Supreme Court of California Justia
Citation 49 Cal. 4th 315, 232 P.3d 612, 110 Cal. Rptr. 3d 612

Minkler v. Safeco Ins.

Filed 6/17/10

IN THE SUPREME COURT OF CALIFORNIA

SCOTT MINKLER,
Plaintiff and Appellant,
S174016
v.
SAFECO INSURANCE COMPANY OF
9th Cir. No. 07-56689
AMERICA,
C.D. Cal.
No. CV-07-04374-MMM
Defendant and Respondent.
____________________________________)

We have agreed to answer a question of California insurance law directed
to us by the United States Court of Appeals for the Ninth Circuit. Scott Minkler
(Scott) sued David Schwartz (David) and David‟s mother, Betty Schwartz (Betty),
alleging that David, an adult, sexually molested Scott, then a minor. The
complaint alleged, among other things, that some of the acts of molestation
occurred in Betty‟s home, and as a result of Betty‟s negligent supervision.
Betty was the named insured under a series of homeowners policies issued
by Safeco Insurance Company of America (Safeco), and David was an additional
insured. The policies‟ liability coverage provisions promised to defend and
indemnify, within policy limits, “an” insured for personal injury or property
damage arising from a covered “occurrence,” but they specifically excluded
coverage for injury that was “expected or intended” by “an” insured, or was the
foreseeable result of “an” insured‟s intentional act. Absent contrary evidence, in a
policy with multiple insureds, exclusions from coverage described with reference
1


to the acts of “an” or “any,” as opposed to “the,” insured are deemed under
California law to apply collectively, so that if one insured has committed acts for
which coverage is excluded, the exclusion applies to all insureds with respect to
the same occurrence. (E.g., Fire Ins. Exchange v. Altieri (1991) 235 Cal.App.3d
1352, 1360-1361 (Altieri); see California State Auto. Assn. Inter-Ins. Bureau v.
Warwick (1976) 17 Cal.3d 190, 194-195.)
However, as is often the case, the instant policies also contained a
severability-of-interests or “separate insurance” clause providing that “[t]his
insurance applies separately to each insured.” The question is whether such a
clause establishes, in a case like this, an exception to the rule described above, so
that Betty is barred from coverage only if her own conduct in relation to David‟s
molestation of Scott fell within the policies‟ exclusion for intentional acts.
Courts nationwide are split on the general issue whether a severability-of-
interests provision in a policy covering multiple insureds alters the otherwise
collective effect of an exclusion for the acts of “an” or “any” insured. Two
California Court of Appeal decisions, though not directly on point, are arguable
authority for the proposition that a severability-of-interests clause cannot have
such an effect. (See Bjork v. State Farm Fire & Casualty Co. (2007)
157 Cal.App.4th 1 (Bjork); California Casualty Ins. Co. v. Northland Ins. Co.
(1996) 48 Cal.App.4th 1682 (California Casualty Ins. Co.).) A majority of this
court has not previously spoken on the point. (But see Safeco Ins. Co. v. Robert S.
(2001) 26 Cal.4th 758, 771-778 (conc. & dis. opn. of Baxter, J.) (Robert S.).)
Applying California principles of insurance policy interpretation, we now
conclude that an exclusion of coverage for the intentional acts of “an insured,”
read in conjunction with a severability or “separate insurance” clause like the one
at issue here, creates an ambiguity which must be construed in favor of coverage
that a lay policyholder would reasonably expect. Given the language of the
2
“separate insurance” clause, a lay insured would reasonably anticipate that, under
a policy containing such a clause, each insured‟s coverage would be analyzed
separately, so that the intentional act of one insured would not, in and of itself, bar
liability coverage of another insured for the latter‟s independent act that did not
come within the terms of the exclusion. We thus determine that Betty was not
precluded from coverage for any personal role she played in David‟s molestation
of Scott merely because David’s conduct fell within the exclusion for intentional
acts.
FACTS
The facts are taken (with some paraphrasing) from the Ninth Circuit‟s order
in Minkler v. Safeco Ins. Co. (2009) 561 F.3d 1033 (Minkler), requesting this court
to address an issue of California law.
In 2003, Scott sued Betty and David in superior court. Scott‟s first
amended complaint alleged that David, Scott‟s Little League coach, had sexually
molested Scott over a period of several years, beginning in 1987. Scott asserted
multiple causes of action against David, including sexual battery, intentional
infliction of emotional distress, negligence, and negligence per se. Scott also
asserted a single cause of action for negligent supervision against Betty, based on
allegations that David molested Scott in Betty‟s home, that Betty knew her son
was molesting Scott, but that Betty failed to take reasonable steps to stop her son
from doing so.
From August 26, 1988, to August 26, 1995, Betty held a series of
homeowners insurance policies issued by Safeco.1 The policies provided general
liability coverage to each insured up to a limit of $300,000 for each occurrence.

1
The annually renewed policies did not differ materially in their terms. Thus
we, like the Ninth Circuit, discuss them collectively as “the policies.”
3


The policies defined “an insured” to include both the policyholder and any relative
resident of the policyholder‟s household. At the relevant times, David was an
additional insured under the policy, apparently by virtue of this definition.
The “Exclusions” provisions of the policies‟ liability coverage section
contained an intentional acts exclusion that provided: “Personal Liability
[coverage] . . . do[es] not apply to bodily injury or property damage: (a) which is
expected or intended by an insured or which is the foreseeable result of an act or
omission intended by an insured . . . .” However, the policies‟ “Conditions”
provisions also contained a severability-of-interests clause that stated: “This
insurance applies separately to each insured. This condition will not increase our
limit of liability for any one occurrence.” (See Minkler, supra, 561 F.3d 1033,
1034.)
Acting on behalf of himself and Betty, David tendered the defense of
Scott‟s complaint to Safeco. Citing the intentional acts exclusion, Safeco‟s
insurance adjuster denied the tender as to both David and Betty.
Scott then obtained a default judgment against Betty in the amount of
$5,020,612.20. Subsequently, Scott entered into a settlement agreement with
Betty. In exchange for a covenant not to execute on the judgment, Betty assigned
her claims against Safeco to Scott.
On May 15, 2007, Scott filed this action in superior court against Safeco
and Safeco‟s insurance adjuster, Patricia Orris. The complaint asserted causes of
action for breach of contract and tortious breach of the covenant of good faith and
fair dealing. It alleged, in essence, that, in light of the severability-of-interests
clause, Safeco had wrongfully denied coverage for Scott‟s claim against Betty. By
stipulation, Orris was dismissed from the action. Safeco removed the case to the
United States District Court for the Central District of California on the basis of
diversity of citizenship.
4
In federal court, Safeco filed a motion to dismiss (Fed. Rules Civ. Proc.,
rule 12(b)(6), 28 U.S.C.) on the ground the intentional acts exclusion barred
coverage for Scott‟s claims against Betty. Scott conceded that, absent the
severability clause, the intentional acts exclusion would bar coverage for his
negligent supervision claim against Betty; David was “an insured” within the
meaning of the policy, and Scott‟s bodily injury resulted from David‟s intentional
acts. However, Scott contended the severability-of-interests clause excepted
Betty‟s coverage from the exclusion, either expressly or under California rules for
interpretation of ambiguity in insurance contracts.
The district court granted Safeco‟s motion to dismiss, and Scott timely
appealed. Concluding that the effect, under California law, of the severability-of-
interests clause on the policies‟ coverage of Scott‟s claim against Betty would
determine the outcome of the action, the Ninth Circuit requested that this court
decide the following question: “Where a contract of liability insurance covering
multiple insureds contains a severability-of-interests clause in the „Conditions‟
section of the policy, does an exclusion barring coverage for injuries arising out of
the intentional acts of „an insured‟ bar coverage for claims that one insured
negligently failed to prevent the intentional acts of another insured?”
Pursuant to California Rules of Court, rule 8.548(f)(5), we restated the
question slightly to read as follows: “Where a contract of liability insurance
covering multiple insureds contains a severability clause, does an exclusion
barring coverage for injuries arising out of the intentional acts of „an insured‟ bar
coverage for claims that one insured negligently failed to prevent the intentional
acts of another insured?” We turn to that issue.

