In Gonzalez v. Fire Insurance Exchange (No. H039368, filed 2/5/15), a California appeals court ruled that a personal umbrella policy’s broader coverage gave rise to a duty to defend sexual molestation allegations that were outside the coverage of the underlying primary homeowners policy.
The plaintiff sued Fire Insurance Exchange (FIE) and Truck Insurance Exchange (TIE) as the assignee and judgment creditor of an insured youth she had sued for participating in a gang rape of her during a college baseball team party. The youth was insured under his parents’ homeowners policy issued by FIE, and an umbrella policy issued by TIE. The plaintiff had alleged that the insured was a participant when she attended the party, was given shots of hard liquor and was subsequently assaulted by an unknown number of men. She sued nine individuals alleging 15 causes of action, including negligence for failing to rescue her, 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 the defendants had told others that she had consented to the sexual assault in the subsequent days and months following the party. All of the causes of action were pleaded as to the insured “and/or each” of the other named defendants, except for a single cause of action for negligence alleged against the insured.
The insured’s claim was denied under both primary and umbrella policies on the grounds that (1) none of the alleged conduct was the result of an ‘accident’ or ‘occurrence’; (2) all claims were excluded by a sexual molestation exclusion because they were all inextricably intertwined with the actual sexual molestation; (3) the policies excluded coverage for punitive damages; and, (4) the claims all involved willful conduct and were excluded by the intentional acts exclusion and Insurance Code section 533.
The appeals court agreed that the claims were not covered by the primary FIE homeowners policy, notwithstanding its inclusion of personal injury coverage for false imprisonment, wrongful invasion of rights of privacy and libel, slander or defamation of character. The policy covered “those damages which an insured becomes legally obligated to pay because of bodily injury, property damage or personal injury resulting from an occurrence,” with occurrence defined as an accident. Thus, the occurrence requirement applied not only to the bodily injury and property damage coverages, but the personal injury coverage as well. The Gonzalez court cited Lyons v. Fire Ins. Exchange (2008) 161 Cal.App.4th 880, which involved the same policy wording and where the court had concluded that the personal injury coverage was subject to the occurrence/accident requirement along with the bodily injury and property damage coverages.
The Gonzalez court then proceeded to find that there was no accident, even if the complaint alleged negligence. The court cited Quan v. Truck Ins. Exchange (1998) 67 Cal.App.4th 583, for the proposition that sexual molestation is not an accident, and “‘[n]egligent’ and ‘accidental’ are not synonymous.” Among other things, the Gonzalez court said that even if other cases found that false imprisonment could be committed accidentally, such facts had not been alleged in the plaintiff’s own underlying complaint: “[Her] attempt to parse out the complaint for accidental conduct that may give rise to coverage is unavailing; the entirety of her allegations involved intentional conduct.” The court likewise rejected an effort to argue that the underlying complaint’s allegations sounding in slander or invasion of privacy could be accidental. Thus, there was no duty to defend under the FIE homeowners policy.
The Gonzalez court came to a different conclusion for the TIE umbrella policy. The umbrella policy covered damages caused by an occurrence, which was defined to mean: “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.” Thus, as in commercial general liability policies, the accident requirement applied only to the bodily injury and property damage coverages, with personal injury coverage applying to “offenses committed during the policy period.” Thus, the court found a potential for coverage stating:
“Accordingly, the Truck umbrella policy sets forth no requirement that a personal injury arise out of an ‘accident’ in order for there to be coverage. As a result, Gonzalez’s complaint, which alleged causes of action for false imprisonment, slander per se, and invasion of privacy, raised the potential for coverage under the umbrella policy’s provision providing coverage for damages from an ‘occurrence’ resulting in ‘personal injury,'” as occurrence is specifically defined in the TIE umbrella policy.
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