PENNEY CASUALTY INSURANCE COMPANY v. S.K., Defendant and Respondent.

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Court of Appeal, Fourth District, Division 1, California.

J.C. PENNEY CASUALTY INSURANCE COMPANY, Plaintiff and Appellant, v. M.K., a Minor, etc., Defendant and Appellant, S.K., Defendant and Respondent.


Decided: April 25, 1989

Handelman & Bacon, Lawrence K. Handelman, Kenneth E. Bacon, Sacramento, and Henry K. Gaus, San Jose, for plaintiff and appellant. Monaghan & Metz, David P. Strauss, Elizabeth E. Kline and Linda G. Workman, San Diego, for defendant and appellant. Ann Haralambie and Judith A. Rowland, San Diego, as amici curiae on behalf of defendant and appellant. Lance C. Schaeffer, San Diego, for defendant and respondent.

In these consolidated appeals, both an insurer and the child molested by the insured challenge a declaratory judgment with respect to coverage under a homeowner's insurance policy J.C. Penney Insurance Company (Penney) issued to Robert G. Hahn.   Hahn had pled guilty to one count of child molesting (Pen.Code, § 288, subd. (a)) against M.K. (M) whose mother, S.K. (S), had befriended Hahn and caused him to babysit M in his home.   Both M and S sued Hahn for damages and prevailed on a negligence theory (stipulated to in M's case) in a jury trial defended by an attorney provided by Penney which had given Hahn notice of its reservation of rights to deny coverage.

The judgment under review on this appeal declares (1) Penney is collaterally estopped to deny coverage for Hahn's litigated negligent acts as to S, and (2) there is no coverage under the policy as to M.

Penney's appeal asserts that the trial court erred in holding it is collaterally estopped to deny coverage.   Penney further asserts as a matter of law under Allstate Ins. Co. v. Kim W. (1984) 160 Cal.App.3d 326, 206 Cal.Rptr. 609 there is no coverage for acts of child molestation committed by an insured.

M's appeal asserts that collateral estoppel should apply in her case just as in her mother's case and prevent Penney from denying coverage.   M also contends the trial court erred in applying Kim W. to preclude coverage in M's case.

We reverse, concluding that since the insurer defended the underlying civil action under an effective reservation of rights to deny coverage, collateral estoppel as to issues in the underlying action is inapplicable.   Moreover, we conclude that since only acts done with a preconceived design to inflict injury are excluded from insurance coverage under Insurance Code section 533 and the pertinent exclusionary language of the insurance policy, it is improper to apply a general presumption in every case of child molesting that this preconceived design to inflict injury attends each act of child molesting so as to exclude insurance coverage in every such case.


Penney issued to Hahn a comprehensive homeowner's policy providing liability insurance of $100,000 per occurrence and covering the period October 10, 1983, through October 10, 1984.   Under the terms of the policy Penney “[a]grees to pay on behalf of the insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury ․ to which this insurance applies․”  The policy does not apply “to bodily injury or property damage which is either expected or intended from the standpoint of the Insured.”

On September 30, 1984, M brought to the attention of her mother, S, the fact she had been molested by Hahn, whom S had befriended as a neighbor and caused to babysit M.   M was then five years old.   According to Hahn's deposition, the molesting consisted mostly of fondling M 20 to 25 times, but he admitted digitally penetrating her vagina once with his thumb and orally copulating her once.

Hahn was charged with eight counts of willfully and lewdly committing lewd or lascivious acts upon or with the body of a child under the age of 14 years.  (Pen.Code, § 288, subd. (a).)  On October 19, 1984, Hahn pled guilty to one count in a plea bargain dismissing the other seven counts.   Hahn was sentenced to prison for six years.

On December 26, 1984, Penney sent Hahn a letter reserving Penney's rights on the issue of coverage.   The letter reads in pertinent part:

“Under your J.C. Penney Casualty Insurance Company Homeowner's Policy No. 0956449–3, coverage is excluded, under Exclusion 1(f) of Section II of the policy, with respect ‘to bodily injury or property damage which is either expected or intended from the standpoint of the insured.’   In addition, there is no coverage under your policy for exemplary or punitive damages which may be awarded against you in a court of law in any civil action filed against you with respect to the claims made against you by [S] and [M].

“Accordingly, J.C. Penney Casualty Insurance Company reserves its right to deny or disclaim coverage on the grounds set forth above or on any other grounds allowd [sic] by law or set forth in the text of your policy.

“Notwithstanding the above, J.C. Penney Casualty Insurance Company will appoint separate and independent counsel to represent you in connection with the lawsuit which it is contemplated that [S] and [M] will file against you in the San Diego County Superior Court.   However, you should also understand that J.C. Penney Insurance intends to file a declaratory relief action for the purpose of contesting your coverage under its homeowner's policy, and J.C. Penney Insurance will, upon a final finding of non-coverage by a court of law, then refuse to provide any further defense to you and, in addition, refuse to indemnify or reimburse you for any damages awarded or assessed against you in connection with any lawsuit filed against you by [S] and [M].”

