26th Oct 2015
Insurer’s redefinition of “personal injury” in recent policies in order to reduce personal injury coverage to listed acts which are triggered only if caused by an “occurrence” (accident)
In recent years, insurers have devised an endorsement restricting coverage for COVERAGE B acts. This is accomplished by restricting COVERAGE B acts to only those acts that arise from an “occurrence” (accident). [Grange Ins. v. Lintott (N.D. Cal. 2015) 77 F. Supp. 3d 926, 936] This change to the “trigger” for COVERAGE B torts is not insignificant. See discussion at § P40:2.1 – § P40:2.1.1. Over the past decades, COVERAGE B torts [see § P40:3 Coverage B “offenses” described] were referred to as “personal injury coverage B torts”. Appellate court decisions described “personal injury” torts in a highly specialized sense. The phrase “personal injury” as construed by the courts did not mean physical damage to person or property. Rather, the phrase “personal injury” was described to mean an injury arising out of false arrest, detention or imprisonment, malicious prosecution, wrongful eviction, oral or written libel, slander, oral or written publication of material that violates a person’s right to privacy. See Martin Marietta Corp. v. Insurance Co. of North America (1995) 40 Cal. App. 4th 1113, 1124-1125]
Insurance industry change
The insurance industry changed the nature and extent of “personal injury” coverage from intentional tort acts to only those intentional torts (personal injuries) arising from an occurrence or accident, which are acts that at best are described as “not implausible”. [Grange Ins. v. Lintott (N.D. Cal. 2015) 77 F. Supp. 3d 926, 936 (homeowner’s policy containing coverage for “personal injury” caused by an occurrence covers only “accidental defamation”)]
The same insurance industry change restricting coverage for “personal injury” has been implemented to restrict coverage for false imprisonment. [Lyons v. Fire Ins. Exchange (2008) 161 Cal. App. 4th 880, 886 (homeowner’s policy “merging” coverage B torts into coverage A “occurrence” torts)] See § F8 FALSE IMPRISONMENT [§ F8:2 False imprisonment based upon negligence].
Significance in merging coverage A with coverage B
The import in terms of coverage is:
1. The merger of coverage A with coverage B quickly reduces coverage for defense costs. Coverage B indemnity for damages is precluded by Insurance Code § 533. See § F8 FALSE IMPRISONMENT [§ F8:1.1].
2. The insurance company under the merger plan will pay for the cost of defense only when coverage B torts are caused by an “occurrence”. [Grange Ins. v. Lintott (N.D. Cal. 2015) 77 F. Supp. 3d 926, 936]
Insurer’s coverage provision merging coverage A and coverage B
The Grange Insurance policy provided coverage in the event of “bodily injury” or “property damage” caused by an “occurrence”. The policy set forth definitions for each of these items. “Occurrence” was defined as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions, which results, during the policy period, in: (a) “bodily injury”; (b) “property damage”. “Property damage” was defined as “physical injury to, destruction of, or loss of use of tangible property”. “Bodily injury” was defined as “bodily harm, sickness or disease, including required care, loss of services and death that results”.
In Grange Ins. v. Lintott, the insured Lintott “for an additional premium” of $31.00, purchased “personal injury”. The endorsement defined “personal injury as including, in part, injury arising out of one or more of the following offenses: … (2) libel, slander or defamation of character …”. [Grange Ins. v. Lintott (N.D. Cal. 2015) 77 F. Supp. 3d 926, 929] Unfortunately for the insured Lintott, the “personal injury” coverage for defamation was included within the definition of “bodily injury” under the “personal injury endorsement”. Compare Lyons v. Fire Ins. Exchange (2008) 161 Cal. App. 4th 880, 886 where “personal injury” covering false arrest, imprisonment … was described as “personal injury” resulting from an “occurrence” in the policy coverages.
