FIRE INSURANCE EXCHANGE v. JENNIFER

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Court of Appeal, Second District, Division 6, California.

FIRE INSURANCE EXCHANGE, erroneously sued and served herein as Farmers Insurance Exchange, et al., Petitioner, v. The SUPERIOR COURT of the State of California for the County of Santa Barbara, Respondent. JENNIFER O., et al., Real Party in Interest.

Civ. No. B070722.

Decided: August 04, 1993

Tharpe & Howell, Todd R. Howell, Robert J. Needham, Santa Barbara, Horvitz & Levy, Daniel J. Gonzalez and Mitchell C. Tilner, Encino, for petitioners. No appearance for respondent. Ford & Pedersen, William H. Ford III, Neil Pedersen, Los Angeles, Sinsheimer, Schiebelhut & Baggett and Robert K. Schiebelhut, San Luis Obispo, for real parties in interest.

OPINION ON REHEARING

 We filed our original opinion in this matter on January 14, 1993.   On March 11, 1993, the California Supreme Court filed its opinion in Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 17 Cal.Rptr.2d 210, 846 P.2d 792, as modified at 5 Cal.4th page 294c (hereafter Horace Mann ).   The Supreme Court granted review and retransferred the cause to us for reconsideration in light of Horace Mann.   We have done so and reach the same result:  There is no insurance coverage and no duty to defend a child molester who wilfully attempts to thwart his own prosecution by importuning the victim from cooperating in the police investigation of his own crimes.   As we shall explain this conduct is “inseparably intertwined” (Horace Mann, supra, at p. 1085, 17 Cal.Rptr.2d 210, 846 P.2d 792) with the molestation so as to preclude the duty to defend as a matter of law.

The attempts to thwart the prosecution are excluded from insurance coverage because of the policy's own language, the fair import of J. C. Penney Casualty Ins. Co. v. M.K. (1991) 52 Cal.3d 1009, 278 Cal.Rptr. 64, 804 P.2d 689 and Horace Mann, supra, 4 Cal.4th at pages 1083–1085, 17 Cal.Rptr.2d 210, 846 P.2d 792 (see discussion, infra ), and Insurance Code section 533.1  Regardless of how others may theoretically construe the insured's post-molestation acts and statements, they were wilful and do not give rise to a duty to defend.

In September of 1987, then six-year old Jennifer O. and her mother, a housekeeper, moved into the home of Jerome Valenta.   On March 21, 1990, Jennifer O. told her mother that Valenta had been sexually molesting her.   The police were notified and a Penal Code section 288(a) arrest warrant was issued for Valenta on March 23, 1990.2  Aware of the investigation, Valenta changed the locks at his residence on March 24, 1990.   The next day he wrote a letter to Jennifer O.'s mother terminating her employment.   On March 28, 1990 Valenta surrendered on the warrant, was arrested, and posted $250,000 bail.

At the April 6, 1990 arraignment, the municipal court reduced bail but added a “no contact” condition of release.   Between March 24, 1990 and April 5, 1990, Valenta, both in person and in writing, contacted Jennifer O. and her mother several times asking them not to cooperate with the police.   He told Jennifer O. that he loved her, that he was sorry to have hurt her, and that he missed her.   Notwithstanding the “no contact” order, Valenta met with Jennifer O. and her mother on April 11, 1990.   He asked them to pray with him for guidance and not cooperate with the authorities.   On April 12, 1990, Valenta was arrested for intimidating a witness.  (Pen.Code, § 136.1, subd. (c);  see People v. Saffle (1992) 4 Cal.App.4th 434, 440, 5 Cal.Rptr.2d 648.)

On April 30, 1990, pursuant to a negotiated disposition, Valenta pled no contest to two counts of violating Penal Code section 288(a).   He was sentenced to state prison.   The witness intimidation charge was dismissed.

On June 25, 1990, Jennifer O. filed a civil lawsuit against Valenta.   Her complaint alleged sexual molestation and included causes of action for negligence and negligent infliction of emotional distress.

Valenta tendered the lawsuit to his carrier, Fire Insurance Exchange (Farmers), based on his homeowner's policy.   On August 16, 1990, Farmers employed counsel to defend him.   Following its investigation of the claim, and after obtaining a “coverage opinion” from another law firm, Farmers notified Valenta on October 10, 1990 that it was denying coverage and would no longer provide a defense.   One ground cited was that the policy excluded coverage for any occurrence caused by the insured's intentional acts.   The attorney retained by Farmers was allowed to withdraw as Valenta's attorney of record.   Valenta thereafter retained his own counsel.