On January 4, 1985, Penney filed its complaint for declaratory relief seeking a determination there is no coverage under the policy based on the policy's exclusion for damages expected or intended from the standpoint of the insured as well as the provision of Insurance Code section 533 that “[a]n insurer is not liable for a loss caused by the wilful act of the insured․”

M and S filed the underlying action for damages against Hahn on June 12, 1985.   Attorney James M. Lane, who had represented Hahn in the criminal case, was hired as Cumis counsel (San Diego Federal Credit Union v. Cumis Ins. Society, Inc. (1984) 162 Cal.App.3d 358, 208 Cal.Rptr. 494) and engaged in settlement negotiations before filing an answer on behalf of Hahn.   Counsel for M and S agreed to an arrangement under which they would execute a covenant not to execute in exchange for an assignment from Hahn of his cause of action against Penney for breach of the covenant of good faith and fair dealing, with Hahn defaulting in the action and the court determining damages.   When Lane notified Penney of this proposal on October 1, 1985, Penney responded by expressing the belief Lane was allying himself with the plaintiffs and breaching the cooperation clause of the policy.

There followed a flurry of communications between Lane and counsel for Penney.   The communications culminated in an October 30, 1985, letter from a law firm notifying Lane that the firm had been retained to represent Hahn's interests and had filed an answer on his behalf, followed by Lane's response protesting these acts, describing the acts as having “effectively terminated my representation of Mr. Hahn ․ [and] wrested the defense of the case from Mr. Hahn and from me.”

Attorney Danny R. Grant, retained by Penney, conducted the remainder of Hahn's defense in the underlying action.   At the start of a December 6, 1985, deposition of Hahn in connection with the declaratory relief action in which Lane continued to represent Hahn, the following colloquy occurred between Grant, Lane and Hahn:

“Mr. Grant:  I would like to make a statement before we begin and have Mr. Hahn indicate whether he would like me to represent him.   Mr. Hahn, you understand that I have been retained by your insurance carrier J.C. Penney to defend you in the action of [K] versus Hahn.   Do you understand that?

“Mr. Hahn:  Yes, I do.

“Mr. Grant:  You understand also that they are claiming that there is no coverage.   Do you understand that?

“Mr. Hahn:  That they are claiming there is no insurance coverage for the incident?   Yes, I think so.

“Mr. Grant:  And you understand that because they are claiming no coverage in the fact, they have retained me and are paying my bill;  that a conflict of interest appears.   Do you understand that?

“Mr. Hahn:  Yes.

“Mr. Grant:  Now, would you like me still to represent you or would you like to have someone else represent you in this matter?

“Mr. Lane:  Before you answer that, I have got to confer with him off the record.

(Discussion held off the record)

“Mr. Hahn:  I do so without waiving any rights that have occurred during the time of our—or any—without waiving any rights occurring during the time of Mr. Lane's representation, and I still protest his dismissal on the case.

“Mr. Grant:  Just for the record, Mr. Lane has not been dismissed.   Whether he refuses to defend in the action is not here nor there.   All I want to know from you, you appreciate the situation, and you still would like me to represent you in the [K] versus Hahn matter?

“Mr. Hahn:  Yes.

“Mr. Lane:  For the record, Mr. Lane has been dismissed.   The opinions on that may differ, but Mr. Lane's services as Mr. Hahn's attorney in the matter of [K] versus Hahn have been terminated by the actions undertaken by J.C. Penney and Mr. Grant's office.

“Mr. Grant:  And just once more for the record, Mr. Lane has not been dismissed at any time.   He has the right to be associated in the [K] versus Hahn matter.   I stand ready to have him do so today.   He's welcome to participate in the defense of the [K] versus Hahn matter.   He has not been intentionally excused from any action in that record.   I welcome his association and participation in the defense on the [K] versus Hahn matter.

“Mr. Lane:  And opinions don't change the facts.”

These diametrically opposed views of Lane's continuing status as counsel for Hahn in the underlying action remained throughout the proceedings.   In a November 12, 1985, letter Penney attorney, William V. Stafford, said Penney “has never made any attempt whatsoever to compel [Lane] to withdraw as attorney of record for Mr. Hahn․”  Grant testified in the declaratory relief trial that at the deposition of Hahn he specifically requested Lane to join in the defense and associate with his office to handle the case “and he refused to do so.”   Lane testified in the declaratory relief trial he had been “fired, dismissed, terminated, ejected.” 1

In the trial of the underlying action for damages by M and S against Hahn, on May 16, 1986, a jury returned a verdict in the amount of $400,000 in favor of M “as a legal result of defendant Hahn's negligence” and in the amount of $100,000 in favor of S.   Preceding the trial, M and S dismissed their causes of action alleging intentional torts.   They went to trial solely on theories of negligence and negligent infliction of emotional distress.   At the start of the plaintiffs' case, Grant stipulated that as to M his client Hahn was negligent.   As a result of the stipulation, the court entered a directed verdict on the issue of liability in M's action.   The matter of Hahn's negligence as to S was submitted to the jury which in special verdicts found Hahn was negligent and his negligence was a legal cause of damage to S.