The validity of the merger scheme, merging coverage A with coverage B
If an insurance term (e.g. personal injury) has been previously judicially construed, this construction should be read into the policy UNLESS the parties express a contrary intent. [Cunningham v. Universal Underwriters (2002) 98 Cal. App. 4th 1141, 1150] See § C89 CONSTRUING A POLICY [§ C89:3 Judicial construction of a term]. A limitation in a policy [§ L42 LIMITATION ON COVERAGE [§ L42:1 In general]] or an exclusion [§ E49 EXCLUSION [§ E49:13], [§ E49:13.02]], that takes away or limits coverage reasonably expected by the insured must be conspicuous, plain and clear to be enforceable. [North American Building v. Fireman’s Fund Ins. (2006) 139 Cal. App. 4th 627, 642] For the policy language to be plain and clear the limitation should be precise and understandable. [Feurzeig v. Ins. Co. of the West (1997) 59 Cal. App. 4th 1276, 1283] Words in an exclusion (limitation) must be part of the vocabulary of an average person and must be part of the working vocabulary of average persons and must be phrased in a logical manner. [Blasiar Inc. v. Fireman’s Fund (1999) 76 Cal. App. 4th 748] Whether a coverage limitation is plain and clear is an issue of law, reviewed de novo. [Brown v. Mid-Century (2013) 215 Cal. App. 4th 841, fn. 7] See § P48 PLAIN AND CLEAR [§ P48:01 In general]; § L11 LAYMAN: CONSTRUCTION OF POLICY PROVISIONS [§ L11:2]. A policy should be read as a layman would read it and not as it might be analyzed by an attorney or insurance agent expert. [Canadian Ins. v. Ehrlich (1991) 229 Cal. App. 3d 383, 392] Also see § L11:9 Factors that a layman can consider in establishing coverage.
As a general rule, “personal injury” under coverage B differs from coverage A in that coverage B grants coverage for injury arising out of specific types of offenses that are OTHERWISE EXCLUDED UNDER COVERAGE A. Unlike liability coverage for bodily injury or property damage under coverage A, “personal injury” coverage under coverage B is not based on an accidental occurrence. Rather, “personal injury” is triggered by one of the offenses listed in the policy. See discussion § P40:2.1 – § P40:2.2.
Additionally, coverage B coverage for damage differs from coverage A. See § P40: 3.17 Coverage B [CGL] coverage for damage differs from Coverage A.
A provision is not “clear and conspicuous” where its purpose is to change law, which purpose would be outside the knowledge of a layman. The change of coverage in the industry’s merger of coverage A and coverage B was not a change of any definition of defamation, false imprisonment, etc. The change was a change to the “trigger” of coverage [see § T53 TRIGGER OF COVERAGE] limiting coverage to coverage B intentional tort offenses only caused by an “occurrence” (accident). Laymen are bound by the meaning of words used in the ordinary sense. When ordinary people do not understand the meaning of a word they generally turn to a dictionary. [Stamm Theaters v. Hartford Cas. (2001) 93 Cal. App. 4th 531, 543] A dictionary, for example, sets forth the meaning of “evict” “eviction” “wrongful eviction”. [Cunningham v. Universal Underwriters (2002) 98 Cal. App. 4th 1141, 1149-1150]
“Personal injury” coverage B has been defined and described in numerous appellate decisions. See § P40:2.1.1CGL policy: designation of “occurrence” under Coverage A and Coverage B. Coverage B offenses are construed broadly to encompass all specific torts which reasonably could fall within the general category. [Martin Marietta v. Insurance Co. of North America (1995) 40 Cal. App. 4th 1113, 1125] Additionally, the specific words within “personal injury” coverage B have been defined. See § P40:2.2.1 Words defined; § P40:3.7 Definitions. Given the numerous appellate decisions which have judicially construed the meaning of “personal injury” coverage B, Ms. Lintott, in paying the $31.00 for coverage for defamation, would not have concluded that coverage for defamation would be limited to “accidental” triggers for defamation listed on the wall in the men’s restroom or other limited “non-implausible” defamation described in the Restatement of Torts. [Grange Ins. v. Lintott (N.D. Cal. 2015) 77 F. Supp. 3d 926, 936] Limitation of the “trigger” of merger limiting such coverage would be known only to a coverage attorney. If the $31.00 premium for this extra coverage endorsement for personal injury is meant to be for rare occurrences giving rise to such intentional torts coverage, the insured should be entitled to be told that such coverage is so limited. Otherwise, the judicial construction of “personal injury” should exist entitling the insured to a defense on the grounds that such limitation is not plain and clear as described above.
References in bold are to Mr. Cornblum’s legal text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE (2015), published by ThomsonReuters (1-800-344-5008). Those with WestLaw can search using the database CAINLAWDDR