5


DISCUSSION2
The principles governing the interpretation of insurance policies in
California are well settled. “Our goal in construing insurance contracts, as with
contracts generally, is to give effect to the parties‟ mutual intentions. (Bank of the
West v. Superior Court (1992) 2 Cal.4th 1254, 1264; see Civ. Code, § 1636.) „If
contractual language is clear and explicit, it governs.‟ (Bank of the West, at
p. 1264; see Civ. Code, § 1638.) If the terms are ambiguous [i.e., susceptible of
more than one reasonable interpretation], we interpret them to protect „ “the
objectively reasonable expectations of the insured.” ‟ (Bank of the West, at
p. 1265, quoting AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 822.) Only
if these rules do not resolve a claimed ambiguity do we resort to the rule that
ambiguities are to be resolved against the insurer. (Bank of the West, at p. 1264.)”
(Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495,
501.) The “tie-breaker” rule of construction against the insurer stems from the
recognition that the insurer generally drafted the policy and received premiums to
provide the agreed protection. (See Crawford v. Weather Shield Mfg., Inc. (2008)
44 Cal.4th 541, 552; La Jolla Beach & Tennis Club, Inc. v. Industrial Indemnity
Co. (1994) 9 Cal.4th 27, 37-38.)
To further ensure that coverage conforms fully to the objectively reasonable
expectations of the insured, the corollary rule of interpretation has developed that,
in cases of ambiguity, basic coverage provisions are construed broadly in favor of
affording protection, but clauses setting forth specific exclusions from coverage

2
An amicus curiae brief in support of Betty has been filed by Steven W.
Murray, APC. An amicus curiae brief in support of Safeco has been filed jointly
by the American Insurance Association, the Pacific Association of Domestic
Insurance Companies, and the Property Casualty Insurers Association of America.
6


are interpreted narrowly against the insurer. The insured has the burden of
establishing that a claim, unless specifically excluded, is within basic coverage,
while the insurer has the burden of establishing that a specific exclusion applies.
(TRB Investments, Inc. v. Fireman’s Fund Ins. Co. (2006) 40 Cal.4th 19, 27;
MacKinnon v. Truck Ins. Exchange (2003) 31 Cal.4th 635, 647-648 (MacKinnon);
see also E.M.M.I., Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 471;
Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 406.)
The existence of a material ambiguity in the terms of an insurance policy
may not, of course, be determined in the abstract, or in isolation. The policy must
be examined as a whole, and in context, to determine whether an ambiguity exists.
(MacKinnon, supra, 31 Cal.4th 635, 648; Waller v. Truck Ins. Exchange, Inc.
(1995) 11 Cal.4th 1, 18.)
The basic liability coverage offered by Betty‟s Safeco policies was
expressed as follows: “If a claim is made or a suit is brought against an insured
for damages because of bodily injury or property damage caused by an occurrence
to which this coverage applies, we will: [¶] 1. pay up to our limit of liability for
the damages for which the insured is legally liable; and [¶] 2. provide a defense
at our expense . . . .” Safeco does not contend that Scott‟s claims against Betty fell
outside the scope of this basic coverage provision.3

3
The policies defined an “occurrence” as “an accident, including exposure to
conditions which results, during the policy period, in bodily injury or property
damage.” (Italics added.) Safeco does not assert that Scott‟s claims related to his
alleged molestations by David are beyond the scope of this basic coverage because
the molestations were not “accident[s],” and we have not been asked to address
that issue. We therefore do not do so. (But see Delgado v. Interinsurance
Exchange of Automobile Club of Southern California
(2009) 47 Cal.4th 302, 308-
317; Hogan v. Midland National Ins. Co. (1970) 3 Cal.3d 553, 560.)
7


