In Helguera v. Mid-Century Insurance Co., California’s Fourth District Court of Appeal held that an intentional acts exclusion in the liability coverage part of a homeowners insurance policy issued by Mid-Century Insurance Co. barred coverage for an underlying wrongful death lawsuit. The court rejected the insured’s argument that the exclusion rendered coverage illusory.
The underlying wrongful death lawsuit involved a shooting at a party at the insured’s house. During the party, the insured pointed an unloaded gun at a guest, pulled the trigger, and the gun did not fire. The insured then set the gun down. Unbeknownst to him, a guest later loaded a round into the firearm. Later during the party, the insured picked up the firearm again, aimed it at a guest, and pulled the trigger without confirming whether the gun was still unloaded. This time, the now-loaded gun shot and killed the guest. As a result of this incident, the insured pleaded guilty to involuntary manslaughter in a separate criminal proceeding.
The insured sought defense and indemnity coverage from Mid-Century for the underlying wrongful death lawsuit. Mid-Century denied coverage. Thus, the insured (through his parents as assignees of his interests) sued Mid-Century for breach of contract for failing to provide coverage and bad faith. The trial court granted Mid-Century’s motion to dismiss the lawsuit, and the insured appealed.
On appeal, the California appellate court affirmed the dismissal on the grounds that the policy’s intentional acts exclusion barred coverage. The exclusion stated, in part:
We do not cover bodily injury … which is caused by, arises out of or is the result of an intentional act by or at the direction of any insured. By way of example this includes but is not limited to any intentional act or intentional failure to act by any insured, whether a criminal act or otherwise, where resulting injury or damage would be objectively expected to a high degree of likelihood, even if not subjectively intended or expected. This exclusion applies even if … [a]ny insured did not understand that injury or damage may result …
For purposes of application of this exclusion, a plea of guilty, no contest, or true in a criminal proceeding, which involves the same acts or activities which are the basis of a claim for damages against any insured, shall conclusively bar any bodily injury … arising or resulting from or caused by such acts or activities from coverage under this policy. This applies whether the insured actually admits or admitted guilt by plea.
On appeal, the insured did not dispute that the terms of the intentional acts exclusion unambiguously barred coverage for the underlying wrongful death lawsuit. Instead, the insured argued that the exclusion “is facially invalid because it is so overbroad that it makes the policy’s promise of coverage for negligence claims illusory.”
In support, the insured appears to have focused on the fact that the exclusion, as written, can apply to intentional acts even if the insured did not subjectively expect or intend for the intentional act to cause harm. The insured claimed that every negligence claim against an insured arises to some extent from an insured’s intentional act. Thus, if the exclusion applied to any intentional act regardless of whether there was a subjective intent to cause harm, the exclusion would bar coverage for any negligence claim, rendering coverage for negligence claims illusory.
The California appellate court rejected the insured’s argument. It explained that, notwithstanding the insured’s contentions, a negligence claim against an insured is not always premised on an intentional act. For example, negligence claims can be premised on an insured’s failure to act. Accordingly, the court held that the exclusion was enforceable and did not render coverage illusory.
The California appellate court also affirmed the dismissal of the insured’s bad faith claim. The court explained that, when there is no coverage, the insured cannot prevail on a claim for bad faith.
