The California Court of Appeal has held that a homeowners insurer was required to defend its insured in an assault and battery case where there was a possibility that the insured had acted in “self-defense.” ( Delgado v. Interinsurance Exchange of the Automobile Club of Southern California (2007) WL 1519893)
Facts
Jonathan Delgado and Craig Reid got into a physical altercation. Delgado later sued Reid, asserting two causes of action. In the first cause of action for intentional tort, Delgado alleged that Reid, acting without provocation or justification, repeatedly “struck, battered and kicked … Delgado ….” In the second cause of action for negligence, Delgado alleged that Reid “ negligently and unreasonably believed … that [Reid] was engaging in self-defense when [Reid] negligently and unreasonably physically and violently struck and kicked … Delgado ….”
Reid tendered defense of the action to his homeowners insurer, Interinsurance Exchange of the Automobile Club (the Exchange), under a policy with liability limits of $100,000. The Exchange, allegedly without conducting any investigation, rejected Reid’s tender. The Exchange asserted that Reid’s alleged liability (1) did not arise from an “occurrence,” or “accident,” as required by the policy’s insuring clause, and (2) fell within the policy’s exclusion for “intentional acts or omissions committed by … any insured that are (a) of a willful or malicious nature or (b) grossly negligent or reckless; and which could reasonably be expected to result in bodily injury.”
After the Exchange rejected Reid’s tender, Delgado and Reid reached a settlement of the personal injury action. As part of the settlement, Delgado dismissed his intentional tort claim against Reid, and Delgado and Reid stipulated that Reid had negligently used excessive force in the exercise of self-defense. The trial court then entered a judgment of $150,000 on Delgado’s negligence claim against Reid. Thereafter, Reid paid Delgado $25,000 in partial satisfaction of the judgment and assigned to Delgado any rights Reid might have against the Exchange for its refusal to defend. In return, Delgado gave Reid a partial satisfaction of judgment and a covenant not to execute on the remainder of the judgment against Reid’s own assets.
Delgado (as assignee) then sued the Exchange for declaratory relief, bad faith and enforcement of the underlying judgment. However, the trial court dismissed Delgado’s complaint against the Exchange at the pleading stage, ruling that Delgado’s claims against Reid in the underlying action were not potentially covered under the Exchange policy.
Holding
The Court of Appeal reversed. The appellate court reasoned that in the underlying action Delgado had alleged that Reid negligently acted in self-defense , which suggested the possibility that Reid had engaged in unintentional conduct. According to the appellate court, under prior case law, such unintentional conduct would qualify as an “occurrence” or “accident” within the meaning of the policy’s insuring clause, and would not fall within the policy’s “intentional acts” exclusion. Thus, the Exchange was obligated to defend Reid in the underlying action.
The appellate court further held that the Exchange could not claim there was any “genuine dispute” as to whether it had a duty to defend Reid in the underlying action. Specifically, in light of existing case law establishing that an insurer has a duty to defend an insured who may negligently have acted in self-defense, there could be no legal dispute that the Exchange had a duty to defend Reid in the underlying action. Further, to the extent that there was a factual dispute as to whether Reid had actually acted in self-defense, the very existence of that factual dispute would establish a potential for coverage and, hence, a duty to defend. The appellate court thus held that, as a matter of law, the Exchange had acted in bad faith (i.e., unreasonably) by failing to defend Reid in the underlying action. The appellate court remanded the matter to the trial court for further proceedings.
Comment
Oddly, it was the plaintiff in the underlying action who claimed that the insured might have acted in “self-defense.” Usually, of course, it is the insured who asserts that position. In any event, the appellate court concluded there was a factual issue as to whether the insured had negligently used excessive force while acting in self-defense. That factual issue was sufficient to trigger the insurer’s duty to defend.
Note that the appellate court was reviewing this case at the pleading stage. Thus, the court assumed that all of the plaintiff’s allegations against the insurer were true. While the appellate court may correctly have concluded that the plaintiff’s pleading was sufficient to state a cause of actionagainst the insurer, the appellate court seemingly went too far in holding that the insurer acted in bad faithas a matter of law. There may be other reasons, not apparent from the face of the plaintiff’s complaint, that explain why the insurer declined to defend the insured in the underlying action.