In the liability “Exclusions” provisions, the policies stated that “Personal
Liability [coverage] . . . do[es] not apply to bodily injury or property damage”
which, among other things, “is expected or intended by an insured or which is the
foreseeable result of an act or omission intended by an insured.” (Italics added.)
California decisions uniformly have held that, viewed in isolation, a clause
excluding coverage for particular conduct by “an” or “any” insured, as opposed to
“the” insured, means that such conduct by one insured will bar coverage for all
other insureds under the same policy on claims arising from the same occurrence.
This rule applies even when the insureds seeking coverage did not themselves
participate in the act for which coverage is excluded, and even when their liability
is premised on their own independent acts or omissions that would otherwise be
covered. (Medill v. Westport Ins. Corp. (2006) 143 Cal.App.4th 819, 832;
California Casualty Ins. Co., supra, 48 Cal.App.4th 1682, 1697-1698; Western
Mutual Ins. Co. v. Yamamoto (1994) 29 Cal.App.4th 1474, 1486-1487; Altieri,
supra, 235 Cal.App.3d 1352, 1361.)
However, the “Conditions” provisions of Betty‟s policies declared that
[t]his insurance applies separately to each insured. This condition will not
increase our limit of liability for any one occurrence.” (Italics added.) The issue
presented is whether this severability or “separate insurance” clause created
ambiguity as to the scope of the exclusion for intentional acts by “an” insured, and
if so, whether the ambiguity must be resolved in favor of an interpretation
whereby the exclusion applied only to the insured who committed such acts. We
conclude that the answer to both questions is yes.
Though Safeco argues otherwise (see discussion, post), a reasonable
interpretation of the severability language simply contradicts any inference that a
coverage exclusion for the intentional acts of “an insured” — i.e., one insured
among several — would bar coverage for all others, such that all must sink or
8
swim together. The severability clause stated that “[t]his insurance” (italics
added) was “separately” applicable to “each insured.” The broad reference to
separate application of “this insurance” suggested, as indicated above, that each
person the policies covered would be treated, for all policy purposes, as if he or
she were the sole person covered — i.e., that in effect, each insured had an
individual policy whose terms applied only to him or her.
Safeco points to the second sentence of the severability clause, specifying
that “[t]his condition will not increase our limit of liability for any one
occurrence.” Such language, Safeco asserts, unambiguously demonstrates that the
sole purpose of the entire clause was to specify that each insured was separately
entitled, if otherwise covered for a particular claim, to be indemnified up to the full
policy limits applicable to an individual insured, so long as the $300,000 per
occurrence limit was not exceeded.
We do not agree. The clause certainly had that effect, but nothing in its
language suggests this was its only aim. The words of the clause can reasonably
be read to mean that the per occurrence indemnity ceiling was the sole exception
to the general rule that all provisions of the policies — i.e., “[t]his insurance” —
would apply to each insured as if he or she were the only insured.
Of course, Safeco could easily have removed any uncertainty and made
explicit that the severability clause had only the limited meaning Safeco now
asserts. Safeco only needed to replace the first sentence of the clause with a
provision that “[t]he limits of liability of this policy apply separately to each
insured.” Such language would have made clear that the clause‟s purpose was not
to make exclusions from coverage individual rather than collective, but merely to
extend the full individual indemnity limits to each person among several insureds
under the same policy, subject to the per occurrence ceiling.
9
Safeco explains that severability clauses were first added to commercial
liability policies in the mid-1950‟s to countermand a line of decisions which had
held that a provision excluding coverage for “the insured” in a policy with
multiple insureds operated collectively, so as to exclude coverage for all, with
respect to a particular occurrence, if it excluded coverage for any. (See, e.g.,
Michael Carbone, Inc. v. General Acc. Ins. Co. (E.D.Pa. 1996) 937 F.Supp. 413,
419 (Michael Carbone, Inc.); State, Dept. of Transp. v. Houston Cas. (Alaska
1990) 797 P.2d 1200, 1205-1206 (conc. opn. of Mathews, J.); Smith & Simpson,
The Mixed Action Rule and Apportionment/Allocation of Defense Costs and
Indemnity Dollars (2003) 29 Thurgood Marshall L.Rev. 97, 178; Tinker,
Comprehensive General Liability Insurance — Perspective and Overview (1975)
25 Fed‟n. Ins. Couns. Q. 217, 237.) But Safeco fails to indicate how this history
resolves any facial ambiguity in the clause at issue here. Indeed, it undermines
Safeco‟s limited construction of the current clause by establishing that the original
intent was to make clear the separate application of policy exclusions, not just
liability limits, to each individual insured.
Nor are we persuaded that there can be no ambiguity because the
severability clause did not appear in the “Exclusions” provisions of the policies,
but in the “Conditions” provisions. Safeco suggests the latter section was not
concerned with the scope of liability coverage, or exclusions therefrom, but
instead set forth the parties‟ mutual obligations in implementing the policy
provisions. But again, Safeco fails to indicate how a policy “[c]ondition[ ]”
stating that “[t]his insurance” applies separately to each insured is not reasonably
susceptible of the construction that the entire policy, particularly its exclusions
from coverage, has such a separate effect as to each insured.
For these reasons, we are convinced that the severability clause in Betty‟s
Safeco policies, when read in conjunction with the exclusion for the intentional
10
acts of “an insured,” created an ambiguity as to whether a coverage exclusion for
an intentional act or injury by one insured extended to all other insureds under the
policies. Accordingly, we must construe that ambiguity, if possible, to conform to
the objectively reasonable coverage expectations of the insured.
We conclude that, in light of the severability clause, Betty would
reasonably have expected Safeco‟s policies, whose general purpose was to provide
coverage for each insured‟s “legal[ ] liab[ility]” for “injury or . . . damage” to
others, to cover her separately for her independent acts or omissions causing such
injury or damage, so long as her conduct did not fall within the policies‟
intentional acts exclusion, even if the acts of another insured contributing to the
same injury or damage were intentional. Especially when informed by the policies
that “[t]his insurance applies separately to each insured,” it is unlikely Betty
understood that by allowing David to reside in her home, and thus to become an
additional insured on her homeowners policies, “[she was] narrowing [her] own
coverage for claims arising from his [intentional] torts. In light of the severability
provision, Safeco‟s intent to achieve that result was not clearly expressed, and the
ambiguity must be resolved in the [insured‟s] favor.” (Robert S., supra, 26 Cal.4th
758, 777 (conc. & dis. opn. of Baxter, J.).)
Safeco suggests Betty could not reasonably expect coverage for “parasitic”
claims against her arising from David‟s intentional acts. But this is not a situation
where the only tort was the intentional act of one insured, and where the liability
of a second insured, who claims coverage, is merely vicarious or derivative. On
the contrary, Scott‟s claim against Betty clearly depends upon allegations that she
herself committed an independent tort in failing to prevent acts of molestation she
had reason to believe were taking place in her home. Under such circumstances,
she had objective grounds to assume she would be covered, so long as she herself
had not acted in a manner for which the intentional acts exclusion barred coverage.
11
Safeco asserts that, unless we conclude Betty‟s policies barred coverage for
claims against Betty arising from David‟s acts of sexual molestation, we will
encourage householders to turn a “blind eye” to acts of sexual abuse taking place
in their homes. Certainly we do not wish to promote such a result. But we must
interpret the policies as we find them, and in that context, Safeco‟s argument
proves both too much and too little.
We confront here simply an exclusion for intentional acts by “an” insured.
Unlike many current homeowner insurance contracts, Betty‟s policies did not
contain a specific exclusion for claims arising from sexual molestation. Hence,
nothing we hold in this case concerns how an exclusion framed in those terms
should be construed. By the same token, the policy interpretation advanced by
Safeco — i.e., that David‟s intentional acts of molestation bar coverage for all
other insureds‟ liability arising from these acts — would apply not only to cases of
sexual misconduct, but to all claims against one insured on grounds that his or her
mere negligence permitted another insured to commit an intentional tort. As we
have indicated, in light of the severability clause in Betty‟s policies, we cannot
accept Safeco‟s view of the scope of its exclusion.
Our close review of relevant decisional law, both in California and
elsewhere, does not alter our conclusion. At the outset, we note that two Court of
Appeal decisions have touched upon the interplay between an exclusionary clause
and a severability clause. Neither case is directly on point, and neither persuades
us to depart from our reasoning in the matter before us.
In California Casualty Ins. Co., supra, 48 Cal.App.4th 1682, one Yessian,
while riding a jet ski, was injured in a collision with a “Waverunner” watercraft
owned by a married couple, the Harmers. At the time of the accident, Mr. Harmer
was operating the Waverunner, and Mrs. Harmer was a passenger. The
Waverunner was powered by an internal jet pump. One of the Harmers‟ liability
12
policies expressly excluded coverage for liability for injury “ „arising out of . . .
the ownership, maintenance, use, loading or unloading of a watercraft . . . with
inboard . . . motor power owned by any insured.‟ ” (Id. at p. 1690.) The policy
also contained a clause providing that it (i.e., the policy) applied “ „separately to
each insured.‟ ” (Id. at p. 1696.)
In a coverage action, Yessian, as assignee of the Harmers‟ liability
coverage claims, asserted, among other things, that even if the policy excluded
coverage for both Harmers based on ownership and operation of the Waverunner,
the severability clause provided “separate” protection for Mrs. Harmer against a
theory, not based on ownership or use of the Waverunner, that she was
derivatively liable for her husband‟s tort under the community property laws —
i.e., that a tort judgment against Mr. Harmer could be enforced against her
community interest in the marital estate. The Court of Appeal, like the trial court,
rejected this argument.
The Court of Appeal noted the California rules that the exclusion of a
particular event from liability coverage also excludes coverage for derivative or
vicarious liability arising from the same event (citing Hartford Fire Ins. Co. v.
Superior Court (1983) 142 Cal.App.3d 406, 416 [aircraft exclusion barred air
crash coverage for derivative liability of pilot‟s spouse under community property
laws]) and that if a policy excludes coverage for the particular act of “an” or “any”
insured, commission of an excluded act by one insured bars coverage for all other
insureds arising from this act, even if claims against the other insureds are not
based on their personal commission of the act. In the Court of Appeal‟s view, the
fact that the policy before it had a severability clause did not alter these principles.
(California Casualty Ins. Co., supra, 48 Cal.App.4th 1682, 1695-1698.)
For guidance, the Court of Appeal referred to the split in authority in other
jurisdictions concerning how a severability clause affects a policy exclusion (see
13
discussion, ante and post). The court found that, “at least in the context of this
case, in which coverage is urged on the basis of the community property laws,” the
decisions holding that a severability clause cannot prevail over a plainly worded
exclusion were more persuasive. (California Casualty Ins. Co., supra,
48 Cal.App.4th 1682, 1697.) As the court explained, a contrary conclusion, under
the circumstances there presented, would effectively nullify a policy exclusion in
the case of married coinsureds, since one coinsured spouse could always demand
coverage for the excluded tortious act of the other on the mere basis of derivative
community property liability. (Id., at pp. 1697-1698.)
Here, as we have seen, we do not confront such a case, or such a
consequence. Betty seeks protection for her separate assets against a claim of
liability based on her own conduct independent of David‟s excluded acts.
Application of the severability clause to conclude that Betty is covered so long as
she personally did not commit conduct within the intentional act exclusion does
not inherently negate the operation of the exclusion against David himself. Thus,
we are satisfied that California Casualty Ins. Co. is not dispositive or persuasive
authority on the issue before us.4

