Coverage — continued from Previous Page
fraud of an employee not acting in a “managerial capacity.” (Id. at 1003.) Other courts have reached similar conclu- sions. (See, e.g., California State Auto. Ass’n Inter-Ins. Bureau v. Carter (1985) 164 Cal.App.3d 257, 263 [210 Cal.Rptr. 140] [noting that “[a]n exception to a bar to indemnification for intentional acts under section 533 is found when an insured is held vicariously liable for compensatory damages caused by another’s willful tort”.])
The leading decision on this issue
may be Dart Industries Inc. v. Liberty Mutual Insurance Co. (1973) 484 F.2d 1295. In Dart, the insured was held liable for libel based on statements made by its presi- dent. The insurer denied coverage for the judgment, arguing that a corporation can act only through its agents and may be liable, as here, for the willful acts of its agents within the scope of their employ- ment. It further argued that because the president’s statements were within his cor- porate responsibilities, his acts were the acts of the insured and, therefore, cover- age was barred by section 533. The Ninth Circuit disagreed. It
explained that under the insurer’s view, a defense could arguably be interposed that almost every tortious act of a corporate agent or employee was “wilful” under the
statute. This would make the comprehen- sive liability policy illusory for corporate purposes. The court then acknowledged that it was undisputed that the president was an agent of the corporation as its president; that he was acting in the course of his employment in sending the [libelous] letter; that other corporate offi- cials were consulted or were aware of its preparation; that it was not the type of matter that would be discussed with the Board of Directors or senior management . . . ; and that it was not discussed at that level either before being sent or ratified after being sent. The court concluded that section 533 did not bar coverage. It so held because there was no “proof that the policy-making management of the corporation approved, ratified or had any knowledge of the letter or its libel.” In Downey Venture v. LMI Insurance
Co. (1998) 66 Cal.App.4th 478 [78 Cal.Rptr.2d 142], a California Court of Appeal addressed insurance coverage for a claim of malicious prosecution. The pol- icy expressly covered claims of malicious prosecution. However, the insurance car- rier denied coverage for a settlement, contending that coverage was barred. The court agreed, holding: We conclude that the public policy precluding indemnification coverage
for ‘wilful acts,’ as expressed in section 533, bars indemnification for any mali- cious prosecution claim for which an insured is personally liable in California, even though such coverage was expressly promised in the policy; however, such public policy does not preclude a defense and an insurer promising coverage for malicious prose- cution is nonetheless liable to provide a defense to such a claim.
(Id. at 487.) The court explained that the com-
mission of malicious prosecution neces- sarily involves – indeed requires – an impermissible motivation. An insured can be found liable for malicious prosecution only if the insured is found to have pos- sessed “actual hostility or ill will toward plaintiff [or if] . . . the proceedings are instituted primarily for an improper purpose.” (Id. at 495.) The court reasoned that the presence
of “such hostility, ill will or improper motivation is sufficient to establish the tort of malicious prosecution as not only an intentional act, but one that is wrong- ful; and it is necessarily harmful to both the plaintiff and the judicial process.” Therefore, it concluded that “there can be no indemnification under the . . . policy as it is clearly precluded by that
78— The Advocate Magazine JUNE 2011
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