11th Nov 2013

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In preparing jury instructions for a trial involving insurance coverage, I undertook as part of a consulting relationship with a trial attorney to read the CACI jury instructions, § 2300 – § 2337.  My reaction after reading and absorbing the contents was:  ARE YOU KIDDING ME?

The jury instructions are inadequate in the following particulars:

1.    The Directions for use .  Many attorneys and judges do not believe that a CACI instruction should be modified. It is commonplace for an attorney researching the two volume CACI text to not read 2 CJER-TRIAL § 13.11 (modifying CACI instructions). This facade of infallibility exists because Rule 2.1050(e) [Use of instructions] advises that use of CACI “… is strongly encouraged”.  Some attorneys and judges are not aware that CACI instructions are not the law itself, and are not entitled to a “presumption of correctness”.  Bowman v. Wyatt (2010) 186 Cal.App.4th 286, 298, fns. 6, 7.

2.    The CACI instruction is followed by a section entitled Sources and Authority.  This section is composed of direct quotes from appellate decisions.  There is no explanation as to how the quotes are to be used or tailored to a particular insurance trial when the CACI instruction is incomplete.  Confusion as to use of the Sources and Authority section is due to the fact that judges are told to use great care when using statements from opinions because statements taken out of context may be inappropriate when the particular facts of the opinion are distinguishable.  Bay Summit v. Shell Oil (1996) 51 Cal.App.4th 762, 778, fn. 9.  If the Sources and Authority section consisted of an overview of the law as it relates to the subject of the CACI instruction, which overview places the quoted judicial opinions in an organized perspective the proper use of the Sources and Authority would be more meaningful.  See Pantoja v. Anton (2011) 198 Cal.App.4th 87, 129-133 where a judge gave an instruction based on a California Supreme Court opinion which was a correct statement of the law.  However this instruction was misleading under the circumstances of the particular case without additional instructions.

3.    Some CACI instructions do not give guidance to the definitional meaning of important terms.  Reluctance to define terms so as to give meaning to a jury panel stems from an unexplained statement in the CACI USER GUIDE:  “The instructions avoid separate definitions of legal terms whenever possible”. CACI USER GUIDE, page xxv. Such terms left repeatedly undefined are:  (1) unreasonable, (2) without proper cause.  This leaves an opening in the closing argument portion of the case for counsel to argue to the jury alleged meanings of these terms which are not accurate, supporting erroneous “argument” definitions by false illustrations.  For example the meaning of “unreasonable” in a dictionary is not the same meaning as “unreasonable” in the law of insurance.  See Adelman v. Associated Intern. Ins. (2001) 90 Cal.App.4th 352, 369-370 (an honest mistake, bad judgment or negligence is not “bad faith”).

This NEWSLETTER discusses the rather simple, short CACI 2303 instruction for exclusions.   Surrounding CACI 2303 are the following questions:

1.    Should CACI 2303 be read at all notwithstanding the fact the insurer is quoting an instruction from the policy in question?
2.    What record or motions should the trial court have before it, or should rule upon, before the court determines if CACI 2303 should be read or modified to conform to the facts of the case?


CACI 2303 states:

[Name of defendant] claims that [name of plaintiff]’s [liability/loss] is not covered because it is specifically excluded under the policy. To succeed, [name of defendant] must prove that [name of plaintiff]’s [liability/loss] [arises out of/is based on/occurred because of] [state exclusion under the policy].

Preliminary considerations

This instruction is woefully inadequate.  Before drafting a jury instruction pertaining to exclusions, the first consideration must be given to whether the court should instruct on the particular exclusion.  See § E49 EXCLUSIONS [§ E49:10 Purview of the exclusion; insured’s conduct as “outside the purview”; exclusion does not apply].  There are numerous theories available to prevent the insurer from asserting a policy exclusion.  See § E49:25 Theories to prevent insurer from asserting an exclusion as a defense.  

When does the trial judge instruct the jury about one or more policy exclusions?  The answer is that a jury is advised about an exclusion when there exists no factual issue regarding the exclusion’s applicability to act as a complete or partial bar to plaintiff’s loss.  Where there exists a factual issue regarding whether a policy exclusion is applicable to bar coverage, CACI 2303 should reflect the subject of the dispute, as follows:

Named plaintiff claims that [his][her] loss [liability] is covered because the exclusion just read to you was not [the predominate cause – first party] [loss] [did not thoroughly investigate – first party, see CACI 2332 discussed in § J13.03:4.13  or [was potentially covered under the policy – third party, see § J13.03:4.17] as I will more fully instruct on.



In a first party property loss, the insured, when confronted by an exclusion, desiring to contest an exclusion’s application,  must offer admissible evidence factually disputing the application of the exclusion.  See Adams v. Allstate (C.D. Cal. 2002) 187 F.Supp.2d 1219, 1228 (insured failed to offer any evidence to dispute the insurer’s denial of coverage based upon expert testimony);  § F47 FOUNDATION, CRACKING [§ F47:3 Sufficiency of proof of facts to establish coverage].