4
Safeco urges that allowing coverage under the circumstances presented here
encourages artful pleading of sham tort claims of “negligent supervision” by
injured persons, as well as collusion among all the parties to the underlying tort
action to shift payment responsibility to a liability insurer. Safeco hints that such
collusion occurred here, in that, after Safeco denied Betty‟s demand for a defense
and indemnity in Scott‟s tort action, she allowed Scott to take a hefty default
judgment against her, then assigned her coverage claim to Scott in return for a
covenant not to execute on this judgment.
As Safeco suggests, we must be wary of policy interpretations that
encourage artful and sham tort pleading, especially where a sexually molested
plaintiff may thereby seek some “threadbare” means of tapping into the judgment-
proof molester‟s liability insurance, contrary to the public policy against coverage
(Footnote continued on next page.)
14


A more recent case, Bjork, supra, 157 Cal.App.4th 1, addressed the
application of a severability clause as against a so-called “resident relative”
exclusion. Plaintiff Bjork sued her mother, Carol Ferguson, alleging that Carol
negligently failed to prevent Melvin Ferguson, Carol‟s husband and Bjork‟s father,
from molesting Bjork while Bjork was a minor living in the family home. Certain
of Carol and Melvin‟s State Farm homeowners policies for the relevant period
excluded liability coverage for “ „bodily injury to you or any insured.‟ ” “Insured”
was defined to include “ „you, and if residents of your household: [¶] a. your
relatives; and [¶] b. any other person under the age of 21 who is in the care of a
person described above.‟ ” (Bjork, supra, 157 Cal.App.4th 1, 4.)

(Footnote continued from previous page.)

for intentional acts of sexual abuse. (See Ins. Code, § 533; J. C. Penney Casualty
Ins. Co. v. M. K.
(1991) 52 Cal.3d 1009, 1019; Horace Mann Ins. Co. v.
Barbara B.
(1993) 4 Cal.4th 1076, 1089 (conc. & dis. opn. of Baxter, J.).) But the
public policy against insurance for one‟s own intentional sexual misconduct does
not bar liability coverage for others whose mere negligence contributed in some
way to the acts of abuse. In such cases, there is, at least, no overriding policy
reason why a person injured by sexual abuse should be denied compensation for
the harm from insurance coverage purchased by the negligent facilitator.

Of course, Safeco specifically promised to defend Betty against claims that
would be covered if true, even if they ultimately turned out to be “groundless,
false, or fraudulent.” On the other hand, if an insurer‟s investigation discloses that
there is, in fact, no possibility of coverage — for example, where, in order to avoid
a coverage exclusion, a third party has artfully pled as mere negligence what the
insurer can prove was intentional misconduct by the insured — the insurer‟s duties
to defend and indemnify cease from that time forward. (Scottsdale Ins. Co. v. MV
Transportation
(2005) 36 Cal.4th 643, 655, 657; Buss v. Superior Court (1997)
16 Cal.4th 35, 46; but see Horace Mann Ins. Co. v. Barbara B., supra, 4 Cal.4th
1076, 1082-1083.) And “collusion” of the sort Safeco suggests here is a common
result when a liability insurer‟s decision to opt out of the third party suit is made
prematurely — i.e., before the insurer has reliably determined that there is no
potential for coverage.
15


State Farm denied coverage under these policies, citing the resident relative
exclusion. Thereafter, Bjork and Carol stipulated to a judgment against Carol,
who then assigned her claims against State Farm to Bjork in return for a covenant
not to execute on the judgment. As assignee of Carol‟s claims, Bjork sued State
Farm, alleging an improper denial of liability coverage to Carol. State Farm
moved for summary judgment, again invoking the resident relative exclusion. The
trial court granted summary judgment, and the Court of Appeal affirmed.
On appeal, Bjork urged, among other things, that the policies‟ severability
clause precluded application of the resident relative exclusion to Carol. Alluding
to the concurring and dissenting opinion in Robert S., supra, 26 Cal.4th 758, Bjork
argued that, in light of the severability provision, the policy‟s exclusions,
including the resident relative exclusion, must apply individually to each insured,
and solely from the perspective of the person seeking coverage. Hence, Bjork
insisted, in an assessment whether Carol was entitled to liability protection against
a tort claim advanced by Bjork, the fact that Bjork met the resident relative
definition of an additional insured, whose injuries were thus excluded from the
policies‟ liability coverage, should be disregarded.
In rejecting this argument, the Bjork Court of Appeal pointed out the
distinction between the facts of Robert S. and those of the case before it. As the
Bjork court explained: In Robert S., the policy excluded liability coverage for
claims arising from any “ „ “illegal act” ‟ ” committed by “ „ “an insured,” ‟ ” but
it also contained a severability clause. (Bjork, supra, 157 Cal.App.4th 1, 9, italics
omitted, quoting Robert S., supra, 26 Cal.4th 758, 763.) The insured parents in
Robert S. sought coverage for a negligent supervision claim arising from a fatal
shooting in the family home by their resident, and coinsured, son, who was
convicted of manslaughter for the killing. In those circumstances, the concurring
and dissenting opinion in Robert S. argued, the severability clause caused the
16
illegal act exclusion to bar coverage only for the insured who had committed a
criminal violation, not for other insureds whose liability was not based on their
commission of such an excluded act.
Noting the split of authority on the issue, the Bjork court “[did] not take a
position” on whether the concurring and dissenting opinion in Robert S. stated the
correct view of a severability clause. (Bjork, supra, 157 Cal.App.4th 1, 11,
fn. 11.) Instead, Bjork reasoned that even if, as that opinion suggested, such a
clause requires evaluation of each insured‟s coverage solely from that insured‟s
individual perspective, Carol, the sued parent in Bjork itself, had no claim under
her State Farm policies in view of the resident relative exclusion. This, Bjork
explained, was because the policy clearly provided, and informed each individual
insured, that liability claims between persons insured under the policy, including
relatives residing in the same household, were excluded from coverage.
Acceptance of Bjork‟s argument that Carol was covered despite the resident
relative exclusion would remove all meaning and purpose from the exclusion for
liability disputes between coinsured persons.
We do not face that situation here. As in Robert S., the exclusion at issue is
for particular acts by an insured, but a severability clause promised “separate”
application of the policies‟ provisions to each insured. Under these circumstances,
as in Robert S., the severability clause in the policies may reasonably and logically
be read to provide that the exclusion applies only to a particular insured who
personally engaged in the excluded conduct. Nothing in Bjork is inconsistent with
such a construction.5