Trial of the declaratory relief action was in May 1987.   The court received evidence bearing on Hahn's state of mind when he committed the acts of molestation.   In Hahn's deposition he testified that he intended to do the acts of molestation but that he did not think it would cause psychological harm or other harm to M.   Psychologist and psychoanalyst, Doctor Sidney Smith, who was called by M, had examined Hahn.   Smith offered the opinion that Hahn never sought to harm M in any way.   Penney's expert, psychiatrist Melvin G. Goldzband, M.D., did not examine Hahn but reviewed the documents and data concerning him in connection with the case.   Answering a question concerning Hahn's intent to harm M, Goldzband testified:

“[T]he concept of harm doesn't appear to have much place.   The motivation for the behavior was sexual gratification, not harm of the victim.”

Goldzband also testified that in most cases in his experience fondling of a child by an adult male is a willful act.   It was Goldzband's opinion “that [Hahn] did not really consciously propose any physical harm to this child, and that it probably was not part of his thought process․  The wilfulness has to do with his own wish for the sexual congress with the child.”

In reaching judgment in the declaratory relief action, the trial court was not called upon to apply any of this testimony concerning Hahn's mental state.

Instead, in S's case the trial court applied the rule stated in Lamb v. Belt Casualty Co. (1935) 3 Cal.App.2d 624, 631, 40 P.2d 311, and other cases, that after a trial of an underlying action ostensibly involving a matter covered by insurance, “where one is bound either by law or agreement to protect another from liability, he is bound by the result of a litigation to which such other is a party, provided he had notice of the suit and an opportunity to control and manage it ․ the [underlying] judgment is conclusive evidence that the insured was liable, and to the extent of the amount of the judgment.”  (See also Artukovich v. St. Paul–Mercury Indem. Co. (1957) 150 Cal.App.2d 312, 320–321, 310 P.2d 461;  Miller v. United States Fid. & Cas. Co. (1935) 291 Mass. 445, 197 N.E. 75, 77.)   Thus, in S's case, since the matter of Hahn's negligence was fully litigated in the underlying action with the jury returning a special verdict in favor of S on that issue, the trial court held Penney bound by that underlying judgment.

In M's case, however, the trial court held that since the matter of Hahn's negligence was stipulated rather than litigated, under Lamb, supra, there was merely a presumption of negligence which Penney was entitled to overcome by proper proof.   The trial court then applied Kim W., supra, 160 Cal.App.3d 326, 333, 206 Cal.Rptr. 609, as dispositive of the coverage issue.  Kim W. holds “an act which is a violation of Penal Code section 288 is a wilful act within the meaning of Insurance Code section 533.”  (Fn. omitted.)   Accordingly, under Kim W., there can be no coverage by insurance of such an act.  (See also Fire Insurance Exchange v. Abbott (1988) 204 Cal.App.3d 1012, 1019–1029, 251 Cal.Rptr. 620.)


IEstoppel to Deny Coverage

 In Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 279, 54 Cal.Rptr. 104, 419 P.2d 168, it is pointed out that “the court in the third party suit does not adjudicate the issue of coverage․  The only question there litigated is the insured's liability․  [T]he question of whether or not the insured engaged in intentional conduct does not normally formulate an issue which is resolved in that litigation.”  (Fn. omitted.)   The court then announces:

“In any event, if the insurer adequately reserves its right to assert the noncoverage defense later, it will not be bound by the judgment.   If the injured party prevails, that party or the insured will assert his claim against the insurer.   At this time the insurer can raise the noncoverage defense previously reserved.”  (Ibid., fn. omitted.)

The quoted statement, albeit dictum (see United States Fidelity & Guaranty Co. v. Superior Court (May) (1988) 204 Cal.App.3d 1513, 1521–1522, 252 Cal.Rptr. 320), has become the established decisional law of California.   (Insurance Co. of the West v. Haralambos Beverage Co. (1987) 195 Cal.App.3d 1308, 1320, 241 Cal.Rptr. 427, “an insurer who assumes the defense of a disputed claim can avoid waiving coverage defenses and avoid estoppel by providing a sufficient and timely reservation of rights” (fn. omitted);  Val's Painting & Drywall, Inc. v. Allstate Ins. Co. (1975) 53 Cal.App.3d 576, 586, 126 Cal.Rptr. 267, “the insurer can avoid being bound by the judgment against the insured if it secures a nonwaiver agreement from the insured [citations] or makes an adequate reservation of rights.  [Citations.]”;  see also Centennial Insurance Company v. Miller (E.D.Cal.1967) 264 F.Supp. 431, 436.)

There is no question raised in this case concerning the adequacy or timeliness of Penney's reservation of rights to deny or disclaim coverage.   Accordingly, under the established rule preserving a noncoverage defense when there is an adequate and timely reservation of rights, the trial court erred in applying collateral estoppel to preclude Penney from denying coverage on the basis negligence was adjudicated in S's case in the underlying action.   (Insurance Co. of the West, supra, 195 Cal.App.3d 1308, 1319–1322, 241 Cal.Rptr. 427.)

The cases on which S relies to support the trial court are simply inapposite because there was no timely, adequate reservation of rights for the courts to consider in reaching their respective conclusions on the binding effect of the underlying judgment.  (See 7C, Appleman Insurance Law and Practice, § 4694, p. 336 et seq.;   cf. 8 Appleman, Insurance Law and Practice, § 4860, p. 533 et seq., particularly pp. 543–544 and fn. 12.)

