In an interesting new decision, the Ninth Circuit in Aspen Specialty Ins. Co. v. Miller Barondess, LLP (“Miller Barondess”) held that Section 533 of the California Insurance Code—which states that “[a]n insurer is not liable for a loss caused by the willful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured’s agents or others”—precluded coverage under a lawyers professional liability insurance policy issued to the law firm Miller Barondess, LLP for a malicious prosecution action. In doing so, the Ninth Circuit reversed a district court ruling that Section 533 did not apply because there had been no final adjudication of the malicious prosecution allegation.FACTSThe litigation resulting in the Miller Barondess coverage decision spun off from two other cases: Lincoln Studios, LLC v. DLA (the “Lincoln Studios Action”) and P6 LA MF Holdings SPE, LLC v. NMS Capital Partners I, LLC (the “Malicious Prosecution Action”).A. The Lincoln Studios ActionIn 2010, P6 LA MF Holdings SPE, LLC (“AEW”) and NMS Capital Partners I, LLC (“NMS”) entered into a joint venture agreement (the “JVA”) in order to acquire and develop residentia

__________________________________Fortuity is the hallmark of liability insurance, incorporated into insurance policies through the definition of “occurrence.” California law adds an additional layer of complexity to the typical occurrence requirement in Section 533 of the California Insurance Code, which prohibits coverage for an insured’s wilful acts. Recently, California courts had the opportunity to revisit these concepts in AIU Ins. Co. v. McKesson Corp. (discussing occurrence)1 and Certain Underwriters at Lloyd’s of London v. ConAgra Grocery Products Co. (discussing Section 533).

And this theory is being tested in climate change cases against energy companies.As new legal theories and trends emerge, so do insurance cases addressing coverage for those liabilities. A recent California decision tackles one issue: Is a public nuisance claim based on the willful acts of the insured’s predecessor barred from coverage?The case—Certain Underwriters at Lloyd’s London v. ConAgra Grocery Products Co.—addresses California Insurance Code Section 533. That law says an insurer is not liable for a loss caused by the policyholder’s willful act.

A California federal court, applying California law, found that a lawsuit for intentional interference with contractual relations necessarily alleged a willful act and was therefore uninsurable under California Insurance Code Section 533. United Talent Agency v. Markel Am. Ins. Co., 2023 WL 6449399 (C.D. Cal. Sept. 29, 2023). The court further held that other counts in the underlying lawsuit that were not necessarily willful were likewise precluded by Section 533 because they were inseparably intertwined with the alleged willful conduct.During the effective period of its management liability policy, the insured talent management agency was sued by a competing agency. The competing agency alleged that the insured had intentionally interfered with contractual relations, induced breach of contract, intentionally interfered with prospective economic advantage, conspired to breach its fiduciary duty and duty of loyalty, aided and abetted breaches of fiduciary duty and duty of loyalty, breached its fiduciary duty, breached its duty of loyalty, and engaged in unfair competition under California law.After resolving the underlying lawsuit by settlement, the insured sought and was denied coverage from the insurer. In the ensuin

An insurer issued a professional liability policy to a law firm. The law firm faced a suit for malicious prosecution in connection with a real estate transaction gone awry, which settled prior to trial. The insurer denied coverage for the settlement based on California Insurance Code Section 533. Section 533 provides that “[a]n insurer is not liable for a loss caused by the wilful act of the insured.”The insurer sought declaratory relief that its policy did not cover the settlement. The United States District Court for the Central District of California held that, because the underlying lawsuit settled, the willful conduct was not sufficiently established and therefore Section 533 did not apply.The Ninth Circuit reversed, holding that Section 533 does not require a final adjudication of willful conduct. The court held that, in applying Section 533, California courts examine the allegations of the underlying complaint, not whether there has been an actual adjudication of those allegations. The court also rejected an argument that the underlying lawsuit fell into a carveout to Section 533, providing that an insurer “is not exonerated by the negligence of the insured, or of the insured’s agents or others.” The court noted that, even though the underlying lawsuit sought to hold t

The insured employer sought coverage for a claim brought by a former employee. The employee alleged that the company promised him an equity stake in the company but later refused to pay and instituted arbitration. The employer tendered the claim under its EPL policy. The policy excluded claims “arising out of, based upon or attributable to the committing of any . . . deliberate fraudulent act if any final adjudication establishes that such . . . deliberate fraudulent act was committed.” The insurer agreed to defend under a reservation of rights. The arbitrator found that the company engaged in fraud because it never intended to honor its promise of equity. After the employee confirmed the arbitration award in his favor, the insurer denied coverage for the judgment.In the ensuing coverage litigation, the court sided with the insurer. First, the insurer cited California Insurance Code Section 533. The court agreed that Section 533 “prohibits indemnification for intentionally harmful conduct such as fraud.” Second, the insurer cited the fraud exclusion in its policy. The court agreed that the judgment implicated the exclusion because the arbitrator found that the insured induced its former employee to stay with fraudulent intent.The court also dismissed the insured’s claim for breach of the implied covenant of good faith and fair dealing. It also rejected the insured’s request for leave to amend the complaint, finding that such efforts would be futile.[View source.]

