UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF CALIFORNIA
March 22, 1994
JESUS CASTRO, as Administrator of the Estate of JUAN CASTRO, Deceased, Plaintiff,
ALLSTATE INSURANCE COMPANY, and DOES 1 through 50, inclusive, Defendants.
The opinion of the court was delivered by: MARILYN L. HUFF
ORDER GRANTING DEFENDANT'S AND DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT
Sometime prior to April 1989, Defendant Allstate Insurance Company issued a Deluxe Homeowner'S Policy (the "Policy") to Carmelita Cook. Both Carmelita Cook and her son, Ariel Cook, were "Insured Persons" within the meaning of the Policy. On April 14, 1989, Ariel Cook shot and killed Juan Castro at a public recreation center. On November 8, 1989, Ariel Cook was convicted of first degree murder.
On April 13, 1990, Plaintiff Jesus Castro, as administrator of his deceased son's estate, filed a wrongful death action against Carmelita Cook in state court. In sum, the complaint alleged Carmelita Cook's negligence in supervising Ariel Cook caused Juan Castro's death. Carmelita Cook tendered the lawsuit to Allstate.
Defendant agreed to retain Cumis counsel for Ms. Cook, but declined to defend and/or indemnify her in the action. It did so based on 1) California Insurance Code Section 533; and 2) the "intentional acts" and "criminal acts" exclusions set forth in the homeowner's policy.
Carmelita Cook then settled the suit. Plaintiff's estate received a stipulated judgment of $ 100,000 against Carmelita Cook and a complete assignment of Carmelita's rights against Defendant Allstate. In return, Carmelita Cook received a covenant not to execute or record the judgment.
On September 16, 1993, Plaintiff, as assignee of Carmelita Cook's rights against Allstate, filed suit against Defendant in the Superior Court of the State of California. Plaintiff asserted two causes of action: 1) Breach of Insurance Contract; and 2) Breach of the Covenant of Good Faith and Fair Dealing. On October 6, 1993, Defendant filed its notice of removal to this court. Plaintiff and Defendant now bring cross-motions for summary judgment.
Because Carmelita Cook had no reasonable expectation of coverage against Plaintiff's complaint in the underlying action, Allstate owed her no duty to defend. Accordingly, the court grants Defendant's and denies Plaintiff's motion for summary judgment.
The California Supreme Court, in Horace Mann Ins. Co. v. Barbara B., 4 Cal. 4th 1076, 846 P.2d 792 (1993), summarized the principles governing adjudication of the insurer's duty to defend its insured against a third party lawsuit:
[A] liability insurer owes a broad duty to defend its insured against claims that create a potential for indemnity.... Implicit in this rule is the principle that the duty to defend is broader than the duty to indemnify; an insurer may owe a duty to defend its insured in an action in which no damages ultimately are awarded....
The determination whether the insurer owes a duty to defend usually is made in the first instance by comparing the allegations of the complaint with the terms of the policy. Facts extrinsic to the complaint also give rise to a duty to defend when they reveal a possibility that the claim may be covered by the policy....
Any doubt as to whether the facts give rise to a duty to defend is resolved in the insured's favor....
Id. at 1081 (citations omitted).
Plaintiff moves for summary judgment that Allstate owed Carmelita Cook a duty to defend. Allstate moves for summary judgment that it owed no such duty. See Montrose Chemical Corp. v. Superior Ct., 6 Cal. 4th 287, 301, 861 P.2d 1153 (1993). The court addresses each motion concurrently by comparing the allegations of the underlying complaint with the terms of the Policy.
The underlying complaint alleges in relevant part:
19. At all times herein mentioned, Defendant Carmelita Cook negligently supervised the activity of her child Ariel Cook in that Defendant knew of the dangerous propensities and habits of said Ariel Cook but failed to exercise proper control or give appropriate warnings to prevent such conduct of Ariel Cook. Defendant had the ability to control the conduct of Ariel Cook but refused to do so and ignored her duty.
20. That as a result of such negligence, Ariel Cook continued to engage in dangerous and unlawful activities which ultimately resulted in his assault upon Decedent (Juan Castro), proximately causing the injuries herein complained of.
Complaint, PP 19-20.
The Policy states in relevant part:
Joint Obligations Provision
The terms of this policy impose joint obligations on persons defined as an Insured Person. This means that the responsibilities, acts and failures to act of a person defined as an Insured Person will be binding upon another person defined as an Insured Person.
Losses We Cover:
Subject to the terms, limitations and conditions of this policy, Allstate will pay damages which an Insured Person becomes legally obligated to pay because of bodily injury or property damage arising from an accident covered by this part of the policy.
Intentional Acts Exclusion
We do not cover bodily injury or property damage resulting from:
An act or omission intended or expected to cause bodily injury or property damage. This exclusion applies even if the bodily injury or property damage is of a different kind or degree, or is sustained by a different person or property than that intended or expected; or
An act or omission committed by an Insured Person while insurance or while lacking the mental capacity to control his or her conduct while unable to form any intent to cause bodily injury or property damage. This exclusion applies only if a reasonable person would expect some bodily injury or property damage to result from the act or omission.
Criminal Acts Exclusion
We do not cover bodily injury or property damage resulting from:
A criminal act or omission; or
An act or omission which is not criminal in nature and committed by an Insured Person who lacked the mental capacity to appreciate the criminal nature or wrongfulness of the act or omission or to conform his or her conduct to the requirements of the law or form the necessary intent under the law.
This exclusion applies regardless of whether the insured person is actually charged with, or convicted of, a crime.