In the next section we discuss whether the matter of Hahn's mental state must be adjudicated in a retrial pertaining to both M and S, or whether there can be no coverage as to both M and S in any event due to application of the rule of Kim W., supra, 160 Cal.App.3d 326, 206 Cal.Rptr. 609.


Application of Kim W.

 The question of applicability of the apparent holding of Kim W. that as a matter of law any person who commits an act violating Penal Code section 288 commits a willful act within the meaning of Insurance Code section 533 should be considered in the context of certain basic rules of insurance law.   First, an exclusionary clause “must be construed strictly against the insurer and liberally in favor of the insured․”  (Crane v. State Farm Fire & Cas. Co. (1971) 5 Cal.3d 112, 115–116, 95 Cal.Rptr. 513, 485 P.2d 1129.)  Insurance Code section 533 is the equivalent of an exclusionary or exculpatory clause subject to the rule that the burden of bringing itself within an exculpatory clause is on the insurer.  (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 879–881, 151 Cal.Rptr. 285, 587 P.2d 1098.)   Likewise, Insurance Code section 533 is subject to strict construction against the insurer and liberal construction in favor of the insured.  (See Congregation of Rodef Sholom v. American Motorists Ins. Co. (1979) 91 Cal.App.3d 690, 697, 154 Cal.Rptr. 348.)

 Our approach to this issue also is tempered with the recognition that Insurance Code section 533's pronouncement of an insurer's nonliability for loss caused by the willful act of the insured, along with Civil Code section 1668,2 “establish a public policy to prevent insurance coverage from encouragement of wilful tort.”  (Tomerlin v. Canadian Indemnity Co. (1964) 61 Cal.2d 638, 648, 39 Cal.Rptr. 731, 394 P.2d 571.)   An insurance policy indemnifying the insured against liability due to his own willful wrong is void as against public policy.  (Arenson v. Nat. Automobile & Cas. Ins. Co. (1955) 45 Cal.2d 81, 84, 286 P.2d 816.)

Clemmer v. Hartford Insurance Co., supra, 22 Cal.3d 865, 887, 151 Cal.Rptr. 285, 587 P.2d 1098, involving a question of coverage under the insurance policy of a person convicted of second degree murder, states the fundamental rule “that even an act which is ‘intentional’ or ‘willful’ within the meaning of traditional tort principles will not exonerate the insurer from liability under Insurance Code section 533 unless it is done with a ‘preconceived design to inflict injury.’ ”  (Italics added;  see also Walters v. American Ins. Co. (1960) 185 Cal.App.2d 776, 783, 8 Cal.Rptr. 665, “although he ‘intended the act,’ plaintiff acted by chance and without a preconceived design to inflict injury just as though he were acting intentionally, although negligently, and injured someone.”  (Italics added.)   The clear implications of this statement of the rule are (1) it pronounces a subjective, preconceived design, test, and (2) coverage in the case of persons convicted of second degree murder is not precluded under Insurance Code section 533 as as a matter of law.

In Clemmer the operative facts surrounding the criminal event for which insurance coverage was held not to be precluded are described by the court as follows:

“Plaintiffs, Marjorie Clemmer and Hugh Clemmer, are respectively the widow and minor son of Dr. Hugh Clemmer, deceased.   Dr. Daniel Lovelace had worked for Dr. Clemmer, and he was shocked when the latter on January 29, 1971, advised him that the employment relationship would be terminated.   The next day Dr. Clemmer was shot and killed by Dr. Lovelace, the Hartford Insurance Company's insured.   Just prior to the shooting Dr. Lovelace, from his apartment window, had observed Dr. Clemmer in a nearby gas station.   Dr. Lovelace placed a pistol in a shoe box, went to his car, placed the box and pistol on the seat, and drove across the street (from his apartment) to the gas station.   He pulled next to a gas pump and spoke to the attendant.   He then left the car and, carrying the gun, approached Dr. Clemmer.   He greeted Dr. Clemmer, then shot him twice.   These shots were followed by two more shots.   Finally, Dr. Lovelace knelt close to the victim and at close range shot him in the head.   The gun was placed on the ground.   Dr. Lovelace remarked that he knew what he was doing and that Dr. Clemmer was destroying him professionally.”  (Clemmer, supra, 22 Cal.3d at pp. 871–872, 151 Cal.Rptr. 285, 587 P.2d 1098.)

As we read Kim. W., the court announced alternative grounds for its conclusion there was no coverage under Insurance Code section 533 for the act there involved.   First, the court deemed a violation of Penal Code section 288 to be an act fitting within the following description:

“[T]he nature of the intentional act of the insured is such that an intent to cause at least some harm can be inferred as a matter of law, and that as long as some harm is intended, it is immaterial that harm of a different magnitude from that contemplated actually resulted.”  (Kim W., supra, 160 Cal.App.3d at p. 332, 206 Cal.Rptr. 609.)

Second, by his answer the insured 3 in Kim W. “effectively admitted that his conduct was intentional.   Nowhere in his answer did he allege that although his acts were wilful, their harmful consequences were unexpected, or that he had no intent to harm his victim.”  (Id. at p. 333, 206 Cal.Rptr. 609.)

