18th Aug 2015

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There are five types of acts considered in the courts when the issue is whether the act in question is covered as an “accident” or “occurrence” under a liability or property policy. The five acts are:

1. intentional act;
2. deliberate act;
3. fortuitous act;
4. acts excluded under Insurance Code § 533;
5. sexual act

For purposes of establishing insurance coverage under a liability policy or property policy, an intentional act is distinct from a deliberate act. A covered intentional act is a fortuitous act. A deliberate act is a non-fortuitous act. See § F44 FORTUITOUS [§ F44:02 Deliberate act distinguished].

With regards to the subject of fortuity, a nonfortuitous act is one performed without being dependent on “chance”, one which would “inevitably” cause harm. [Prudential-LMI Com. Ins. v. Superior Court (1990) 51 Cal. 3d 674, 695] See § I27 INEVITABLE [§ I27:1 In general].

Intentional act

An intentional act for purposes of being a covered act under a liability or property policy is an unexpected, unforeseen, or designed happening or consequence of an act from either a known or unknown cause. [Hogan v. Midland National Ins. (1970) 3 Cal. 3d 553, 559]

Deliberate act

A “deliberate act” is an act performed by one who knowingly contemplates the “result” of his act before committing the act. [Hogan v. Midland National Ins. (1970) 3 Cal. 3d 553, 560] See § D24 DELIBERATE ACT [§ D24:1 Liability policy]; § D24:4 Intentional vs. deliberate acts]. Such acts are excluded. Compare however when a deliberate act is coupled with some additional, unexpected, independent and unforeseen happening that produces injury. An illustration of this is a deliberate act coupled with a mistake causing damage. This becomes an accident covered under a liability policy. [Firco v. Fireman’s Fund (1959) 173 Cal. App. 2d 534, discussed at § T47 TREES; WRONGFUL CUTTING [§ T47:2 Duty to defend].

Insurance Code § 533 precludes an insurer’s liability for a deliberate act the insured expected or intended to cause damage. [Reagen’s Vacuum v. Beaver Ins. (1994) 31 Cal. App. 4th 375, 388]

Fortuitous act

A fortuitous act is an event which so far as the parties to the contract are aware, is dependent on “chance”. See § F44 FORTUITOUS [§ F44:2 Fortuitous as defined in the Restatement of the Law, Contracts]. The opposite of an act dependent on chance is a loss which would have incurred inevitably. An “inevitable event” occurs in the absence of an accident or occurrence. [Prudential-LMI Com. Ins. v. Superior Court (1990) 51 Cal. 3d 674, 695]

A nonfortuitous act may resemble in many circumstances a deliberate act because both acts lead to results which are “inevitable”. However the circumstances of these two latter acts can distinguish a deliberate act from a nonfortuitous act. A nonconsensual sexual act is a deliberate act by the wrongdoer. A nonfortuitous act is one performed without chance. As a matter of insurance law all sexual acts are excluded under Insurance Code § 533. See § S32 SEXUAL ACTS.

Illustrations of nonfortuitous acts are:

1.  turning off an MRI machine with knowledge the act would damage the machine;
2.  constructing a shower without a shower pan which inevitably led to water damage;
3.  developing property in violation of the law [Modern Development Co. v. Navigators Ins. (2003) 111 Cal. App. 4th 932] 4. trespass by the construction of a building that encroached on the adjoining owner’s property [Fire Ins. Exchange v. Superior Court (2010) 181 Cal. App. 4th 388] See § T51 TRESPASS [§ T51:4].

Acts barred by Insurance Code § 533

Insurance Code § 533 states: “An insurer is not liable for a loss caused by the wilful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured’s agent or others.”

A “wilful” act under Insurance Code § 533 precludes coverage for liability arising from deliberate conduct that the insured expected or intended to cause damage. [Mez Industries v. Pacific Nat. Ins. (1999) 76 Cal. App. 4th 856, 876] A “wilful” act is conduct more blameworthy than the sort of misconduct involved in ordinary negligence, something more than mere intentional doing of an act constituting such negligence. [Transport Indem. v. Aerojet General (1988) 202 Cal. App. 3d 1184, 1188] See § W15 WILLFUL ACT [§ W15:1 Generally].

