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Supreme Court Decision Limits Insurers' Defense Duties In Intentional Tort Cases

By: Kurt W. Melchior

A California Supreme Court decision significantly narrows an insurer's duty to defend policyholders named in lawsuits alleging assault, battery or other intentional conduct.

On August 3, 2009, California's Supreme Court unanimously held in Delgado v. Interinsurance Exchange of the Automobile Club of Southern California, No. S 155129, that "an injury-producing event is not an ‘accident' within the policy's coverage language when all of the acts, the manner in which they were done, and the objective accomplished occurred as intended by the actor." Thus, there was no duty to defend the insured against the claims alleged.

For over 40 years, Gray v. Zurich Ins. Co. has been the foundation for the California courts' expansive interpretation that required insurance companies to defend their policyholders against lawsuits even where the underlying claims alleged only intentional conduct. (Indemnity against the insured's intentional conduct is forbidden by statute, Insurance Code section 533, and by most insurance policies.) As in this week's Delgado case, the policyholder in Gray was sued solely on claims of assault and battery. Gray v. Zurich Ins. Co. (1966) 65 Cal.2d 263. Recognizing that the underlying pleadings were "malleable, changeable and amendable," the Gray Court refused to assume that the facts would support the exclusion which the insurer had invoked. Instead, the Court held that an insurer "cannot construct a formal fortress of the third party's pleadings and retreat behind its walls." Rather, a complaint which "presented the possibility that [plaintiff] might obtain damages that were covered by the indemnity provisions of the policy" must be defended by the defendant's liability insurer, even though the complaint had also alleged that the insured "willfully, maliciously, brutally and intentionally assaulted" the plaintiff.

The Delgado court did not overrule Gray v. Zurich but dismissed its reasoning in substantial part. Mainly, the Delgado court explained that the assault and battery allegations did not state claims potentially covered under the standard insuring agreement, which had been revised by the insurance industry in 1985. The Delgado court held that Gray and other cases which followed it were distinguishable because they only "pertain to the question of unreasonable use of force or unreasonable self-defense in the context of an insurance policy's exclusionary clauses, not as here in the context of a policy's coverage clause." Exclusions, the court observed, quoting from a later decision, "are construed narrowly and must be proven by the insurer, [whereas] the burden is on the insured to bring the claim within the basic scope of coverage."

Insurers can be expected to argue broadly that Delgado is a game-changer with respect to the duty to defend, certainly with respect to claims of intentional torts such as that at issue there and even beyond. That is not necessarily the case; but policyholders will need to marshal focused arguments to obtain a defense in cases alleging intentional misconduct. For instance:

  • As stated, Delgado focused narrowly on "accident" policies and did not abrogate the defense obligation for policies where the coverage limitation appears in an exclusion.

  • After Delgado, policyholders must be alert to identify possible causes of underlying claims involving acts with an unintended bad outcome somewhere in the chain of events leading up to the present claim – a point where one or more of those "acts, the manner in which they were done, and the objective accomplished" did not "occur[] as intended by the actor." (State of California v. Allstate Ins. Co., 45 Cal. 4th 1008 (2009).)

  • When confronted with claims alleging both intentional and unintentional conduct, policyholders should focus on the latter and demand a defense to the entire lawsuit, under the reasoning of Buss v. Superior Court, 16 Cal. 4th 97 (1997).

California continues to impose a broad duty to defend where any component of the policyholder's alleged actions or their results is unintentional. Less than six months ago, the same California Supreme Court ruled – again unanimously – in the State of California case noted above, that although the insured had intentionally placed toxic wastes in a containment pond from which they leaked and then greatly damaged the environment, for defense coverage purposes the critical moment in the chain of events which led to that pollution was not the insured's placement of the wastes in the pond but its "negligently designing, building, and operating the site." In such a situation (and there may be many variations of it), defense coverage, at the least, should be required; and the Court so ruled. Dual causation, such as this scenario evokes, is well established in insurance coverage law. State Farm Mut. Auto Ins. Co. v. Partridge, 10 Cal. 3d 94 (1973).

The liberating force of Gray v. Zurich has sustained policyholders and their bar for nearly half a century. Now, because the insurance industry changed the placement of a word within the policy language and because different judges are sitting, that is no longer the case. But there may still be means at hand to retrieve defense coverage in many disputed cases, as explained above.

Kurt W. Melchior is chair of the firm's Insurance Coverage Practice Group. He has over 50 years' experience litigating complex commercial matters, including class actions, antitrust, insurance coverage, healthcare, and professional responsibility cases. He can be reached at

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