5
We stress that our reasoning and conclusion under the specific
circumstances of this case, which involves the interplay between a severability
clause and an exclusion for the intentional acts of “an” insured, does not mean a
(Footnote continued on next page.)
17


(Footnote continued from previous page.)

severability clause necessarily affects all exclusions framed in terms of “an” or
“any” insured. Thus, the concern of both Safeco and its amici curiae that we must
consider how such a ruling would affect each of the numerous uses of the phrase
“an insured” throughout Safeco‟s policies is not well founded. In some cases, the
collective application of an exclusion that refers to “an” or “any” insured may be
so clear in context that the presence of a severability clause could neither create,
nor resolve, an ambiguity. In such cases, even the broadest interpretation of the
severability clause could not affect the obvious meaning of the exclusion except,
impermissibly, to negate it completely. Possible examples include common
exclusions of liability coverage for entire categories of risk (such as liability
arising from “an” or “any” insured‟s ownership or operation of an airplane, car, or
boat), or for claims by one insured against another person insured under the same
policy.

A number of decisions from other jurisdictions holding that a severability
clause could not alter a plainly worded exclusion applicable to “an” or “any”
insured have involved just such types of exclusions. (See, e.g., United Fire and
Cas. Co. v. Reeder
(5th Cir. 1993) 9 F.3d 15 [applying La. law; liability exclusion
for injury to “an insured”]; Michael Carbone, Inc., supra, 937 F.Supp. 413
[applying N.J. law; exclusion for liability arising from ownership or operation of
motor vehicle by “any insured”]; BP America v. State Auto Property & Cas. Ins.
Co.
(Okla. 2005) 148 P.3d 832 [same under Okla. law]; Government Employees
Ins. Co. v. Moore
(Va. 2003) 580 S.E.2d 823 [exclusion for liability for “personal
injury to any insured”]; American Motorists Ins. Co. v. Moore (Mo.Ct.App. 1998)
970 S.W.2d 876 [liability exclusion for injury to “an” insured; “insured” included
relative residing in named insured‟s household]; Oaks v. Dupuy (La.Ct.App. 1995)
653 So.2d 165 [liability exclusion for motor vehicle ownership or operation by
“any insured”]; Gorzen v. Westfield Ins. Co. (Mich.Ct.App. 1994) 526 N.W.2d 43
[liability exclusion for motor vehicle ownership or operation by “an” insured;
court noted that exclusion from policy of entire category of events was clear];
National Ins., etc. v. Lexington Flying Club (Ky.Ct.App. 1979) 603 S.W.2d 490
[liability exclusion for bodily injury to “a named insured” and residents of “named
insured‟s” household].)

Application of a severability clause can never result in a finding of
coverage the insured had no objective reason to expect. Thus, each exclusion
applicable to “an” or “any” insured must be examined individually, and in context,
to determine the effect a severability clause like the one at issue here might have
on its operation.
18


As indicated above, decisions in other jurisdictions have disagreed about
the effect of a severability clause, in a liability policy covering multiple insureds,
on an exclusion for the intentional, criminal, or fraudulent acts of “an” or “any”
insured. Some have concluded that, when one of these indefinite articles is used in
the exclusion, the presence of a severability clause renders the scope of the
exclusion ambiguous. Invoking the rule of construction in favor of the insured,
these decisions have held that the exclusion is thus several, not collective, such
that the noncovered act of one insured does not preclude coverage for other
insureds who did not themselves act intentionally, criminally, or fraudulently.
(E.g., Shapiro v. American Home Assur. Co. (D.Mass. 1984) 616 F.Supp. 900, 904
[“any” is ambiguous; thus, severability clause makes exclusion in Securities Act
liability policy for fraudulent act of “any” insured several rather than collective];
Premier Ins. Co. v. Adams (Fla.Dist.Ct.App. 1994) 632 So.2d 1054, 1055
[severability clause limited exclusion for intentional act of “any insured” to
particular insured who intentionally caused injury]; Catholic Diocese of Dodge
City v. Raymer (Kan. 1992) 840 P.2d 456, 459-462 [“an” is ambiguous; thus,
severability clause makes exclusion for intentional act of “an” insured several
rather than collective]; Northwestern Nat. Ins. Co. v. Nemetz (Wis.Ct.App. 1986)
400 N.W.2d 33, 38 [same].)6

6
A number of additional decisions have concluded that a severability clause
may negate the collective effect of even such “categorical risk” exclusions as those
for injuries arising from vehicle ownership or use, or business pursuits, by “an” or
“any” insured, as well as the common homeowners policy exclusion for injuries to
“an” or “any” household member who is insured under the same policy. (See,
e.g., State Farm Fire & Cas. Ins. Co. v. Keegan (5th Cir. 2000) 209 F.3d 767, 770-
771 [applying Tx. law; by virtue of severability clause, exclusion for injury to
“an” insured, defined to include resident of named insured‟s household, did not
bar coverage of one named insured against claims of injury to resident of another
named insured‟s household]; West American Ins. Co. v. AV&S (10th Cir. 1998)
(Footnote continued on next page.)
19


A greater number of cases, we recognize, have taken the opposite view,
concluding that a severability clause does not alter the collective application of an
exclusion for intentional, criminal, or fraudulent acts by “an” or “any” insured.
These decisions have variously reasoned that a severability clause is intended only
to extend policy limits separately to each insured and, in any event, cannot prevail
over a clear expression that coverage for all insureds is barred in a case where
“an” or “any” insured has committed an excluded act. (E.g., EMCASCO Ins.
Co. v. Diedrich (8th Cir. 2005) 394 F.3d 1091, 1098 [applying S.D. law; exclusion
for intentional acts by “one or more insureds” is clearly collective and cannot be
affected by severability clause]; Standard Fire Ins. Co. v. Proctor (S.D.Md. 2003)

(Footnote continued from previous page.)

145 F.3d 1224, 1226 [applying Utah law; by virtue of severability clause, business
liability policy‟s exclusion for injury arising from use of motor vehicle owned or
operated by “any” insured did not apply to those insureds who did not own or
operate the accident vehicle]; State Farm Fire and Cas. Co. v. Hooks (Ill.App.Ct.
2006) 853 N.E.2d 1, 9 [in light of severability clause, exclusion for injury to “any”
insured, defined to include resident of named insured‟s household, did not bar
coverage for one named insured against claims of injury to person living in
another named insured‟s household]; United Servs. Auto. v. DeValencia
(Ariz.Ct.App. 1997) 949 P.2d 525, 527 [by virtue of severability clause, exclusion
in parents‟ homeowners policy for injury arising from business engaged in by “an”
insured did not bar coverage of molestation claims against 14-year-old son, who
was additional insured, absent evidence he was personally engaged in parents‟ day
care business]; American Nat. Fire Ins. v. Fournelle Est. (Minn. 1991)
472 N.W.2d 292, 295 [in light of severability clause, exclusion for injury to “any”
insured, defined to include resident of named insured‟s household, should be
narrowly construed to allow coverage for claims against one named insured for
injury to persons who were residents of the other named insured‟s household];
Worcester Mut. Ins. Co. v. Marnell (Mass. 1986) 496 N.E.2d 158, 161 [by virtue
of severability clause, exclusion in parents‟ homeowners policy for injury arising
from use of motor vehicle owned or operated by “any” insured did not bar
coverage of parents for claims of negligent supervision of son‟s party, leading to
drunken, injury-causing accident by son, an additional insured, in his own car].)
20