Sexual acts are always excluded

Sexual acts performed by the insured are NEVER accidents, NEVER occurrences as a matter of law. [Merced Mutual Ins. v. Mendez (1989) 213 Cal. App. 3d 41; Quan v. Truck Ins. (1998) 67 Cal. App. 4th 503, 600 following Merced Mutual] Sexual molestation is a willful act under Insurance Code § 533. [Marie Y. v. General Star Indem. (2003) 110 Cal. App. 4th 928, 953] See § S32 SEXUAL ACTS. Because sexual acts are never covered under an insurance policy, the insured’s subjective intent never comes into play, never is a consideration, is totally irrelevant to the issue of coverage. [Rodriguez v. Williams (1986 Wash.) 729 P.2d 627, 630-631 discussed below]

Nonetheless California Courts of Appeal have discussed sexual acts coverage issues under the wrongful rubric of “accidental acts” or “deliberate acts” again noting that sexual acts are neither. The impact of wrongfully failing to distinguish sexual acts (and also nonfortuitous acts) from nonsexual acts and fortuitous acts is that one set of court of appeal opinions holds that “intentional acts” are not accidents and intentional acts are only covered if “some additional unexpected, independent and unforeseen happening occurs that produces damage”. A second set of court of appeal opinions holds just the opposite, that being “intentional” or “willful” acts within the meaning of insurance law principles are covered unless the acts is done with a “preconceived design to inflict injury”. See Gonzalez v. Fire Ins. Exchange (2015) 234 Cal. App. 4th 1220, 1239. See discussion § I58:03 Intentional acts which are excluded.

The historical confusion started in Merced Mutual Ins. v. Mendez , a case involving sexual assault, when the court stated:

“In terms of fortuity and/or foreseeability, both “the means as well as the result, must be unforeseen, involuntary, unexpected and unusual”. [Uniguard Mutual Ins. v. Argonaut (1978 Wash. App.) 579 P.2d 1015, 1018]  We agree coverage is not always precluded merely because the insured acted intentionally and the victim was injured. An accident, however, is never present when the insured performs a DELIBERATE ACT unless some additional, unexpected, independent, and unforeseen happening occurs that produces the damage (ibid). Clearly, where the insured acted deliberately with the intent to cause injury the conduct would not be deemed an accident. Moreover, where the insured intended all the acts that resulted in the victim’s injury, the event may not be deemed an “accident” merely because the insured did not intend to cause injury. Conversely, an “accident” exists when any aspect of the causal series of events leading to the injury or damage was intended by the insured and a matter of fortuity.” (emphasis added)

Merced Mutual Ins. was the first California appellate opinion that separated the “means” (i.e. act of the insured) from the “result” (consequences). Also, Merced Mutual Ins. statements limiting consideration of the insured’s intent to cause injury to causal series of events was not supported by citation to any authority other than presumably an interpretation of the holding in Uniguard Mutual Ins. v. Argonaut.

Uniguard Mutual Ins. held that a fire started by an 11 year old could not under an OBJECTIVE STANDARD be covered even though the resulting damage was not intended by the 11 year old. See discussion by the Washington Supreme Court in Rodriguez v. William, infra, 729 P.2d 627, 630.  After discussing Uniguard Mutual Ins. objective standard application, the Supreme Court of Washington overruled Uniguard Mutual Ins. holding that ordinarily the act of the insured must be viewed by considering the insured’s subjective state of mindRodriguez also held that if the insured’s act involved sexual misconduct, such misconduct was never covered under a policy as a matter of law. [Rodriguez 729 P.2d 627, 630] In California as now in Washington after the Supreme Court overruled Uniguard Mutual Ins., the subjective belief of the insured, i.e. the intent to cause damage (or consequence) controls. [Chadwick v. Fire Ins. (1993) 17 Cal. App. 4th 1112; Gonzalez v. Fire Ins. Exchange (2015) 234 Cal. App. 4th 1220, 1241-1242 discussed at § S32 SEXUAL ACTS [§ S32:1.01 Duty to defend; inseparably intertwined with sexual acts].

Quan v. Truck Ins. misquoted Merced Mutual Ins. (which wrongly relied upon Uniguard Mutual Ins.) by stating:

“An accident can flow from an INTENTIONAL ACT only if some additional unexpected, independent, and unforeseen happening occurs that produces the wrongful damage.” [Merced, supra, 213 Cal. App. 3d at page 50]

Quan’s misquote is its reference to an INTENTIONAL ACT, where Merced Mutual Ins. referred to a DELIBERATE ACT. Thus, Quan failed to recognize that intentional acts are not synonymous with deliberate acts. Quan further did not recognize that sexual acts are neither accidental acts nor deliberate acts, but are a separate category of “wilful” acts not covered because of Insurance Code § 533. See § W15 WILLFUL ACT [§ W15:9 Willful act as a matter of law].

