-based liability coverage for "accidents" focuses on the nature of the insured’s injury-producing conduct, and not on the insured’s motivation, expectation of harm or whether the insured inflicted injury under a mistake of law or fact. Finally, the Delgado decision supports the view that an insurer’s duty to defend under "occurrence"-based liability coverage for "accidents" is not triggered if the insured is alleged to have inflicted intentional injury and there are no allegations or other information indicating that some other "unexpected, unforeseen, or undesigned" event combined with the insured’s intentional acts to cause injury.
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