286 F.Supp.2d 567, 574 [applying Md. law; “any,” unlike “an,” is not ambiguous;
thus, regardless of severability clause, exclusion for intentional act of “any”
insured is collective rather than several]; Allstate Ins. Co. v. Kim (D. Hawaii 2000)
121 F.Supp.2d 1301, 1308 [applying Hawaii law; exclusion for intentional act by
“an insured” unambiguously applies to “innocent” coinsureds, regardless of
severability clause]; Safeco Ins. Co. v. White (Ohio 2009) 913 N.E.2d 426, 441-
442 [severability clause does not suggest that “an insured” or “any insured” means
“the insured,” or that exclusions would not apply to innocent coinsureds];
SECURA Supreme Insurance Company v. M.S.M. (Minn.Ct.App. 2008)
755 N.W.2d 320, 328-329 [severability clause did not render ambiguous, or
otherwise affect, clearly collective bar of coverage for injury arising from criminal
act of “any” insured]; Villa v. Short (N.J. 2008) 947 A.2d 1217, 1225 [“an
insured,” as used in intentional act exclusion, has the same collective meaning as
“any insured,” and is thus not made ambiguous by severability clause]; J.G. v.
Wangard (Wis. 2008) 753 N.W.2d 475, 486 [exclusion for damage caused by
intentional act of “any,” as opposed to “an,” insured is collective to all coinsureds,
regardless of severability clause]; Mutual of Enumclaw Ins. Co. v. Cross
(Wn.Ct.App. 2000) 10 P.3d 440, 445 [severability clause does not render
ambiguous either “an insured” or “any insured” as used in intentional act
exclusion]; Johnson v. Allstate Ins. Co. (Me. 1997) 687 A.2d 642, 645
[severability clause cannot alter clearly collective effect of exclusion for
intentional act of “an insured”]; American Family v. Copeland-Williams
(Mo.Ct.App. 1997) 941 S.W.2d 625, 627-629 [exclusion for damages from
intentional act by “any insured” is unambiguously collective rather than several,
despite severability clause]; Chacon v. American Family Mut. Ins. Co. (Colo.
1990) 788 P.2d 748, 752 [exclusion for intentional act by “any insured” is
collective despite severability clause]; Great Central Ins. Co. v. Roemmich
21
(S.D. 1980) 291 N.W.2d 772, 774-775 [exclusion for intentional act of “any
insured” is unambiguous and cannot be affected by severability clause].)7
For the reasons we have detailed above, we agree with those cases giving
effect to a severability or “separate insurance” clause as against an exclusion of
coverage for the intentional acts of “an” insured. As we have explained, even if a
provision excluding coverage for injury arising from the specified acts of “an”
insured would normally mean that the excludable conduct of one insured bars
coverage for all, a policy provision stating that “[t]his insurance applies
separately to each insured” (italics added) reasonably implies a contrary result, at
least in certain circumstances. Such a severability or “separate insurance” clause
may reasonably be read as applying both the policy‟s coverage and its exclusions
individually to each person protected by the policy, with the result, in a case like
this one, that an exclusion of coverage for a specified kind of culpable conduct
applies only to the individual insured or insureds who committed it.
The ambiguity thus created must be resolved, if possible, in a way that
preserves the objectively reasonable coverage expectations of the insured seeking
coverage. Here, even if Betty‟s homeowners policies excluded liability coverage
for injuries intentionally caused by “an” insured, she had, in light of the policies‟
severability clause, an objectively reasonable expectation that the policies would
cover her so long as her own conduct did not fall within the intentional acts

7
As indicated above, several out-of-state decisions have expressly
distinguished between exclusionary clauses that apply to the specified activities of
“an” insured and those that frame the exclusion in terms of a particular activity by
“any” insured. These cases suggest that, while “an” could mean either “the” or
“any,” and is thus ambiguous in light of a severability clause, the use of “any”
clearly conveys that the excluded activity of one insured will bar coverage for all
others, regardless of a severability clause. Here, we confront a policy that
excluded coverage for injuries caused by “an” insured‟s intentional acts.
22


exclusion. She had no reason to expect that David‟s residence in her home, and
his consequent status as an additional insured on her homeowners policies, would
narrow her own coverage, and the protection of her separate assets, against claims
arising from his intentional acts. 8

8
As noted above, the policy exclusion at issue applied to injury or damage
“which is expected or intended by an insured or which is the foreseeable result of
an act or omission intended by an insured
. . . .” (Italics added.) Citing this
language, Safeco argued in its brief on the merits, and stressed at oral argument,
that even if the severability clause requires separate analysis of Betty‟s coverage,
regardless of whether David’s acts fell within the exclusionary clause, the
exclusion nonetheless applied directly to Betty in light of allegations in Scott‟s tort
complaint that Betty actually saw David molesting Scott, and thus must herself at
least have “expected” the inherent injury arising from the molestations. Safeco
has also asserted, for similar reasons, that coverage for Betty is directly barred
because injury to Scott, as the result of David‟s intentional molestations, was
“foreseeable” to Betty. But these issues are outside the scope of the0 question
presented to us by the Ninth Circuit Court of Appeals, and we therefore do not
address them.
23



We therefore hold that, in light of the severability clause in Betty‟s policies,
the exclusion of coverage for injuries arising from “an” insured‟s intentional acts
did not preclude coverage for Betty‟s liability, if any, arising from the
molestations for the sole reason that David, another insured under the policies, had
committed intentional, and thus excludable, acts. Instead, Betty‟s coverage must
be analyzed on the basis of whether she herself committed an act or acts that fell
within the intentional act exclusion. Accordingly, we answer the question
presented by the United States Court of Appeals for the Ninth Circuit “no.”
BAXTER, J.
WE CONCUR:

GEORGE, C.J.
KENNARD, J.
WERDEGAR, J.
CHIN, J.
MORENO, J.
CORRIGAN, J.
24



See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion Minkler v. Safeco Insurance Company of America
__________________________________________________________________________________

Unpublished Opinion


Original Appeal
Original Proceeding XXX (on certification pursuant to rule 8.548, Cal. Rules of Court)
Review Granted
Rehearing Granted

__________________________________________________________________________________

Opinion No.

S174016
Date Filed: June 17, 2010
__________________________________________________________________________________

Court:


County:
Judge:


__________________________________________________________________________________

Attorneys for Appellant:

Shernoff Bidart Darras Echeverria, Shernoff Bidart Echeverria, Michael J. Bidart, Ricardo Echeverria; The
Ehrlich Law Firm and Jeffrey Isaac Ehrlich for Plaintiff and Appellant.

Steven W. Murray as Amicus Curiae on behalf of Plaintiff and Appellant.


__________________________________________________________________________________

Attorneys for Respondent:

Sedgwick, Detert, Moran & Arnold, Christina J. Imre, Gregory Halliday and William Burger for Defendant
and Respondent.

Lewis Brisbois Bisgaard & Smith and Raul L. Martinez for American Insurance Association, Pacific
Association of Domestic Insurance Companies and Property Casualty Insurers Association of America as
Amici Curiae on behalf of Defendant and Respondent.