Foundation, cracking exclusions

The foundations of a structure may be damaged by a number of causes.  When a loss is caused by a combination of a covered and specifically excluded risk, the loss is covered if the covered risk is the efficient proximate cause.  [State Farm v. Von Der Lieth (1991) 54 Cal.3d 1123, 1131-1132]  See § F47 FOUNDATION, CRACKING [§ F47:2 Coverage; efficient proximate cause]; § J13.03:4.5 [CACI 2306 covered and excluded risk]

Contradictory facts disputing the relevance of an exclusion

Denial of a claim contradicted by existing facts may be deemed unreasonable.  A jury may find that an insurer acted unreasonably if the insurer ignores evidence available to it which supports the claim of plaintiff.  [Wilson v. 21st Century (2007) 42 Cal.4th 713, 721]  See § I81 INVESTIGATE: DUTY OF INSURER – FIRST PARTY POLICY [§ I81:2.3 Contradictory fact], [§ I81:2.4 Ignoring facts].  An insurer must “thoroughly investigate” into any possible basis that might support the insured’s claim before the insurer can deny coverage.  See § I81 INVESTIGATE: DUTY OF INSURER – FIRST PARTY POLICY [§ I81:2 “Thoroughly investigate” defined].


Construction defect performed by subcontractor; faulty workmanship exclusion

When an insured/subcontractor is denied a defense based upon the faulty workmanship exclusion, the insured subcontractor must introduce evidence showing that “other causes” such as improper maintenance by others, defective materials supplied by others or designed by others (covered loss), were a cause of the third party damage.  [George F. Hillenbrand v. INA (2002) 104 Cal.App.4th 784, 793-794]  See § F49 FRAMING CONTRACTOR [§ F49:2 Faulty workmanship exclusion; coverage due to some other cause];  § O41 OTHER PROPERTY [§ O41:2 – O41:3].

Absolute earth movement exclusion in CGL policy; exclusion applies to only part of the loss

A CGL liability policy will contain “absolute earth movement exclusions”.  These exclusions exclude coverage caused by earth movement, earthquake, landslide, subsidence, mud flow, erosion or the sinking, rising, shifting, expanding or contracting of earth or soil.  If a contractor, when confronted with this exclusion, proves that the property damage was caused by construction defects other than subsidence, the exclusion may not apply.  [USF Ins. v. Clarendon America (C.D. Cal. 2006) 452 F.Supp.2d 972, 983, 995; discussed at § E2 EARTH MOVEMENT [§ E2:6 Liability policy – absolute earth movement exclusion]. See § J13.03:4.5 CACI 2306.

Lack of “connection”

Any exclusion from coverage in a policy must necessarily be connected  to the insured’s wrongful acts, not to the wrongful acts of a third party  [Marquez Knolls Property Owners v. Executive Risk Indem. (2007) 153 Cal.App.4th 228, 234]  See § E49 EXCLUSIONS [§ E49:10.3 Lack of “connection”].

Proximate cause

Any limitation on the insurer’s defense obligations must be read to extend only to property damage caused by that work.  [USF Ins. v. Clarendon America (C.D. Cal. 2006) 452 F.Supp.2d 972, 998]

Intentional vs. non-intended conduct

So long as the possibility of a judgment based upon non-intentional conduct exists, there is a potential for coverage giving rise to the insurer’s duty to defend.  Where the issue of “intent” is disputed, the intentional conduct exclusion may not apply.  [McGranahan v. Ins. Corp. of New York (2008, E.D. Cal.) 544 F.Supp.2d 1052, 1059]  See § C107 CONTRACTOR’S LIABILITY POLICY [§ C107:5.1 Intentional v. non-intentional conduct].


In the absence of a factual issue regarding an exclusion’s applicability to bar coverage, the interpretation of an exclusion is a question of law for the court.  See § E49 EXCLUSIONS [§ E49:12.1 Interpretation is a question of law for the court].  The determination of whether an exclusion applies in the absence of a factual dispute is made by the court outside the presence of the jury.  If the court determines that the exclusion is not ambiguous or is conspicuous, plain and clear, then the exclusion [with or without modification as discussed above] is read to the jury.  See Aas v. Superior Court (2006) 24 Cal.4th 627, 633-634 discussed at § M13 MANDAMUS [§ M13:8 Motion to exclude all evidence]; § M50.05 MOTIONS IN LIMINAE.  There exists numerous theories to support an insured’s contention that an exclusion does not apply.  See § E49 EXCLUSIONS [§ E49:25 Theories to prevent insurer from asserting an exclusion as a defense].

Ambiguous plain and clear

Insureds often attempt to persuade the court to instruct the jury that exclusions cannot be ambiguous, are strictly construed or must be conspicuous, plain and clear.  All of these subjects are questions of law for the court and not subject to a determination by a jury.  See § A66 AMBIGUITY [§ A66:2]; § B22 BROAD CONSTRUCTION OF COVERAGE [§ B22:2.1 Exclusion, strict construction defined];  § E49 EXCLUSIONS [§ E49:13 Exclusions construed against insurer; reason for rule];  § C83 CONSPICUOUS [§ C83:1.1 Issue of law]; § P48 PLAIN AND CLEAR [§ P48:01 Issue of law]. 

BOLDS references are to sections in Volumes 1, 2 and 3 of CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE, available through Thomson Reuters at 1-800-344-5008.

Subscribers to WestLaw can research all volumes of California Insurance Law Dictionary and Desk Reference on WestLaw by referencing CAINLAWDDR

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