Since there is no more reason for calling one ground the real basis for the decision in Kim W. as compared to the other ground, we cannot accept the characterizations by M and S of the first stated ground as dictum in the case.  (See 9 Witkin Cal.Procedure (3d ed. 1985) Appeal, § 786, pp. 757–578.)   Kim W. was an appeal from a judgment on the pleadings testing whether the rights of Kim W. and the insured could be determined as a matter of law from the face of the pleading attacked, there the insured's answer to the insurer's complaint for declaratory relief, and from matters of which the court could properly take judicial notice.

In Kim W. the insured's answer to the insurer's complaint for declaratory relief admitted participation in “ ‘such acts which constituted a violation of Penal Code No. 288,’ ” referring to the complaint's allegation that during certain years he engaged in conduct with Kim W. and others, “ ‘assaulting and battering them for his own sexual gratification and in violating [sic ] Section 288 of the Penal Code ․ and subdivisions A(b)(2) and Section 288(c) [sic ].’ ”  (Kim W., supra, 160 Cal.App.3d 326, 330, 206 Cal.Rptr. 609.)   The trial court denied the insured's motion to amend his answer by withdrawing his admission and granted the insurer's motion for judgment on the pleadings based on Insurance Code section 533 and the insurance policy's exclusion of coverage for “ ‘bodily injury or property damage intentionally caused by an insured person.’ ”  (Id. at pp. 329–330, 206 Cal.Rptr. 609.)

Kim W. upheld the denial of the insured's motion for leave to amend (id. at p. 331, 206 Cal.Rptr. 609) and proceeded to resolve the main issue on the alternate grounds described above.   The court's rationale for concluding that an act which is a violation of Penal Code section 288 is a willful act within the meaning of Insurance Code section 533, and supporting its view that an act within Penal Code section 288 is an act from which it can be inferred as a matter of law there was an intent to cause at least some harm, is stated as follows:

“One who admits that his conduct violated section 288 has admitted (1) a lewd or lascivious act upon a part of the body (2) of a child under the age of 14 (3) with the intent of arousing, appealing to, or gratifying the lust or passions or sexual desires of either the perpetrator or the child.   [Citation.]  Section 288 is intended not just to punish individuals for violating the moral standards of the community, but also to protect infants and children from lewd and lascivious assaults.  [Citations.]  Implicit in the determination that children must be protected from such acts is a determination that at least some harm is inherent in and inevitably results from those acts.   As the court stated in People v. Austin (1980) 111 Cal.App.3d 110 [168 Cal.Rptr. 401], ‘Significant harm may occur to a child who is caused to engage in or submit to the lustful intendments of a person seeking sexual self-gratification.   The range of proscribed potentially harmful acts is limited only by the imagination of the perpetrator.   The harm may be manifested in many different mental, emotional and physical ways, leaving a child with possible lasting and debilitating fears.’  (Id., at pp. 114–115, [168 Cal.Rptr. 401].)”  (Id. at pp. 332–333, 206 Cal.Rptr. 609.)

Near the conclusion of Kim W.'s discussion of the main issue, in the paragraph stating the alternative ground that the insured admitted the intentional nature of his act by failing to deny this in his answer, the court states that the “preconceived design to inflict injury” rule of the Clemmer case, supra, 22 Cal.3d 865, 151 Cal.Rptr. 285, 587 P.2d 1098, and the case of Congregation of Rodef Sholom v. American Motorists Ins. Co., supra, 91 Cal.App.3d 690, 154 Cal.Rptr. 348, is of no assistance to the insured and third party victim.  Kim W. explains this statement by saying:

“[B]oth cases involve issues relating to the capacity of the insured to form the requisite intent, rather than the difference between the intent to act and the intent to injure;  [the insured's] answers in this case raised no issue as to his mental capacity.”  (Id. 160 Cal.App.3d at p. 334, 206 Cal.Rptr. 609.)

The case at bar is similar to Kim W. in that Hahn admits having intended to commit the acts violating Penal Code section 288.   It bears certain similarity to Clemmer also, however, in that the expert testimony can be interpreted as bearing on his capacity to form a preconceived design to inflict injury.   For example, Dr. Smith testified that he believed Hahn was operating under an irresistible impulse that he could not control his actions and that at the moment he was engaged in the molestation he was not thinking of what was right or wrong.   Dr. Goldzband, Penny's expert, testified that while Hahn knew what he was doing and his motivation was sexual gratification of himself, preconceived design or intent to harm M was not a part of Hahn's thinking.

On this factual distinction, Kim W. could be viewed as inapplicable to the present case.   However, we have reservations about whether the rationale given in Kim W. leads to the conclusion the case reaches.   Accepting as true Kim W.'s statements describing the nature of the crime of violating Penal Code section 288, the purpose of the criminal law to protect children from harm and the legislative determination that “at least some harm is inherent in and inevitably results from those acts” (Kim W., supra, 160 Cal.App.3d at p. 333, 206 Cal.Rptr. 609), does the conclusion necessarily or even reasonably follow that in every such case the perpetrator intended to inflict the resulting harm?   We think not.   Though in some cases the conclusion the perpetrator had a preconceived design to inflict injury would reasonably flow from the evidence of the act and the perpetrator's state of mind at the time, this is not the conclusion properly to be reached in every case.