Counsel who argued in Supreme Court (not intended for publication with opinion):

Jeffrey Isaac Ehrlich
The Ehrlich Law Firm
411 Harvard Avenue
Claremont, CA 91711
(909) 625-5565

Christina J. Imre
Sedgwick, Detert, Moran & Arnold
801 South Figueroa Street, 19th Floor
Los Angeles, CA 90017-5556
(213) 426-6900


Request under California Rules of Court, rule 8.548, that this court decide a question of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit. As restated by the court, the question presented is: "Where a contract of liability insurance covering multiple insureds contains a severability clause, does an exclusion barring coverage for injuries arising out of the intentional acts of 'an insured' bar coverage for claims that one insured negligently failed to prevent the intentional acts of another insured?"

Opinion Information
Date:Citation:Docket Number:Category:Status:
Thu, 06/17/201049 Cal. 4th 315, 232 P.3d 612, 110 Cal. Rptr. 3d 612S174016Question of Law - Civilsubmitted/opinion due

Parties
1Minkler, Scott (Plaintiff and Appellant)
Represented by Jeffrey Ehrlich
The Ehrlich Law Firm
411 Harvard Avenue
Claremont, CA

2Safeco Insurance Company of America (Defendant and Respondent)
Represented by Gregory H. Halliday
Segdwick Detert Moran & Arnold, LLP
Three Park Plaza, 17th Floor
Irvine, CA

3Safeco Insurance Company of America (Defendant and Respondent)
Represented by Christina J. Imre
Sedgwick, Detert, Moran & Arnold, LLP
801 S. Figueroa Street, 19th Floor
Los Angeles, CA

4Safeco Insurance Company of America (Defendant and Respondent)
Represented by William Dee Burger
Sedgwick Detert Moran & Arnold, LLP
Three Park Plaza, 17th Floor
Irvine, CA

5American Insurance Association (Amicus curiae)
Represented by Raul L. Martinez
Lewis Brisbois Bisgaard & Smith, LLP
221 N. Figueroa Street, Suite 1200
Los Angeles, CA

6Murray, Steven W. (Amicus curiae)
Represented by Steven W. Murray
Attorney at Law
14930 Ventura Boulevard, Suite 205
Sherman Oaks, CA

7Pacific Association of Domestic Insurance Companies (Amicus curiae)
Represented by Raul L. Martinez
Lewis Brisbois Bisgaard & Smith, LLP
221 N. Figueroa Street, Suite 1200
Los Angeles, CA

8Property Casualty Insurers Association of America (Amicus curiae)
Represented by Raul L. Martinez
Lewis Brisbois Bisgaard & Smith, LLP
221 N. Figueroa Street, Suite 1200
Los Angeles, CA


Opinion Authors
OpinionJustice Marvin R. Baxter

Dockets
Jun 22 2009Request to answer question of state law filed
Information only: United States Court of Appeals for the Ninth Circuit   By the United State Court of Appeals for the Ninth Circuit.
Aug 12 2009Request for certification granted
  The court grants the request, made pursuant to California Rules of Court, rule 8.548, for this court to decide questions of California law presented in a matter pending in the United States Court of Appeals for the Ninth Circuit. Pursuant to rule 8.548(f)(5) of the California Rules of Court, this court restates the questions as follows: "Where a contract of liability insurance covering multiple insureds contains a severability clause, does an exclusion barring coverage for injuries arising out of the intentional acts of 'an insured' bar coverage for claims that one insured negligently failed to prevent the intentional acts of another insured?" For the purposes of briefing and oral argument, plaintiff Scott Minkler is deemed the petitioner in this court. (Cal. Rules of Court, rule 8.520(a)(6).) Moreno and Corrigan, JJ., were absent and did not participate. Votes: George, C.J., Kennard, Baxter, Werdegar, and Chin, JJ.
Aug 13 2009Record sent to Calendar Coordination Office
  Appellant's excerpts of record-2, 2, 3, 4, Misc papers, etc.
Aug 18 2009Certification of interested entities or persons filed
  Scott Minkler, appellant by Jeffrey Ehrlich, counsel
Aug 28 2009Certification of interested entities or persons filed
  Safeco Insurance Company of America, defendant by Gregory H. Halliday, counsel
Sep 14 2009Opening brief on the merits filed
Plaintiff and Appellant: Minkler, ScottAttorney: Jeffrey Ehrlich  
Sep 28 2009Request for extension of time filed
  thirty (30) days, to and including November 13, 2009, to serve and file the answer brief on the merits. Safeco Insurance Company, defendant by William D. Burger, Jr., counsel
Oct 15 2009Extension of time granted
  On application of defendant and good cause appearing, it is ordered that the time to serve and file Defendant's Answer Brief on the Merits is extended to and including November 13, 2009.
Nov 6 2009Request for extension of time filed
  14-days, to and including November 30, 2009, to serve and file defendant's answer brief on the merits. SafeCo Insurance Company, defendant by William D. Burger, counsel
Nov 10 2009Extension of time granted
  On application of Safeco Insurance Company of America and good cause appearing, it is ordered that the time to serve and file defendant's Answer Brief on the Merits is extended to and including November 30, 2009. No further extension of time is contemplated.
Nov 30 2009Answer brief on the merits filed
Defendant and Respondent: Safeco Insurance Company of AmericaAttorney: William Dee Burger  
Dec 17 2009Request for extension of time filed
  30-days, to and including January 20, 2010, to serve and file appellant's reply brief on the merits. Scott Minkler, appellant by Jeffrey I. Ehrlich, counsel
Dec 23 2009Extension of time granted
  On application of appellant and good cause appearing, it is ordered that the time to serve and file appellant's Reply Brief on the Merits is extended to and including January 20, 2010. No further extension of time is contemplated.
Jan 21 2010Reply brief filed (case fully briefed)
Plaintiff and Appellant: Minkler, ScottAttorney: Jeffrey Ehrlich   per CRC 8.25b
Feb 18 2010Application to file amicus curiae brief filed
  Steven W. Murray, amicus curiae Steven W. Murray, counsel
Feb 23 2010Permission to file amicus curiae brief granted
  The application of Steven W. Murray, APC, for permission to file an amicus curiae brief in support of appellant is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Feb 23 2010Amicus curiae brief filed
Amicus curiae: Murray, Steven W.Attorney: Steven W. Murray  
Feb 23 2010Application to file amicus curiae brief filed
  American Insurance Association, et al., amicus curiae by Raul L. Martinez, counsel per CRC 8.25b
Feb 25 2010Permission to file amicus curiae brief granted
  The application of American Insurance Association, et al., for permission to file an amicus curiae brief in support of respondent is hereby granted. An answer thereto may be served and filed by any party within 20 days of the filing of the brief.
Feb 25 2010Amicus curiae brief filed
Amicus curiae: American Insurance AssociationAttorney: Raul L. Martinez Amicus curiae: Pacific Association of Domestic Insurance CompaniesAttorney: Raul L. Martinez Amicus curiae: Property Casualty Insurers Association of AmericaAttorney: Raul L. Martinez  
Mar 1 2010Request for extension of time filed
  fourteen (14) days, to and including March 29, 2010, to serve and file a response to the amicus curiae brief filed by Steven W. Murray
Mar 2 2010Extension of time granted
  On application of respondent and good cause appearing, it is ordered that the time to serve and file a response to the amicus curiae brief of Steven W. Murray is extended to and including March 29, 2010. No further extension of time will be granted.
Mar 18 2010Response to amicus curiae brief filed
Plaintiff and Appellant: Minkler, ScottAttorney: Jeffrey Ehrlich  
Mar 30 2010Response to amicus curiae brief filed
Defendant and Respondent: Safeco Insurance Company of AmericaAttorney: William Dee Burger   By respondent to AC brief filed by Steven Murray. CRC 8.25(b).
Mar 30 2010Case ordered on calendar
  to be argued on Wednesday, May 5, 2010, at 9:00 a.m., in San Francisco
Apr 28 2010Letter sent to:
  each non-amicus party counsel appearing at oral argument, from the Clerk of the Court: "The court has asked me to inform counsel in cases that will be argued at the May 3-6, 2010, oral argument calendar in San Francisco that Justice Joyce L. Kennard will be unable to be present at argument due to unexpected surgery. Upon stipulation of all parties in a case, Justice Kennard will participate in the deliberations and decision in this matter by reviewing the complete videotape recording of the argument and considering all of the written materials in each case. In the absence of the court's receipt of a written stipulation by all parties in a case, the court will decide whether to continue the matter to a future oral argument calendar or to ask the Chief Justice to assign a justice pro tempore who will participate in place of Justice Kennard at the May 3-6, 2010, sessions. "Please telephonically inform Steve Rockwell, Senior Deputy Clerk, at (415) 865-7011 as soon as possible whether the party(ies) you represent will or will not stipulate to Justice Kennard's participation in the case, even though she will not be present at oral argument. Please execute the attached written stipulation and returning it by fax on or before Friday, April 30, 2010. Submit the original signed stipulation to the court either by overnight mail or by bringing the document to the court on the day of argument."
Apr 29 2010Stipulation filed
  Stipulation by counsel Christina J. Imre, that respondent has no objection to Justice Kennard's participation in the deliberations and decision in this matter notwithstanding her absence from oral argument.
Apr 29 2010Stipulation filed
  Stipulation by counsel Jeffrey Isaac Ehrlich, that appellant has no objection to Justice Kennard's participation in the deliberations and decision in this matter notwithstanding her absence from oral argument.
May 5 2010Cause argued and submitted
 