Jennifer O. initially offered to settle the case for policy limits of $300,000.   Farmers rejected the offer.   In April 1991 she obtained a $7 million judgment ($3 million general damages and $4 million punitive damages) against Valenta.   The jury determined, inter alia, that Valenta had intentionally and negligently inflicted emotional distress on Jennifer O.   The trial court assigned Valenta's rights against Farmers to Jennifer O.

On September 10, 1991, Jennifer O. filed suit against Farmers alleging breach of contract and breach of the implied covenant of good faith and fair dealing.

The Farmer's policy defines occurrence as follows:  “Occurrence means an accident including exposure to conditions which results during the policy period in bodily injury or property damage.   Repeated or continuous exposure to the same general conditions is considered to be one occurrence.”

While the policy does not expressly define accidental occurrence, the time-honored definition is that the occurrence must be “․ neither expected nor intended from the standpoint of the insured.  [Citations.]”  (Hurley Construction Co. v. State Farm Fire & Casualty Co. (1992) 10 Cal.App. 4th 533, 539, 12 Cal.Rptr.2d 629.)  “ ‘[A]ccidental means ‘arising from extrinsic causes ․ occurring unexpectedly or by chance ․ happening without intent or thorough carelessness.’  [Citation.]”  (St. Paul Fire & Marine Ins. Co. v. Superior Court (1984) 161 Cal.App.3d 1199, 1202, 208 Cal.Rptr. 5.)  “An intentional act is not an ‘accident’ within the plain meaning of the word.  [Citations.]”  (Royal Globe Ins. Co. v. Whitaker (1986) 181 Cal.App.3d 532, 537, 226 Cal.Rptr. 435, fn. omitted.)

Jennifer O. moved for summary adjudication of issues.   She claimed that, based upon the facts known at the time the claim was first made, Farmers owed Valenta a duty to defend and was liable on the judgment because it rejected the earlier $300,000 offer.  (See Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 276–277, 54 Cal.Rptr. 104, 419 P.2d 168;  Comunale v. Traders & General Ins. Co. (1958) 50 Cal.2d 654, 659–660, 328 P.2d 198;  CNA Cas. Co. v. Seaboard Sur. Co. (1986) 176 Cal.App.3d 598, 605–606, 222 Cal.Rptr. 276.)   She also claimed that Valenta's post-molestation acts and statements were not intentional, that her complaint alleged a “potential” for insurance coverage, and the jury's finding of negligent infliction of emotional distress estopped Farmers from denying the coverage.

Farmers moved for summary judgment.   It argued that the post-molestation acts and statements were proximately linked to the molestation and, therefore, not covered.  (See Ins.Code, § 533;  J.C. Penney Casualty Ins. Co. v. M.K., supra, 52 Cal.3d 1009, 278 Cal.Rptr. 64, 804 P.2d 689.)

Respondent court denied both motions.   It found a triable fact on the issue of whether “Valenta committed acts independent of sexual molestation that were merely negligent rather than willful in character.”   This finding and the antecedent moving and opposition papers negate Jennifer O.'s procedural claim that Farmers waived or is estopped to argue the “nonaccident” theory on this writ petition.   When coverage was denied, Farmers expressly indicated that there was no coverage for intentional conduct.   It has not wavered from this position even though it may have used other words to make its point.

 We also reject Jennifer O.'s procedural claim that Farmers is estopped from raising the coverage issue by reason of the judgment against Valenta.   By Jennifer O.'s theory, she would only have to plead the judgment and Farmers would not be able to raise the coverage issue.

Jennifer O. can take no refuge in the prior judgment even though it was based, in part, on findings of negligence and negligent infliction of emotional distress.   A jury in the prior action cannot erase the exclusions in the policy nor Insurance Code section 533.  “[T]he court in the third party suit does not adjudicate the issue of coverage, ․ [t]he only question there litigatedis the insured's liability.”  (Gray v. Zurich Insurance Co., supra, 65 Cal.2d 263, 279, 54 Cal.Rptr. 104, 419 P.2d 168;  see also Ceresino v. Fire Ins. Exchange (1989) 215 Cal.App.3d 814, 822, 264 Cal.Rptr. 30;  Cal. Practice Guide, Bad Faith, Kornblum, Kaufman, Levine, § 8.113, p. 8.28.3.)

Geddes & Smith, Inc. v. St. Paul Mercury (1959) 51 Cal.2d 558, 334 P.2d 881, does not compel a contrary determination.   There the Supreme Court said at pages 561–562:  “An insurer that has been notified of an action and refuses to defend on the ground that the alleged claim is not within the policy coverage is bound by a judgment in the action, in the absence of fraud or collusion, as to all material findings of fact essential to the judgment of liability of the insured.   The insurer is not bound, however, as to issues not necessarily adjudicated in the prior action and can still present any defenses not inconsistent with the judgment against the insured.  [Citations.]”   As applied to the instant case, the Geddes rule means that Farmers is estopped to contest Valenta's liability and the amount of damages but not coverage.