The parties' cross-motions for summary judgment focus upon the same discrete issue: whether the criminal and/or intentional acts of Ariel Cook precluded coverage for Carmelita Cook's alleged negligence. While both parties agree the Policy explicitly excludes coverage for criminal and/or intentional acts, they differ as to the scope of that exclusion.
Allstate relies upon the Policy's "Joint Obligations" provision to argue Ariel Cook's criminal and/or intentional acts "were binding upon" Carmelita Cook and thus, precluded coverage for any claim against her arising out of the same criminal and/or intentional acts. Plaintiff makes two contrary arguments. First, he argues the criminal and intentional act exclusions are vague insofar as they do not clarify whose criminal or intentional acts are excluded from coverage.
Second, he argues the criminal act exclusion is vague because it refers to "the insured" as the person to whom "this exclusion applies."
The court concludes the Policy's explicit exclusion of coverage for criminal and/or intentional acts, coupled with its "Joint Liability" provision, precluded coverage of claims asserted against Carmelita Cook in the underlying Castro lawsuit. While, "it is a well established principle of insurance law that exclusionary clauses in insurance policies are to be construed strictly against the insurer," the court "'may not, under the guise of strict construction, rewrite a policy to bind the insurer to a risk that it did not contemplate and for which it has not been paid.'" Allstate Ins. Co. v. Gilbert, 852 F.2d 449, 454 (9th Cir. 1988) (quoting Safeco Ins. Co. v. Gilstrap, 141 Cal. App. 3d 524, 533, 190 Cal. Rptr. 425 (1983)).
Plaintiff first argues the criminal and intentional act exclusions are vague because they fail to clarify whose criminal or intentional acts are excluded from coverage. See Policy, Exclusions 1.a), 2.a) (excluding coverage for "act or omission intended or expected to cause bodily injury or property damage" and for "criminal acts or omission"). The court rejects that argument. Allstate's wholesale exclusion of coverage for injury or damage arising out of any criminal or intentional act broadens rather than restricts the scope of the exclusion. In short, Allstate explicitly excludes coverage for all criminal or intentional acts. It is the very absence of any qualification which clarifies rather than obscures the scope of the exclusion.
Though ultimately unsuccessful, Plaintiff's second argument is more persuasive. In short, Plaintiff argues the criminal act exclusion is vague because it refers to "the insured" as the person to whom "this exclusion applies." See Policy, Exclusion 2.b) ("[criminal act or omission] exclusion applies regardless of whether the insured person is actually charged with, or convicted of a crime") (emphasis added). In light of the Policy's explicit "Joint Obligations" provision, however, the court rejects Plaintiff's second argument as well.
As both parties recognize, the question confronted by courts when interpreting intentional/criminal acts exclusions in the context of an innocent co-insured is whether the obligations of the insureds are joint or several. See, e.g., Sales v. State Farm & Cas. Co., 849 F.2d 1383, 1385 (11th Cir. 1988) (whether innocent co-insured can recover under policy depends on whether obligations of insureds are joint or several); American States Ins. Co. v. Borbor, 826 F.2d 888, 894 (9th Cir. 1987).
Courts have generally interpreted policies which exclude the "criminal or intentional acts of an or any insured to clearly exclude coverage for an innocent co-insured. See Gilbert, 852 F.2d at 454; Allstate Ins. Co. v. Condon, 198 Cal. App. 3d 148, 243 Cal. Rptr. 623 (1988). On the other hand, courts have interpreted policies which exclude the "criminal or intentional acts of the insured" to not exclude coverage for an innocent insured. See, e.g., Borbor, 826 F.2d at 894.
The court need not resort to semantic distinctions in the present case, however, because the Policy expressly imposes joint liability for the criminal acts of an insured; that is, such conduct precludes coverage of any other insured under the policy. As the Borbor court noted in interpreting an otherwise ambiguous criminal acts exclusion, "had [the insurer] intended that the wrongful act of any insured would void the policy, it could have unambiguously drafted and included such language in the contract". Id. In drafting the Policy at issue, Allstate did just that. Namely, Allstate included a "Joint Obligations" provision which explicitly voids coverage for liability arising out of the criminal and/or intentional acts of any "Insured Person" under the Policy. Because Carmelita Cook's alleged liability in the underlying Castro lawsuit arose out of the criminal acts of Ariel Cook -- an "Insured Person" under the Policy -- the court determines the Policy did not provide coverage as a matter of law.
Because there was no potential for coverage, Allstate owed Carmelita Cook no duty to defend her against the Castro lawsuit. See Gilbert, 852 F.2d at 453-54 (no duty to defend where coverage precluded under intentional/criminal acts exclusion); Allstate Ins. Co. v. Tankovich, 776 F. Supp. 1394 (N.D. Cal. 1991) (same); see generally Dykstra v. Foremost Ins. Co., 14 Cal. App. 4th 361, 368, 17 Cal. Rptr. 2d 543, 546 (1993) ("where there is no potential for third party to recover on a covered claim, there is no duty to defend"). Accordingly, the court grants Defendant's and denies Plaintiff's motion for summary judgment.
Because the allegations of the underlying complaint gave rise to no potential for coverage under the Policy, Allstate owed Carmelita Cook no duty to defend her against those allegations or the Castro lawsuit as a whole. In short, in light of the Policy's explicit coverage exclusions, Carmelita Cook had no reasonable expectation the Policy would defend her against a lawsuit arising out of her son's criminal homicide of another youth at a public recreation center. Accordingly, the court grants Defendant's and denies Plaintiff's motion for summary judgment.
IT IS SO ORDERED.
MARILYN L. HUFF, JUDGE
UNITED STATES DISTRICT COURT
Filed: March 22, 1994