Jun 15 2010Notice of forthcoming opinion posted
  To be filed on Thursday, June 17, 2010 @ 10 a.m.

Briefs
Sep 14 2009Opening brief on the merits filed
Plaintiff and Appellant: Minkler, ScottAttorney: Jeffrey Ehrlich  
Nov 30 2009Answer brief on the merits filed
Defendant and Respondent: Safeco Insurance Company of AmericaAttorney: William Dee Burger  
Jan 21 2010Reply brief filed (case fully briefed)
Plaintiff and Appellant: Minkler, ScottAttorney: Jeffrey Ehrlich  
Feb 23 2010Amicus curiae brief filed
Amicus curiae: Murray, Steven W.Attorney: Steven W. Murray  
Feb 25 2010Amicus curiae brief filed
Amicus curiae: American Insurance AssociationAttorney: Raul L. Martinez Amicus curiae: Pacific Association of Domestic Insurance CompaniesAttorney: Raul L. Martinez Amicus curiae: Property Casualty Insurers Association of AmericaAttorney: Raul L. Martinez  
Mar 30 2010Response to amicus curiae brief filed
Defendant and Respondent: Safeco Insurance Company of AmericaAttorney: William Dee Burger  
Mar 18 2010Response to amicus curiae brief filed
Plaintiff and Appellant: Minkler, ScottAttorney: Jeffrey Ehrlich  
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May 16, 2011
Annotated by justin gonzales

Facts:
As a child, the plaintiff, Scott Minkler, played little league baseball, with David Schwartz acting as Scott’s coach. In a suit brought against David and David’s mother, Betty Schwartz, Scott alleged that beginning in 1987 David molested him. Allegedly, David molested Scott in Betty’s home and Betty knew that her son was molesting Scott but failed to take reasonably steps to stop her son from doing so.

Acting on behalf of himself and Betty, David tendered the defense of Scott’s complaint to Safeco Insurance Company of America, Betty’s homeowners insurance policies provider. Safeco’s insurance adjuster, however, denied the tender as to both David and Betty because of an intentional acts exclusion contained in the “Exclusions” provisions of the policies’ liability coverage section.

Scott then obtained a default judgment against Betty in the amount of $5,020,612.20. Following this judgment, Scott entered into a settlement agreement with Betty, by which she assigned her claims against Safeco to Scott in exchange for a covenant not to execute on the judgment.

Scott then filed this action against Safeco and its insurance adjuster asserting causes of action for breach of contract and tortuous breach of the covenant of good faith and fair dealing stemming from Safeco’s denial of coverage for Scott’s claim against Betty.

Procedural History:
On May 15, 1007, Scott filed this action in superior court against Safeco and its insurance adjuster, who was later dismissed from the action by stipulation. Safeco removed the case to the United States District Court for the Central District of California on the basis of diversity of citizenship. In federal court, Safeco filed a motion to dismiss on the ground the intentional acts exclusion of the policies’ liability coverage section barred coverage for Scott’s claims against Betty. The district court granted the motion to dismiss. Scott timely appealed this decision. The Ninth Circuit, concluding that the effect of a severability-of-interests clause on policies’ coverage of Scott’s claim against Betty under California law would determine the outcome of the case, requested the Supreme Court of California decide this issue.

Issue:
Whether a severability-of-interests clause in a homeowners policy establishes an exception to the rule excluding all insureds under a policy from coverage if one insured under the policy has committed acts for which coverage is excluded.

Holding:
Yes; a severability-of-interests clause in a homeowners policy does establish an exception to the rule excluding all insureds under a policy from coverage if one insured under the policy has committed acts for which coverage is excluded. Betty’s coverage must be analyzed on the basis of whether she herself committed an act or acts for which coverage is excluded, not whether another person insured under the same policy committed intentional acts excluded from coverage.

Reasoning:
In interpreting the terms of insurance policies, California courts have typically interpreted them to protect the objectively reasonable expectations of the insured. In doing so, courts have recognized that it is generally the insurer, and not the insured, who has drafted the policy and receives premiums to provide the agreed protection.

Applying this principle, the Court determined that in determining the applicability of intentional acts exclusion in light of a severability or separate insurance clause, one must look at the policy as a whole to determine whether an ambiguity exists. In this case, neither party contends that the claim does not fall within the basic liability coverage offered by Betty’s policies. Therefore, the only question was whether Betty could reasonable expect her policies to cover her in spite of David’s intentional acts, which were excluded from coverage.

The Court determined that a reasonable interpretation of the severability language simply contradicts any inference that a coverage exclusion for the intentional acts of an insured would bar coverage for all others. Betty would reasonably have expected Safeco’s policies to cover her separately for her independent acts or omissions causing such injury or damage, so long as her conduct did not fall within the policies’ intentional acts exclusion, even if the acts of another insured contributing to the same injury or damage were intentional. Consequently, Betty had objective grounds to assume she would be covered, so long as she herself had not acted in a manner for which the intentional acts exclusion barred coverage, and therefore the ambiguity should be resolved to protect the objectively reasonable expectations of the insured.

Tags:
Minkler, Safeco Insurance Company, homeowner policy, homeowner insurance, severability-of-interests clause, severability clause, separate insurance clause, intentional act exclusion, an insured