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Gonzalez v. Fire Insurance Exchange

California Court of Appeals, Sixth District

February 5, 2015

JESSICA GONZALEZ, Plaintiff and Appellant,
v.
FIRE INSURANCE EXCHANGE et al., Defendants and Respondents.

Santa Clara County Super. Ct. No. 1-11-CV215537

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COUNSEL

Adleson, Hess & Kelly, Randy M. Hess and Pamela A. Bower for Plaintiff and Appellant.

Becherer Kannett & Schweitzer, Lori A. Schweitzer, Dolores Bastian Dalton and Susan Beneville for Defendant and Respondent.

OPINION

PREMO, J.

In 2007, plaintiff Jessica Gonzalez alleged she was sexually assaulted by Stephen Rebagliati and nine other members of the De Anza College baseball team. A year later, Gonzalez filed a civil lawsuit against her purported assailants. Rebagliati sought insurance coverage for his defense against Gonzalez’s claims through his parents’ homeowner’s and personal umbrella policies, issued by respondents Fire Insurance Exchange (Fire) and Truck Insurance Exchange (Truck). Both companies denied coverage. Eventually, Rebagliati settled with Gonzalez, assigning Gonzalez his rights against Fire and Truck. Gonzalez subsequently filed a complaint against the insurers for breach of the duty of good faith and fair dealing and breach of contract. She also sought recovery of judgment pursuant to Insurance Code section 11580. Fire and Truck moved for summary judgment, arguing they had not owed Rebagliati a duty to defend. The trial court granted their motion for summary judgment.

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On appeal, Gonzalez argues the trial court erred in granting summary judgment, because there was a potential for coverage in her underlying action against Rebagliati due to her allegations of accidental bodily injury, false imprisonment, invasion of privacy, and slander. She also contends Truck’s umbrella policy is broadly worded and does not require an “accident” for personal injury coverage. We conclude summary judgment was properly granted in favor of Fire, because none of Gonzalez’s claims can be construed to allege an accidental occurrence triggering insurance coverage. However, we find the trial court erred in granting summary judgment in favor of Truck, as the insurer failed to conclusively demonstrate its policy exclusions eliminated all potential for coverage. We therefore reverse the order granting summary judgment and remand to the trial court for further proceedings.

Factual and Procedural Background

Gonzalez’s Civil Lawsuit against Rebagliati

On March 3, 2008, Gonzalez filed a civil lawsuit against Rebagliati and nine other individuals. Her complaint contained multiple preliminary allegations that were incorporated by reference in all of her causes of action. These allegations included the following: On March 3, 2007, Gonzalez, who was 17 years old at the time, was invited to a party held by several members of the De Anza College baseball team, including Rebagliati. Upon her arrival, she was given shots of hard liquor in quick succession. Later that night, she was assaulted by an unknown number of men as she lay unconscious in a room. Three women who witnessed the assault attempted to help her but were prevented by men inside the room. Gonzalez’s complaint alleged that Rebagliati, along with several other named defendants, was inside the room where she was assaulted. Eventually, the women broke through the doors and helped Gonzalez to a hospital where she received medical attention. Some of the men in the room took videos, photographs, and cheered while the assault took place.

In total, the complaint alleged 15 causes of action, including causes of action for negligence for failing to rescue Gonzalez from the assault, negligence for inviting her to the party, negligence for serving her alcohol, false imprisonment, invasion of privacy, slander per se, battery, sexual battery, rape, unlawful intercourse, forcible acts, oral copulation, and conspiracy. Her cause of action for slander per se alleged that in the subsequent days and months following the party the defendants had told others that she had consented to the sexual assault. All of the causes of action were pleaded as to Rebagliati “and/or each” of the other named defendants, except for a single cause of action for negligence alleged against Stephen Rebagliati.

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The Fire Homeowner’s Insurance Policy

Rebagliati was covered by a homeowner’s policy issued by Fire. The policy contained the following agreement: “We pay those damages which an insured becomes legally obligated to pay because of bodily injury, property damage or personal injury resulting from an occurrence to which this coverage applies. Personal injury means any injury arising from: [¶] (1) false arrest, imprisonment, malicious prosecution and detention. [¶] (2) wrongful eviction, entry, invasion of rights of privacy. [¶] (3) libel, slander, defamation of character. [¶] (4) discrimination because of race, color, religion or national origin. Liability prohibited by law is excluded. Fines and penalties imposed by law are covered. [¶] At our expense and with attorneys of our choice, we will defend an insured against any covered claim or suit.” (Boldface omitted.)

As defined by the policy, “[o]ccurrence means an accident including exposure to conditions which results during the policy period in bodily injury or property damage. Repeated or continuous exposure to the same general conditions is considered to be one occurrence. [¶] Occurrence does not include accidents or events which take place during the policy period which do not result in bodily injury or property damage until after the policy period.” (Boldface omitted.)

