The Intentional Act of One Insured Does Not Bar Coverage for Allegations of Negligence Against Another Insured

Author:Mr Patrick McKinney
Profession:Farella Braun & Martel
 
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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,...

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