The preconceived design to inflict injury question is present in a case “in which the actor's capacity to harbor the requisite ‘design’ was placed in issue through evidence bearing upon his mental state.”  (Clemmer, supra, 22 Cal.3d at p. 887, 151 Cal.Rptr. 285, 587 P.2d 1098.)   Here, two apparently qualified experts 4 testified intent to inflict injury was not present when Hahn committed the acts constituting violations of Penal Code section 288.   The matter of preconceived design to inflict injury, in our opinion, is properly to be determined on a case-by-case basis as was attempted but not accomplished in the trial of the declaratory relief action here under review.

In this connection, we cannot accept the view expressed in Fire Insurance Exchange v. Abbott, supra, 204 Cal.App.3d 1012, 1028–1029, 251 Cal.Rptr. 620, that psychiatric evidence on the insured's subjective intent to injure the victim is irrelevant and immaterial and possibly “inherently incredible” too (id. at p. 1028, 251 Cal.Rptr. 620).   The court in Abbott reasoned:

“Virtually none of the [psychiatric] testimony was concerned with disproving that either insured intended to perform the acts constituting criminal sexual misconduct or that Abbott lacked the specific intent required by Penal Code section 288, subdivision (a).   In fact, the trial court found that Abbott had violated this section and that Shreve [a second insured in this consolidated case] had violated Penal Code section 288a, subdivision (b)(2).   In light of the inference which must be drawn from such criminal sexual misconduct, any psychiatric evidence offered to negate this criminal intent is immaterial.”   (Id. at p. 1029, 251 Cal.Rptr. 620.)

 Expert testimony on mental state is regularly relied upon by the courts as an aid to the finding of the trier of fact on that subject.  (See 1 Witkin, Cal.Evidence (3d ed. 1986) The Opinion Rule, § 524 et seq., p. 494 et seq.)   An example is expert testimony suggesting a person's mental condition prevented him or her from forming the required mental state for a crime.  (See People v. McCowan (1986) 182 Cal.App.3d 1, 13, 14, 227 Cal.Rptr. 23.)   Another current example is the use of expert psychiatric testimony to support the prosecution of child molesters like Hahn.  (See People v. Bowker (1988) 203 Cal.App.3d 385, 249 Cal.Rptr. 886.)   In Clemmer, supra, 22 Cal.3d at page 887, 151 Cal.Rptr. 285, 587 P.2d 1098, the court considered evidence bearing on the insured's mental state, including expert psychiatric testimony (see id. at p. 878, 151 Cal.Rptr. 285, 587 P.2d 1098), as properly placing in issue the insured's capacity to harbor the requisite preconceived design to inflict injury.   There is no compelling reason to disallow or completely disregard expert psychiatric testimony in cases where preconceived design to inflict injury is an issue properly before the trier of fact.  (See Congregation of Rodef Sholom v. American Motorists Ins. Co., supra, 91 Cal.App.3d 690, 696–698, 154 Cal.Rptr. 348.)

As we have seen, the subjective test of preconceived design to inflict injury pertains to the Insurance Code section 533 exclusion.   In Allstate Ins. Co. v. Overton (1984) 160 Cal.App.3d 843, 849, 206 Cal.Rptr. 823, the court states that the species of “willfulness” contemplated by Insurance Code section 533 “not only transcends recklessness but is something in the nature of specific intent to injure.”   The record before the court in Overton included no finding or statement of decision concerning the insured's intent and only “conflicting stipulated testimony and evidence concerning his intent and a terse stipulation to Overton's conviction of an offense [battery] not requiring the type or level of intent contemplated by the exclusionary clause and statute.”  (Id. at p. 850, 206 Cal.Rptr. 823.)   Applying the subjective specific intent test to this record, Overton could not hold as a matter of law that the insurer was excused from indemnifying Overton.  (Ibid.)

Here, since the court erroneously concluded under Kim W. there was a willful act based solely on the fact of Hahn's conviction of violating Penal Code section 288, the record has similar attributes to that in Overton.   The court prepared no statement of decision.   Accordingly, as in Overton we too cannot conclude there is no coverage as a matter of law.

In the context of an arson case where the insured's intent to inflict some harm was clear it has been held that the language of the insurance policy excluding coverage for “bodily injury or property damage which is either expected or intended from the standpoint of the Insured” has a different meaning from Insurance Code section 533, and that a specific intent on the part of the insured to cause all the resultant damage is not required to apply the policy exclusion.  (United States Fid. & Guar. Co. v. American Employer's Ins. Co. (1984) 159 Cal.App.3d 277, 288–291, 205 Cal.Rptr. 460.) 5  Due to the state of the record before us containing only an application of the Kim W. rule and no statement of decision explaining a factual basis for the court's decision on the issue of Hahn's preconceived design to inflict harm, it is premature to determine the applicability of such a standard here.   A factual finding must be made by the trial court before any different standard based on the policy exclusion language can be considered.

The matter of coverage should be determined on a case-by-case basis after a consideration of competent evidence, including psychiatric testimony, relevant to the crucial issue of whether the insured had a preconceived design to inflict injury.   This conclusion requires a retrial of the issue in both M's and S's cases.