“Where, as here, the facts are not in dispute, it is the appellate court's duty to make an independent determination of insurance coverage.  [Citations.]”  (Hurley Construction Co. v. State Farm Fire & Casualty Co., supra, 10 Cal.App.4th at p. 538, 12 Cal.Rptr.2d 629.)  “ ‘The duty to defend is broader than the duty to indemnify and is measured by the reasonable expectation of the insured.  [Citations.]’ ”  (Fire Ins. Exchange v. Jiminez (1986) 184 Cal.App.3d 437, 441, 229 Cal.Rptr. 83.)   An insurer is obliged to defend an action when “it ascertains facts which give rise to the potential of liability under the policy.”  (Gray v. Zurich Insurance Co., supra, 65 Cal.2d at p. 277, 54 Cal.Rptr. 104, 419 P.2d 168.)   An insurer's duty to defend “depends upon facts known to the insurer at the inception of the suit.”  (Hurley Construction Co. v. State Farm Fire & Cas. Co., supra, 10 Cal.App.4th at p. 538, 12 Cal.Rptr.2d 629.)

 “In determining whether there is a duty to defend, an insurer is not limited to the facts alleged in the underlying complaint, but may make the determination ‘from the total facts it learns from all sources.’  [Citations.]   Where those facts reveal that potential liability does not exist under the policy, the insurer, at its own risk, may refuse to defend the suit.  [Citation, fn. omitted.]”  (Saylin v. California Ins. Guarantee Assn. (1986) 179 Cal.App.3d 256, 263, 224 Cal.Rptr. 493.)  “ ‘[A]n insurer that wrongfully refuses to defend is liable on the judgment against the insured.  [Citations.]’ ”  (Samson v. Transamerica Ins. Co. (1981) 30 Cal.3d 220, 237, 178 Cal.Rptr. 343, 636 P.2d 32.)   The key word here is wrongfully.   (Ceresino v. Fire Ins. Exchange, supra, 215 Cal.App.3d at p. 822, 264 Cal.Rptr. 30.)   Where there is no coverage as a matter of law, refusal to defend is not wrongful.

A child molester cannot reasonably expect coverage while attempting to obstruct the orderly process of a criminal prosecution.  (See Fire Ins. Exchange v. Jiminez, supra, 184 Cal.App.3d at p. 441, 229 Cal.Rptr. 83;  see also Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1265, 10 Cal.Rptr.2d 538, 833 P.2d 545.)   All of the post-molestation acts and statements were “wilful” within the meaning of Insurance Code section 533.   The April 11, 1990 contact was not only criminal (Pen.Code, § 136.1(c);  People v. Saffle, supra, 4 Cal.App.4th 434, 440, 5 Cal.Rptr.2d 648), but a contempt of court.  (Pen.Code, §§ 166.4, 1318, subd. (a)(2).)

Six of the causes of action in Jennifer O.'s complaint against Valenta sought actual and punitive damages based on intentional torts, i.e. assault, battery, false imprisonment, slander, invasion of privacy and intentional infliction of emotional distress.   There is no serious contention about coverage for damages arising out of these six causes of action.

We turn to the remaining two causes of action.   The sixth cause of action for “negligence” alleged that, for a period of two and one-half years, Valenta stood “․ in loco parentis to plaintiff” and breached his duty to Jennifer O. by “․ molesting her and by engaging in a course of conduct both before and following the disclosure to authorities of his molesting Plaintiff, which resulted in further physical and emotional harm to Plaintiff.”   The pre-arrest ingratiating acts and statements, and the actual molestations, even though pled as “negligence,” are nothing more than the attempt to “plead around” the holding of J. C. Penney Casualty Ins. Co. v. M.K., supra, 52 Cal.3d 1009, 278 Cal.Rptr. 64, 804 P.2d 689, condemned by the Supreme Court in Horace Mann, supra, 4 Cal.4th at pages 1084–1086, 17 Cal.Rptr.2d 210, 846 P.2d 792.

The eighth cause of action for negligent infliction of emotional distress alleged that “․ Valenta knew, or should have known, that failure to exercise due care, by attempting to convince Plaintiff to retract [on several occasions] her reports of sexual molestation to authorities would cause Plaintiff severe emotional distress.”   This cause of action included a claim for punitive damages.

