Ct.App. 2/7 B209616 Los Angeles County Super. Ct. No. BC379522
The opinion of the court was delivered by: Baxter, J.
At issue in this case is a fire insurance policy that contains clauses excluding coverage for losses caused by the intentional act or criminal conduct of "any insured." The question is whether, based on these exclusion clauses, the insurer properly prevailed on a demurrer to the cross-complaint of two allegedly innocent insureds who suffered losses when their son, a coinsured under the policy, intentionally set fire to their home. We conclude the answer is no, because the clauses impermissibly reduce coverage that is statutorily mandated. We therefore reverse the judgment of the Court of Appeal, which found otherwise.
FACTUAL AND PROCEDURAL BACKGROUND
Jesus Garcia, Sr., and his wife Theodora Garcia (the Garcias) suffered substantial damage to their home when their adult son set fire to his bedroom. At the time of the fire, the home was covered under a homeowner's policy issued by Century-National Insurance Company (Century-National). Under this policy, Jesus Garcia, Sr., was the named insured, and Theodora Garcia and their son also qualified as insureds. The Garcias filed an insurance claim for the damage, which Century-National investigated and denied.
Century-National filed a complaint seeking a declaration that it has no duty to pay for the Garcias' loss because its insurance policy contains clauses excluding coverage for the intentional act or criminal conduct of "any insured" (collectively, the intentional acts exclusion). The Garcias filed a cross-complaint alleging causes of action for breach of contract, breach of the implied covenant of good faith and fair dealing, and reformation.
As relevant here, Century-National demurred to the cross-complaint, contending the intentional acts exclusion bars any recovery by the Garcias because their son intentionally set fire to their home. The Garcias opposed the demurrer, asserting the policy's intentional acts exclusion impermissibly conflicts with provisions of the Insurance Code that would not bar so-called "innocent insureds" from recovering despite a coinsured's intentional or criminal conduct.*fn1
The trial court agreed with Century-National, determining that (1) the Century-National policy defines the term "any insured," as contained in the intentional acts exclusion, to include relatives of the insured who lived at the insured property, i.e., the Garcias' adult son, (2) courts generally interpret policy exclusions for intentional or criminal acts to exclude coverage for innocent coinsureds, and (3) Insurance Code section 533 expressly sets forth California's public policy of denying coverage for willful wrongs. The court sustained the demurrer without leave to amend and entered a judgment dismissing the cross-complaint. The Court of Appeal affirmed.
In California, fire insurance policies are regulated by the Insurance Code.*fn2 Section 2070 provides: "All fire polices . . . shall be on the standard form, and, except as provided by this article shall not contain additions thereto. No part of the standard form shall be omitted therefrom except that any policy providing coverage against the peril of fire only, or in combination with coverage against other perils, need not comply with the provisions of the standard form of fire insurance policy . . . ; provided, that coverage with respect to the peril of fire, when viewed in its entirety, is substantially equivalent to or more favorable to the insured than that contained in such standard form fire insurance policy." (Italics added.) Provisions of the standard form fire policy are set forth in section 2071. Thus, a policy that does not conform to section 2071's standard provisions must provide total fire coverage that is at least "substantially equivalent" to coverage provided by the standard form. (§ 2070; see Julian v. Hartford Underwriters Ins. Co. (2005) 35 Cal.4th 747, 754 [policy exclusions are unenforceable to the extent they conflict with the Insurance Code].)
As the pleadings reflect, the Century-National policy is a package policy divided into two sections: Section I pertains to property coverage, while Section II pertains to liability coverage. There is no dispute the Section I property coverage is in effect a fire policy subject to the requirements of sections 2070 and 2071. Accordingly, we examine the coverage terms and exclusions applicable to that section.
Section I provides in relevant part that Century-National does "not cover loss caused directly or indirectly by any of the following excluded perils, whether occurring alone or in any sequence, or concurrently, with a covered peril: [¶] . . . [¶] 9. Intentional Loss, meaning any loss arising out of any act committed by or at the direction of any insured having the intent to cause a loss. [¶] 10. Dishonesty, Fraud or Criminal Conduct of any insured." (Italics added.)*fn3
That this intentional acts exclusion uses the term "any insured" is significant. As we recently explained, "[a]bsent 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." (Minkler v. Safeco Ins. Co. of America (2010) 49 Cal.4th 315, 318 [citing cases]; see Western Mutual Ins. Co. v. Yamamoto (1994) 29 Cal.App.4th 1474, 1486-1487.) Consequently, under the policy as written, the Garcias may not recover against Century-National because, even if they were innocent of wrongdoing, their fire losses were caused by another insured, who acted intentionally and criminally.
Although the Century-National policy purports to exclude coverage of the Garcias' losses, section 2070 requires a comparison of the policy with the standard form fire policy set forth in section 2071. The question is whether the Century-National policy provides coverage that is at least as favorable to the insureds as the coverage provided in the standard form. If application of the intentional acts exclusion in the former results in coverage that is not at least substantially equivalent to the level of protection available in the latter, the exclusion is to that extent invalid. (§ 2070; Julian v. Hartford Underwriters Ins. Co., supra, 35 Cal.4th at p. 754.)
Notably, the statutory standard form contains no express exclusion for losses caused by intentional acts or criminal conduct. (See § 2071.) By virtue of section 533, however, "[a]n insurer is not liable for a loss caused by the wilful act of the insured." Because section 533 represents " 'an implied exclusionary clause which by statute is to be read into all insurance policies' " (J. C. Penney Casualty Ins. Co. v. M. K. (1991) 52 Cal.3d 1009, 1019 [citing cases]), the standard form fire ...