Certain final points need brief mention.   M and Amici, National Association of Counsel for Children and Crime Victims Clinic, in briefs also adopted by S, argue certain constitutional principles compel a conclusion that coverage is present.   While we have serious misgivings concerning any constitutional basis for finding coverage (see State Farm Fire & Casualty Co. v. Dominguez (1982) 131 Cal.App.3d 1, 5, 182 Cal.Rptr. 109, “[t]he argument is emotionally intriguing, but it overlooks the fact that such victims cannot recover their loss in many cases where the actor was without resources”), we express no view on these constitutional arguments.

Fire Insurance Exchange v. Abbott, supra, 204 Cal.App.3d 1012, 1025–1028, 251 Cal.Rptr. 620, makes a thorough survey of cases from other jurisdictions, several of which are cited in the briefs before us.   To nobody's surprise, the cases conflict, with a minority of decisions treating insurance coverage for sexual misconduct as dependent on evidence of the insured's actual, subjective intent to injure.  (Id. at p. 1027, 251 Cal.Rptr. 620.)   As we have indicated, under our reading of Clemmer, supra, 22 Cal.3d 865, 151 Cal.Rptr. 285, 587 P.2d 1098, we think this is the California rule.

Abbott purports to agree with a statement made by the Ninth Circuit Court of Appeals in State Farm Fire and Cas. Co. v. Estate of Jenner (9th Cir.1988) 856 F.2d 1359, 1363–1364,6 that Clemmer and Kim W. are not irreconcilable.  (Abbott, supra, 204 Cal.App.3d at p. 1027, 251 Cal.Rptr. 620.)  Abbott proceeds, however, to pronounce a rule of irrelevancy, immateriality and apparently even inherent incredibility regarding the quality of the psychiatric evidence contended to be sufficient to rebut the Kim W. inference from criminal sexual misconduct of an excludable intent to injure.  (Abbott, supra, 204 Cal.App.3d at pp. 1028–1029, 251 Cal.Rptr. 620.)   This rule of Abbott effectively makes the Kim W. presumption an irrebuttable one.   We do not think this conclusion, though supported by certain other courts, can be sustained under the subjective intent test of Clemmer.

We conclude there is nothing in the elements or nature of a Penal Code section 288 crime that makes it worse than or different from a second degree murder for purposes of determining insurance coverage under Insurance Code section 533 and standard policy exclusions for injuries or damages expected or intended from the standpoint of the insured.   If, under Clemmer, coverage in the second degree murder case is not excluded as a matter of law where there is competent evidence, including psychiatric testimony of a nature similar to that presented here, that can reasonably be viewed as addressing the insured's capacity to have a preconceived design to inflict injury, there is no substantial reason to apply an exclusion as a matter of law rule in the case of a child molester convicted of violating Penal Code section 288.


Judgment reversed.   Costs on appeal are awarded to Penney as against S and to M as against Penney.

I concur with the majority that the judgment as to plaintiff S. should be reversed for the reasons set forth in the opinion.

However, I respectfully dissent as to the issue of coverage for plaintiff M.   I would adopt the reasoning of the Kim W. and Abbott cases.

The case of Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 151 Cal.Rptr. 285, 587 P.2d 1098 does not mandate a different result.   In that case, before eyewitnesses, Dr. Lovelace shot Dr. Clemmer five times and killed him.   Clemmer's widow and son obtained a default judgment against Lovelace for wrongful death.   They then filed another action against Hartford to collect on the judgment because Hartford had issued to Lovelace a personal comprehensive liability insurance policy with limits of $5 million.

The only question in the Clemmer case was the mental capacity of Lovelace to intend the act;  there was no holding by the Supreme Court in Clemmer that intent to injure, standing alone, was a dispositive issue.   At trial, Hartford was not allowed to apply the doctrine of collateral estoppel to plaintiffs' assertion of a claim of coverage, hence the trial and conviction of Lovelace for second degree murder was not before the jury.

The critical and distinguishing factor in Clemmer was a finding by the jury that Lovelace “lacked the mental capacity to intend to SHOOT AND HARM Dr. Clemmer and lacked such capacity to govern his own conduct.”  (Id. at p. 873, 151 Cal.Rptr. 285, 587 P.2d 1098;  emphasis added.)   In essence, the jury found Lovelace insane.

Although the Supreme Court in Clemmer noted Lovelace was “tried and convicted of murder in the second degree,” it went on to state that “ ․ at the conclusion of the guilt phase he withdrew his plea of not guilty by reason of insanity.”  (Id. at p. 872, 151 Cal.Rptr. 285, 587 P.2d 1098.)   The court then indicated that Lovelace may have withdrawn his plea of not guilty by reason of insanity “as a result of a determination on his part that the sentence to be served by him under a second degree murder conviction would be preferable to the possible consequence of his prevailing on his insanity pleas, to wit, commitment to a state mental hospital.”  (Id. at p. 877, 151 Cal.Rptr. 285, 587 P.2d 1098.)   This is a recognition that Lovelace's mental capacity, i.e., his sanity, had not been resolved by his conviction.

