defendant L. Arthur Byrd was John Purcell of the Law Offices of Irving Pfeffer.
In this action plaintiff, the insurer on defendant Byrd's homeowner's insurance policy, seeks a declaration that it has no duty to indemnify Byrd for damages arising from the murder of Cynthia L. Engstrom. After review of the briefs submitted by the parties, the oral argument of counsel, and the applicable legal standard, the Court hereby finds that the exclusions of the subject homeowner's insurance policy and California Insurance Code § 533 apply to the insured's actions, and accordingly summary judgment for plaintiff is GRANTED.
On April 2, 1986, defendant Byrd was convicted of second degree murder for the death of Cynthia Engstrom in his home. Byrd caused the death of Engstrom by holding her head under water during a sexual encounter in a partially filled bathtub. The victim's survivors, the other defendants in this action, concurrently filed suit for wrongful death in Superior Court for the County of Marin, Engstrom et al. v. Byrd et al., No. 123937 (filed March 18, 1986). On March 2, 1989, the state court granted summary adjudication of certain uncontested issues in this litigation, specifically that Byrd caused Engstrom's death but did not act with premeditation or with intent to kill. On July 17, 1989, judgment for plaintiffs was entered in the amount of $ 200,000 pursuant to a Stipulation for Entry of Judgment executed by the parties on June 19, 1989. According to the terms of the Stipulation, Byrd admitted liability for negligently causing the death, and the Engstroms agreed not to levy execution upon any of Byrd's personal assets. Byrd also assigned the Engstroms his rights under the homeowner's policy issued by plaintiff. Plaintiff retained counsel for Byrd in this state action under a reservation of rights.
Plaintiff State Farm Fire & Casualty Co. ("State Farm") brought this action in district court for a declaration of rights that it has no liability under the policy to indemnify Byrd for damages resulting from the murder. The policy contains an exclusion from coverage for any "bodily injury or property damage which is expected or intended by the insured," which exclusion parallels California Insurance Code § 533: "An insurer is not liable for a loss caused by the wilful act of the insured; but he is not exonerated by the negligence of the insured . . . ". This clause is read into every insurance contract as a matter of public policy. Fire Ins. Exch. v. Abbott, 204 Cal.App.3d 1012, 1019, 251 Cal.Rptr. 620 (1988). In California, "'Section 1668 of the Civil Code and section 533 of the Insurance Code establish a public policy to prevent insurance coverage from encouragement of wilful tort.'" Evans v. Pacific Indemnity Co., 49 Cal.App.3d 537, 542, 122 Cal.Rptr. 680 (1975) (quoting Tomerlin v. Canadian Indemnity Co., 61 Cal.2d 638, 648, 394 P.2d 571, 39 Cal.Rptr. 731 (1964)).
A. Summary Judgment Standard
As this action is brought pursuant to the Court's diversity jurisdiction under 28 U.S.C. § 1332, the Court applies the summary judgment standard of Rule 56 of the Federal Rules of Civil Procedure, but the substantive law of the State of California. Erie v. Tompkins R.R. Co., 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938). Under the Federal Rules of Civil Procedure, summary judgment may be granted when "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).
The standard for judging either a defendant's or plaintiff's motion for summary judgment is the same standard used to judge a motion for a directed verdict: "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52, 106 S. Ct. 2505, 2512, 91 L. Ed. 2d 202 (1986).
B. Collateral Estoppel Effect of the State Civil Action
Defendants assert in support of their motion for summary judgment that State Farm is estopped to claim that Engstrom's death is covered by these exclusions because State Farm is bound by the stipulated judgment expressly denying that Byrd intended to kill Engstrom.
In California, a party is collaterally estopped from relitigating an issue only if three requirements are met: (1) the issue must be identical with that presently in question; and (2) the earlier action resulted in a final judgment on the merits; and (3) the party to be estopped was either a party to or in privity with a party to the prior action. Clemmer v. Hartford Ins. Co., 22 Cal.3d 865, 874, 587 P.2d 1098, 151 Cal.Rptr. 285 (1978) (citing Bernhard v. Bank of America, 19 Cal.2d 807, 813, 122 P.2d 892 (1942)). These requirements are not present. State Farm was not a party in the action and was not in privity with any party. In particular, the manifest conflict between State Farm and Byrd on the issue of Byrd's intent destroys any privity which might have been inferred from State Farm's retention of counsel for Byrd.
At the outset, it must be noted that the issue of Byrd's intent was never contested in the state civil action, because the parties expressly declined to preserve the issue of Byrd's intention to kill or harm Engstrom for trial. Byrd conceded the issues of causation and lack of premeditation and intent in opposing a plaintiff's motion for summary judgment. The parties then stipulated to Byrd's lack of intent, and the Engstroms agreed not to seek Byrd's personal assets in satisfaction of the judgment:
In making this Stipulation, the parties hereby withdraw from issue all facts and issues included in the PLAINTIFFS' cause of action for intentionally causing the death of CYNTHIA LYNICE ENGSTROM . . . .
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