Confusion in the appellate courts

Unfortunately, as is seen above, certain Courts of Appeal have used the terms intentional act, deliberate act, nonfortuitous act interchangeably. By this is meant that acts barred by Insurance Code § 533, which are acts synonymous with a deliberate act, one done for the express purpose of causing damage or intentionally performed with knowledge that damage is highly probable or substantially certain to result [§ W15 WILLFUL ACT [§ W15:2]] have been described as “intentional acts”. Use of this loose language has given rise to “dictum” [§ D42 DICTUM] stating that “intentional acts” (in reality, deliberate acts) are excluded even though the result is “unexpected” as described in Hogan v. Midland National Ins., supra.

Most acts performed by human beings in their daily lives are performed intentionally. If all intentional acts were to be excluded because the subjective intent of the insured cannot be considered, all liability and property policies would be illusory. See § I2 ILLUSORY [§ I2:2 In general]. Accordingly, most Courts of Appeal have held numerous acts performed intentionally are covered under a liability or property policy. See § I58 INTENTIONAL ACT [§ I58:1 Categories of intentional acts; some are covered, some are not covered, 2. Intent to cause consequences – No coverage; error of Collin v. American Empire Ins.].

With regards to nonfortuitous acts, if an act is not fortuitous, the party’s intention or knowledge of the consequence of a nonfortuitous act is irrelevant. Unfortunately acts which are otherwise not fortuitous have been described as “intentional acts”. Because the issue of “consequence of an act” is irrelevant as it relates to nonfortuitous acts, the courts have wrongly described subjective intent, or lack of knowledge of consequence irrelevant as it relates to an intentional (deliberate) act. See Collin v. American Empire (1994) 21 Cal. App. 4th 787, Merced Mutual Ins. v. Mendez (1989) 213 Cal. App. 3d 41, Albert v. Mid-Century Ins. (2015) 236 Cal. App. 4th 1281, 1290, citing State Farm v. Frake (2011) 197 Cal. App. 4th 568.

The confusion in the law regarding nonfortuitous, nonsexual acts has its origins in Collin v. American Empire Ins. (1994) 21 Cal. App. 4th 787, 810. In Collin, a case involving conversion, which is an act barred by Insurance Code § 533 as noted in Collin, the opinion after recognizing the applicability of Insurance Code § 533 nonetheless caused confusion by mischaracterizing the term “accident” as follows:

“Because the term “accident” refers to the insured’s intent to commit the act giving rise to liability, as opposed to his or her intent to cause the consequences of that act, the courts have recognized – virtually without with exception – that deliberate conduct is not an “accident” or “occurrence” irrespective of the insured’s state of mind. (emphasis added)

Collin, in making that statement referred to prior appellate decisions involving nonfortuitous acts of intentional misrepresentation, fraudulent acts, bank looting, intentional firing, fraud, oral copulation, wrongful termination cases. [Collin, 21 Cal. App. 4th 787, 810-812] Collin failed to recognize in its opinion that other intentional acts not involving such wrongful conduct were covered under Coverage A of a liability policy as an “accident”. See Gray v. Zurich Ins. (1966) 65 Cal. 2d 263, fn. 12] These distinctions in these various cases are discussed and “charted” in § D24 DELIBERATE ACT [§ D24:4 Intentional vs. deliberate acts]; § I58 INTENTIONAL ACT [§ I58:1 Categories of intentional acts; some are covered, some are not covered].

Subjective belief

One may commit a covered intentional act where the insured did not intend or expect damages. [Gonzalez v. Fire Insurance Exchange (2015) 234 Cal. App. 4th 1220, 1240; (insured denied commission of a sexual act)] See § D25.01 DENIAL OF INTENTIONAL AND DELIBERATE WRONGDOING – DUTY TO DEFEND THE INSURED; § I58:03 Intentional acts which are excluded, infra]. Conversely, one may commit an intentional act with the subjective intent to cause expected or intended damages. It is the insured’s subjective belief that determines whether coverage is excluded under the expected-or-intended-act exclusion in a policy. [Gonzalez v. Fire Insurance Exchange (2015) 234 Cal App. 4th 1220, 1240] See § E54 EXPECTED OR INTENDED ACT; § S103 SUBJECTIVE BELIEF OF THE INSURER AND INSURED; § S103.03 SUBJECTIVE BELIEF OF THE INSURER AND INSURED [§ S103.03:5 Expected or intended act; proof of subjective expectation].

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

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