The Fire policy set forth certain exclusions. It specifically provided exclusions for “bodily injury, property damage or personal injury... caused intentionally by or at the discretion of an insured” or that resulted “from any occurrence caused by an intentional act of any insured where the results are reasonably foreseeable.”

The policy also stated it would not “cover actual or alleged injury or medical expenses caused by or arising out of the actual, alleged, or threatened molestation of a child by: [¶] 1. any insured; or [¶] 2. any employee of any insured; or [¶] 3. any volunteer, person for hire, or any other person who is acting or who appears to be acting on behalf of any insured.” (Boldface omitted.)

Additionally, the policy excluded coverage for personal injury “caused by a violation of penal law or ordinance committed by or with the knowledge or consent of any insured.”

The Truck Umbrella Policy

Truck issued an umbrella insurance policy covering Rebagliati, which listed the Fire homeowner’s policy on its schedule of underlying insurance. Truck’s coverage policy stated it would pay damages resulting from an

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“occurrence, ” and it would “defend any insured for any claim or suit that is covered by this insurance but not covered by other insurance.” The Truck policy defined an “occurrence” as “a. with regard to bodily injury or property damage, an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results in bodily injury or property damage during the policy period; or [¶] b. with regard to personal injury, offenses committed during the policy period, even if the resulting injury takes place after the policy expires.”

Bodily injury was defined as “bodily harm to, sickness or disease of any person. This includes death, shock, mental anguish or mental injury that result from such bodily harm, sickness or disease.” Personal injury was defined as injury arising out of several enumerated torts, including “a. false arrest, wrongful detention or imprisonment, or malicious prosecution; [¶] b. wrongful eviction, wrongful entry, or invasion of the right of private occupancy; or [¶] c. libel, slander, defamation of character or invasion of privacy.”

The Truck policy stated “[i]f a claim is made or suit is brought for damages excluded from coverage under this policy, we have no obligation to defend such claim or suit. If underlying insurance does not cover damages covered by this policy, we will: [¶]... defend the insured against any covered claim or suit.”

The policy included exclusions similar to those set forth in the Fire policy. The Truck policy excluded damages “[e]ither expected or intended from the standpoint of an insured.” The policy also excluded damages “[a]rising out of corporal punishment, molestation or abuse of any person by any” insured individual. It also excluded coverage for “personal injury arising out of oral or written publication of material when a willful violation of a penal statute or ordinance has been committed by or with the consent of the insured.”

Fire and Truck’s Denial of Coverage

On June 19, 2008, Rebagliati’s father sent a copy of the complaint filed by Gonzalez to Farmer’s Insurance. Lisa Le, a special general adjuster for Fire and Truck, was assigned Rebagliati’s claim. Le pulled copies of the Fire and Truck policies and consulted with coverage counsel.

On July 30, 2008, Le wrote to Rebagliati’s attorney, denying coverage for Rebagliati’s defense on the grounds that “(1) none of the alleged conduct was the result of an ‘accident’ and thus, there was no ‘occurrence’ as required by the [Fire] Homeowners Policy; (2) all of the claims were excluded by the [Fire] Policy’s Sexual Molestation Exclusion because they were all inextricably intertwined with the actual, alleged, or threatened sexual misconduct,

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sexual molestation, or physical or mental abuse of a minor; (3) the [Fire] Policy excluded coverage for claims for punitive damages; and (4) the claims all involved willful conduct and were excluded pursuant to the [Fire] Policy’s intentional acts exclusion as well as by Insurance Code section 533.” Le also explained that coverage was denied under the Truck policy for the same reasons.

Rebagliati’s attorney sought reconsideration of the denial, and Gonzalez’s complaint was forwarded to coverage counsel for analysis. In October 2008, Fire’s coverage counsel, Lawrence Guslani, wrote to Rebagliati’s attorney and denied coverage on the same grounds previously given. A month later, Rebagliati’s attorney again sought reconsideration of the denial. Guslani wrote back in February 2009, reiterating that coverage was denied because the allegations against Rebagliati were for sexual assault and other nonaccidental conduct.

In August 2009, Rebagliati’s attorney again tendered the defense to Fire and Truck. Guslani wrote to Rebagliati’s attorney and denied coverage.

The Bad Faith Action and Summary Judgment

Later, Rebagliati entered into a confidential settlement agreement with Gonzalez. As part of the agreement, Rebagliati assigned Gonzalez his contractual rights against Fire and Truck. Rebagliati further agreed to entry of judgment in the underlying action against him and in favor of Gonzalez.

In December 2011, Gonzalez initiated a bad faith action against Fire and Truck over their denial of coverage for Rebagliati’s defense.[1] Gonzalez alleged causes of action for breach of the duties of good faith and fair dealing, breach of contract, and sought direct recovery of judgment.

Both insurance companies moved for summary judgment, which the trial court granted on November 26, 2012, after finding the companies did not owe Rebagliati a duty to defend based on Gonzalez’s complaint. On December 18, 2012, judgment ...


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