Innocent Blood: California Style. May the “Innocent” Insured Recover Despite a Coinsured’s Intentional, Excluded Act?

The problem of coverage for the so-called "innocent insured" is a recurring one. The issue arises when there is more than one insured on the policy and one commits an act that would bar coverage. Does that act bar coverage for all, or only for the intentional actor? In California, this problem has reared its head again, or, more accurately, two heads, in the form of two cases the state Supreme Court has agreed to hear and decide. One presents the issue in the context of property coverage, the other as whether there is a duty to defend the non-actor insured under a liability policy.

• Century National Ins. Co. v. Garcia, S179252, rev. gr. 3/17/10. The state Supreme Court just granted review last week. At issue is whether an insurer may enforce an exclusion in a fire policy that denies coverage to "innocent insureds" for damages from a fire intentionally caused by a coinsured. The gist of the insured’s argument is that California Insurance Code Section 2071 mandates the language of fire policies, and it couches the intentional acts exclusion in terms of "the insured." Century National’s policy barred coverage for all when any insured acted intentionally. Garcia asks whether insurers may deviate from the statute’s prescribed language, and to what extent.
• Minkler v. Safeco Ins. Co., S174106, question certified 8/12/10. Minkler, now fully briefed, asks whether the severability clause in a liability insurance policy can trump an intentional acts exclusion which prohibits coverage for all insureds when "an insured" — i.e., any insured — has committed an excluded intentional act. In Minkler, one insured committed child sex abuse. The victim sued not only the abuser but his mother, also an insured, for negligently-supervising her adult son. The victim and insured in Minkler argue that the severability clause creates separate insurance policies, and therefore, an "innocent" insured sued for negligently-supervising the intentional actor is entitled to a defense. Their theory is that because there supposedly are "separate" policies, the only intent that is relevant is that of the mother, who never committed an intentional act. The insurer, by contrast, contends that the severability clause was never designed to rewrite the plain language of the exclusions. The insurer is represented by Appellate Strategist lawyers.