Hartford contended that the evidence as a matter of law compelled the conclusion Lovelace was possessed of his mental faculties when he killed Clemmer.  (Ibid.).  The Supreme Court did not agree, citing the testimony of an expert psychiatrist for the plaintiffs that Lovelace “․ at the time he shot Dr. Clemmer did not have the mental capacity to deliberate and premeditate or to form the specific intent to shoot and harm the victim and did not understand the consequences of his act, being then directed by paranoid delusions.”  (Id. at p. 878, 151 Cal.Rptr. 285, 587 P.2d 1098.)   This is the expert testimony accepted by the jury.   It was not the lack of intent to injure which was dispositive in Clemmer;  it was the lack of mental capacity to form the requisite intent to commit the act itself.

It should also be remembered that in Clemmer the trial court's grant of Hartford's motion for new trial was affirmed by the Supreme Court.   The Supreme Court noted the trial court “rejected the opinions of Dr. Anselen, which would exonerate Dr. Lovelace from the ability to know and recognize the nature of his act and to control his conduct as being absurd.”  (Id. at p. 888, 151 Cal.Rptr. 285, 587 P.2d 1098.)

The only reference in Clemmer to “preconceived design to injure” was a jury instruction which “simply applied this principle to a situation in which the actor's capacity to harbor the requisite ‘design’ was placed in issue through evidence bearing upon his mental state.”   The footnote at the end of this sentence clarifies this requisite “design” where it cites cases “in other jurisdictions considering the mental condition of the actor in determining the willfulness of his act for insurance purposes․”  In other words, the requisite “design” referenced in this section was the mental capacity of the insured in forming the intent to commit the act itself, not the intent to injure.

The discussion on subjective and objective intent is misplaced unless one has evidence regarding a lack of intent to commit the act itself as was present in Clemmer where the defense at both the criminal and civil trials was that Lovelace was insane and did not have the mental capacity to perform the act.

I do agree with the majority that the psychiatric evidence presented in this case was not “inherently incredible.”   It is true that the sexual abusers in a majority of these cases do not intend to injure the victims.   Many times, these individuals believe they are expressing their “love” for the victims or believe the victims like the acts done to them.

Here, Hahn testified he did not intend to injure the five-year-old victim when he sexually molested her 27 times even though he admitted digitally penetrating her vagina with his thumb at least once.   Therefore, the majority's position is that the policy does not exclude coverage for this bodily injury as it was neither “expected or intended from the standpoint of the insured.”   I strongly disagree.

I would hold as a matter of law, as did the courts in Kim W., Abbott and most recently the Ninth Circuit in State Farm Fire and Casualty v. Abraio, 874 F.2d 619, that the intent which is relevant and that which was not proven in the Clemmer case is the intent to commit the act, not subjective nor objective intent to injure.   There is a rebuttable presumption regarding the mental capacity to commit the act;  the intent to injure is irrelevant and immaterial.   As the evidence presented at trial by the experts in this case was that Hahn had the requisite mental capacity to intend the act, there is no coverage under Insurance Code section 533 nor the policy itself.

The California Supreme Court stated in the Clemmer case the plaintiff's contentions “that innocent victims of intentional torts should be able to recover from an insured without regard to the willfulness of the insured clearly runs contrary to the policy expressed in Insurance Code section 533․”  Phrasing these sexual abuse acts as “negligent” or determining that the sexual abuser here did not intend to injure nor did he expect there to be any injury to a five-year-old when he molested her 27 times is contrary to the definition of sexual abuse contained in Penal Code section 288(a).   There is no such crime as negligent sexual abuse pursuant to Penal Code section 288(a).

Therefore, I would affirm the judgment of the trial court and conclude the insured is not covered for the damages sustained by victims of his willful and criminal conduct.


1.   In briefly describing certain aspects of the representation of Hahn in the underlying action, we express no view in connection with the representation except to the extent of recognizing he was represented by counsel at all times in the underlying action.

2.   Civil Code section 1668 provides:  “All contracts which have for their object, directly or indirectly, to exempt anyone from the responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law.”

3.   The person who effectively admitted he intentionally committed the acts proscribed by Penal Code section 288 and who was apparently within the coverage of a homeowner's insurance policy is referred to as the insured.

4.   Smith is a boarded psychologist with the Menninger Foundation of Topeka, Kansas.   Psychiatrist Goldzband, among other things, served as cochairperson of the first two annual mental health/law seminars cosponsored by the superior court and dealing with the subjects of sexual abuse and physical abuse of children, victim and offenders.

5.   We emphasize that the court in United States Fid. & Guar. Co. v. American Employer's Ins. Co., supra, 159 Cal.App.3d 277, 205 Cal.Rptr. 460, unlike the present case, had before it substantial evidence of a preconceived design to inflict injury (id. at pp. 286–287, 291, 205 Cal.Rptr. 460), and the court clearly recognized intent to harm was necessary to invoke the policy exclusion.

6.   The Ninth Circuit Court of Appeals now follows Abbott.   (State Farm Fire & Casualty Co. v. Abraio (April 5, 1989;  88–1799) –––F.2d –––– [89 L.A. Daily J. D.A.R. 4434, 4436].)

TODD, Acting Presiding Justice.

BENKE, J., concurs.

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