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Minkler v. Safeco Insurance Company of America

June 17, 2010


9th Cir. No. 07-56689. C.D. Cal. No. CV-07-04374-MMM.

The opinion of the court was delivered by: Baxter, J.

We have agreed to answer a question of California insurance law directed to us by the United States Court of Appeals for the Ninth Circuit. Scott Minkler (Scott) sued David Schwartz (David) and David's mother, Betty Schwartz (Betty), alleging that David, an adult, sexually molested Scott, then a minor. The complaint alleged, among other things, that some of the acts of molestation occurred in Betty's home, and as a result of Betty's negligent supervision.

Betty was the named insured under a series of homeowners policies issued by Safeco Insurance Company of America (Safeco), and David was an additional insured. The policies' liability coverage provisions promised to defend and indemnify, within policy limits, "an" insured for personal injury or property damage arising from a covered "occurrence," but they specifically excluded coverage for injury that was "expected or intended" by "an" insured, or was the foreseeable result of "an" insured's intentional act. Absent contrary evidence, in a policy with multiple insureds, exclusions from coverage described with reference to the acts of "an" or "any," as opposed to "the," insured are deemed under California law to apply collectively, so that if one insured has committed acts for which coverage is excluded, the exclusion applies to all insureds with respect to the same occurrence. (E.g., Fire Ins. Exchange v. Altieri (1991) 235 Cal.App.3d 1352, 1360-1361 (Altieri); see California State Auto. Assn. Inter-Ins. Bureau v. Warwick (1976) 17 Cal.3d 190, 194-195.)

However, as is often the case, the instant policies also contained a severability-of-interests or "separate insurance" clause providing that "[t]his insurance applies separately to each insured." The question is whether such a clause establishes, in a case like this, an exception to the rule described above, so that Betty is barred from coverage only if her own conduct in relation to David's molestation of Scott fell within the policies' exclusion for intentional acts.

Courts nationwide are split on the general issue whether a severability-of-interests provision in a policy covering multiple insureds alters the otherwise collective effect of an exclusion for the acts of "an" or "any" insured. Two California Court of Appeal decisions, though not directly on point, are arguable authority for the proposition that a severability-of-interests clause cannot have such an effect. (See Bjork v. State Farm Fire & Casualty Co. (2007) 157 Cal.App.4th 1 (Bjork); California Casualty Ins. Co. v. Northland Ins. Co. (1996) 48 Cal.App.4th 1682 (California Casualty Ins. Co.).) A majority of this court has not previously spoken on the point. (But see Safeco Ins. Co. v. Robert S. (2001) 26 Cal.4th 758, 771-778 (conc. & dis. opn. of Baxter, J.) (Robert S.).)

Applying California principles of insurance policy interpretation, we now conclude that an exclusion of coverage for the intentional acts of "an insured," read in conjunction with a severability or "separate insurance" clause like the one at issue here, creates an ambiguity which must be construed in favor of coverage that a lay policyholder would reasonably expect. Given the language of the "separate insurance" clause, a lay insured would reasonably anticipate that, under a policy containing such a clause, each insured's coverage would be analyzed separately, so that the intentional act of one insured would not, in and of itself, bar liability coverage of another insured for the latter's independent act that did not come within the terms of the exclusion. We thus determine that Betty was not precluded from coverage for any personal role she played in David's molestation of Scott merely because David's conduct fell within the exclusion for intentional acts.


The facts are taken (with some paraphrasing) from the Ninth Circuit's order in Minkler v. Safeco Ins. Co. (2009) 561 F.3d 1033 (Minkler), requesting this court to address an issue of California law.

In 2003, Scott sued Betty and David in superior court. Scott's first amended complaint alleged that David, Scott's Little League coach, had sexually molested Scott over a period of several years, beginning in 1987. Scott asserted multiple causes of action against David, including sexual battery, intentional infliction of emotional distress, negligence, and negligence per se. Scott also asserted a single cause of action for negligent supervision against Betty, based on allegations that David molested Scott in Betty's home, that Betty knew her son was molesting Scott, but that Betty failed to take reasonable steps to stop her son from doing so.

From August 26, 1988, to August 26, 1995, Betty held a series of homeowners insurance policies issued by Safeco.*fn1 The policies provided general liability coverage to each insured up to a limit of $300,000 for each occurrence. The policies defined "an insured" to include both the policyholder and any relative resident of the policyholder's household. At the relevant times, David was an additional insured under the policy, apparently by virtue of this definition.

The "Exclusions" provisions of the policies' liability coverage section contained an intentional acts exclusion that provided: "Personal Liability [coverage]... do[es] not apply to bodily injury or property damage: (a) which is expected or intended by an insured or which is the foreseeable result of an act or omission intended by an insured...." However, the policies' "Conditions" provisions also contained a severability-of-interests clause that stated: "This insurance applies separately to each insured. This condition will not increase our limit of liability for any one occurrence." (See Minkler, supra, 561 F.3d 1033, 1034.)

Acting on behalf of himself and Betty, David tendered the defense of Scott's complaint to Safeco. Citing the intentional acts exclusion, Safeco's insurance adjuster denied the tender as to both David and Betty.

Scott then obtained a default judgment against Betty in the amount of $5,020,612.20. Subsequently, Scott entered into a settlement agreement with Betty. In exchange for a covenant not to execute on the judgment, Betty assigned her claims against Safeco to Scott.

On May 15, 2007, Scott filed this action in superior court against Safeco and Safeco's insurance adjuster, Patricia Orris. The complaint asserted causes of action for breach of contract and tortious breach of the covenant of good faith and fair dealing. It alleged, in essence, that, in light of the severability-of-interests clause, Safeco had wrongfully denied coverage for Scott's claim against Betty. By stipulation, Orris was dismissed from the action. Safeco removed the case to the United States District Court for the Central District of California on the basis of diversity of citizenship.

In federal court, Safeco filed a motion to dismiss (Fed. Rules Civ. Proc., rule 12(b)(6), 28 U.S.C.) on the ground the intentional acts exclusion barred coverage for Scott's claims against Betty. Scott conceded that, absent the severability clause, the intentional acts exclusion would bar coverage for his negligent supervision claim against Betty; David was "an insured" within the meaning of the policy, and Scott's bodily injury resulted from David's intentional acts. However, Scott contended the severability-of-interests clause excepted Betty's coverage from the exclusion, either expressly or under California rules for interpretation of ambiguity in insurance contracts.

The district court granted Safeco's motion to dismiss, and Scott timely appealed. Concluding that the effect, under California law, of the severability-of-interests clause on the policies' coverage of Scott's claim against Betty would determine the outcome of the action, the Ninth Circuit requested that this court decide the following question: "Where a contract of liability insurance covering multiple insureds contains a severability-of-interests clause in the 'Conditions' section of the policy, does an exclusion barring coverage for injuries arising out of the ...

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