acts exclusion barring coverage for “Intentional Loss, meaning any loss aris- ing out of any act committed by or at the direction of any insured having the intent to cause a loss. [¶] 10. Dishonesty, Fraud or Criminal Conduct of any insured.” Although this plain language appeared at first blush to bar coverage for all of the insureds, the court relied on Insurance Code section 2070 to conclude otherwise. Section 2070 requires that any policy
providing coverage for the peril of fire must provide coverage that, “when viewed in its entirety, is substantially equivalent to or more favorable to the insured than that contained in such standard form fire insurance policy.” (Id. at 567.) Although the standard form did not contain an intentional acts exclusion, the court rea- soned that, “[b]ecause section 533 repre- sents an implied exclusionary clause which by statute is to be read into all insurance policies the standard form fire policy is properly read as excluding cover- age for losses caused by the wilful act of the insured.” (Id. at 569.) And, “[g]iven the settled meaning of the language used in section 533, the standard form fire pol- icy must be construed as including a will- ful acts exclusion that is protective of innocent insureds.” (Ibid.)
Accordingly, the court concluded
that the policy’s intentional acts exclusion improperly failed to provide coverage at least as favorable as that contained in the standard form fire insurance policy. (Id. at 573.) The exclusion was therefore, to that extent, invalid. (Ibid.) Thus, although there are some nar-
row circumstances where innocent insureds may be barred from coverage by virtue of the intentional conduct of other insureds, protection is generally extended to innocent insureds, even when another insured’s intentional act caused the harm insured against.
Coverage for a corporation found liable for intentional conduct When a corporate insured is found
liable for intentional conduct, the ques- tion of whether coverage is barred cannot be answered simply by an insurance carri- er proving that someone in the corpora- tion acted in an intentionally wrongful matter or where damage or injury was cer- tain to result. Coverage for a corporate insured is barred only if the policy-mak- ing level of management acted with the requisite malevolent intent. It is true that “an employee’s willful,
malicious and even criminal torts may fall within the scope of his or her
employment for purposes of respondeat superior, even though the employer has not authorized the employee to commit crimes or intentional torts.” (Lisa M. v. Henry Mayo Newhall Memorial Hospital (1995) 12 Cal.4th 291, 296-97 [48 Cal.Rptr.2d 510].) However, this does not mean that an insured loses its coverage. Indeed, “[n]either Insurance Code
section 533 nor related policy exclusions for intentionally caused injury or damage preclude a California insurer from indem- nifying an employer held vicariously liable for an employee’s willful acts.” (Id. at 305.) (See also Home Savings of Am., F.S.B. v. Continental Ins. Co. (2001) 87 Cal.App.4th 835, 852 [104 Cal.Rptr.2d 790] [coverage not barred for loss payee when insured intentionally demolished residence absent showing that loss payee “approved or ratified the destruction”].) In Fireman’s Fund Insurance Co. v. City
of Turlock (1985) 170 Cal.App.3d 988 [216 Cal.Rptr. 796], disapproved on other grounds, Vandenberg v. Superior Court (1999) 21 Cal.4th 815 [88 Cal.Rptr.2d 366], the court addressed the issue of the applica- bility of Insurance Code section 533 to an employer’s vicarious liability for the willful fraud of its employee. The court held that section 533 does not bar indemnity for vicarious liability based upon the willful
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www.rileypugh.com JUNE 2011 The Advocate Magazine — 77
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