The courts have reached different conclusions in each on motions for summary judgment.First, a California trial court ruled, in Certain Underwriters at Lloyd's of London v. ConAgra Grocery Products Company, that California's willful acts insurance law precluded coverage for public nuisance claims against the insured based on its predecessor's promotion of lead paint. Evidence in the underlying liability litigation established that the predecessor had actual knowledge that lead paint on residential interior surfaces posed a public health hazard.In the subsequent coverage litigation, the court rejected the insured's attempt to be "insulated from" that knowledge, as well as its argument that the scienter findings in the underlying litigation were insufficient to meet the willfulness standard of California Insurance Code §533, which provides that an "insurer is not liable for a loss caused by the willful act of an insured." According to the court, the fact that senior managers of the predecessor company were not proven to have knowledge of the relevant hazards made no difference, because under §533, an entity's employees' collective knowledge "is what matters."

g and transmitting to multiple regulatory authorities documents Erhart believed evidenced possible wrongdoing; those documents included personal and confidential information that belonged to Garrabrants. At trial, a jury awarded Garrabrants $1,502 on his claims against Erhart for invasion of privacy, receiving stolen property and unauthorized access to computer data in violation of Penal Code § 502. The trial court awarded Garrabrants more than $65,000 in costs and more than $1.3 million in attorney’s fees as the prevailing party. The Court of Appeal reversed the judgment, holding that the trial court erroneously instructed the jury that bank customers have an unqualified reasonable expectation of privacy in financial documents disclosed to banks; that Erhart needed to believe the documents may have been lost or destroyed had he not removed them; and other instructional errors regarding the Penal Code claims. See City of Whittier v. Everest Nat’l Ins. Co., 97 Cal. App. 5th 895 (2023) (Cal. Ins. Code § 533 barring insurer liability for a loss caused by the wilful act of the insured does not preclude insurer indemnification of whistleblower claims arising under Cal. Lab. Code § 1102.5).Health Care “Opt-Out Credits” Do Not Count Towards Calculation Of FLSA Regular Rate of PaySanders v. County of Ventura, 87 F.4th 434 (9th Cir. 2023)The Ninth Circuit affirmed the district court’s grant of summary judgment in favor of the employer (Ventura County) in this putative class action arising under the federal Fair Labor Standards Act (“FLSA”), brought by county firefighters and police officers who opted out of their union- and employer-sponsored health plans. The employees who opted out of these health plans received monetary compensation in return, however part of the compensation was deducted as a fee that was then used to fund the plans from which they had opted out. The employees argued that this opt-out fee should count as part of their “regular rate” of pay for purposes of calculating overti

rds in an effort to convert otherwise non-accidental conduct into an accident.That theory relies on the argument that an insured who suffers from mental illness or delusion may not have the capacity to understand the nature, quality or wrongfulness of their deliberate conduct, or may have otherwise acted under an irresistible impulse.See e.g. Allstate Cas. Ins. Co. v. Griffin, 2005 WL 2122053 *1 (N.D. Cal. 2005); Jacobs v. Fire Ins. Exch., 36 Cal.App.4th 1258 (1995).The argument continues: if the insured is unable to appreciate the nature of their deliberate conduct, or cannot stop it, then they cannot form the intent to act, which somehow renders their deliberate conduct accidental. Griffin, supra,2005 WL 2122053 at *3 (arguing that the insured’s “status as legally insane means that he was incapable of an intentional act”).Surprisingly, few California courts have addressed the issue.And those that have done so seemingly conflate the impact that insanity may have on the application of California Insurance Code section 533 – an exclusion that does require an intent to harm – with the analysis of “accident” – which does not focus on the insured’s state of mind.SeeGriffin, supra,2005 WL 2122053 at *3.In doing so, those courts appear to have ignored that determining whether conduct constitutes an “accident” involves a coverage question, not an exclusion question.Ray, supra, 77 Cal.App.4th at 1048; Ross v. United Servs. Auto. Assn., 2005 WL 375581 *3 (Cal. Ct. App. 2005) (“coverage, not intent, is the threshold question”).Recently, a federal district court considered the issue in First National Ins. Co. of America, et al. v. Redmond James O’Neal, et al., USDC, C.D. Cal., Case No. 2:22-cv-05201-GW-SKx (2023).There, two individuals alleged that Redmond O’Neal (“O’Neal”) violently attacked them in separate unprovoked incidents. Specifically, they accused O’Neal of slitting the throat and plunging a knife into the head of one of them, and hurling a homophobic slur and striking the other in the head with a bottl

y 2023 decisions from the Illinois Supreme Court on the applicable statute of limitations and its determination that a separate claim accrues each time a private entity scans or transmits an individual's biometric identifier or information in violation of section 15(b) or 15(d) of the act likely will lead to additional privacy act litigation.The California Supreme Court recently ruled that the right to privacy includes the right to seclusion in a fax blasting case involving Yahoo, an issue upon which U.S. courts are divided.Lead PaintCoverage issues relating to the $400 million plus lead paint abatement fund (reduced from a $1.15 billion fund) involving three lead paint manufacturers have been subject to three separate coverage actions. Insurers prevailed at the trial court and on appeal in California in theConAgracase based upon the insured's predecessor having actual knowledge of the harms associated with lead paint when it promoted lead paint for interior residential use based upon Section 533 of the California Insurance Code. In theSherwin-Williams and NL Industriescases, the policyholders prevailed in the intermediate appellate courts in New York and Ohio even though the same underlying judgement was involved. Forever ChemicalsForever chemicals have been around since at least the 1940s and have been used in so many products they are said by many to be ubiquitous. Yet, forever chemicals only recently became one of the most fervent areas for civil litigation. There are now thousands of cases pending across the United States, with some eye-opening settlements such as a 3M settlement of $850 million, $70 million by Wolverine, and DuPont's settlement with its spin-off Chemours culminating in the creation of a $4 billion fund for future liabilities. Over a dozen states are suing manufacturers and others for contaminating drinking water and damaging natural resources. Governmental regulators in the United States arrived late to the scene. It was not until September 2022 that the Biden administration announced it