Some of the acts which form the basis for the eighth cause of action, e.g., Valenta's letters to Jennifer O., perhaps in another context and if viewed in isolation, might not have constituted intentional or wilful acts.   However, these acts should not be viewed in isolation.   Because of the proximity in time of Jennifer O.'s repeated molestation and Valenta's awareness of the pending criminal investigation, the post-molestation acts and statements are “inseparably intertwined” therewith.  (Horace Mann, supra, 4 Cal.4th at p. 1085, 17 Cal.Rptr.2d 210, 846 P.2d 792.)   The allegations of attempts to dissuade and entice Jennifer from cooperating with the authorities, although not sexual in character, directly stem from Valenta's awareness of the child molest investigation.   In layman's terms, the claimed negligent acts were wilful attempts to “cover up” the child molestation.

In Horace Mann, the Supreme Court found a duty to defend for a child molesting teacher for acts which may have been “separable” (at p. 1078, 17 Cal.Rptr.2d 210, 846 P.2d 792), not “integral” (at pp. 1083, 1084, 17 Cal.Rptr.2d 210, 846 P.2d 792), not “inseparable” (at p. 1084, 17 Cal.Rptr.2d 210, 846 P.2d 792), not “related” (at p. 1083, 17 Cal.Rptr.2d 210, 846 P.2d 792), and not “inseparably intertwined” (at p. 1085, 17 Cal.Rptr.2d 210, 846 P.2d 792) with the actual child molestation.   Twenty-five alleged acts of misconduct, not amounting to a violation of Penal Code section 288(a) (at p. 1079, fn. 2, 17 Cal.Rptr.2d 210, 846 P.2d 792), created a basis for the duty to defend.

Where as in the instant case, however, the acts of misconduct are “inseparably intertwined” with the molestation, i.e., they directly result from a child molest investigation, a different result obtains.   Here there is a nexus as a matter of law and we can “eliminate” the view that the insured's misconduct was “independent” of the sexual molestation.  (Horace Mann Ins. Co. v. Barbara B., supra, 4 Cal.4th 1076, 1085, 17 Cal.Rptr.2d 210, 846 P.2d 792, as mod. 5 Cal.4th, p. 294c.)   As to the April 11, 1990 contact, a judge ordered Valenta not to have any contact with the victim.   He promised not to do so as a condition of his release but wilfully broke the promise.   Paraphrasing our Supreme Court, here the acts “․ occurred in such close temporal and spatial proximity to the molestation as to compel the conclusion that they are inseparable from it for purposes of determining whether ․ [the carrier] owed a duty to defend ․ [the insured].”  (Horace Mann, supra, 4 Cal.4th at p. 1084, 17 Cal.Rptr.2d 210, 846 P.2d 792;  Coit Drapery Cleaners, Inc. v. Sequoia Ins. Co. (1993) 14 Cal.App.4th 1595, 1608, 18 Cal.Rptr.2d 692.)

Valenta's criminal and contemptuous post-molestation contact with Jennifer O. on April 11, 1990, struck at the victim's psychological well-being, the peace of the People of the State of California, and the heart of the judicial process.   This act, as well as the other post-molestation acts predating the April 6, 1990 “no contact” order were also wilful within the meaning of Insurance Code section 533, intentional, wrongful, and inherently harmful.

There is no duty to defend or provide coverage for “․ an intentional and wrongful act if the harm is inherent in the act itself.”  (J.C. Penney Casualty Ins. Co. v. M.K., supra, 52 Cal.3d at p. 1025, 278 Cal.Rptr. 64, 804 P.2d 689;  Fire Ins. Exchange v. Altieri (1991) 235 Cal.App.3d 1352, 1358, 1 Cal.Rptr.2d 360.)  “[I]nsurers are not required to indemnify their insureds for damages caused by an insured's sexual molestation of a child.  Insurance Code section 533 precludes coverage.”  (J.C. Penney Casualty Ins. Co. v. M.K., supra, 52 Cal.3d 1009, 1014, 278 Cal.Rptr. 64, 804 P.2d 689.)

As aptly stated by Farmers in its petition, “[o]ne cannot importune another unintentionally.”   Once the molestation was completed and Valenta became aware of the pending criminal investigation, his interest shifted from pedophilia to self-preservation.  (See People v. Saffle, supra, 4 Cal.App.4th 434, 440, 5 Cal.Rptr.2d 648.)   Common sense compels the conclusion that his post molestation acts and statements were intended to dissuade Jennifer O. from testifying against him.

At oral argument, counsel for Jennifer O. submitted that the J.C. Penney holding was a narrow one and that the California Supreme Court cautioned that it not be extended beyond its specific and narrow holding.   Counsel is partially correct.   The J.C. Penney court did expressly note the “narrowness of the question” before it.   In Horace Mann, supra, the Supreme Court reiterated the “narrowness” of the holding in J.C. Penney.  (Horace Mann, supra, 4 Cal.4th at p. 1082, 17 Cal.Rptr.2d 210, 846 P.2d 792.)   But, the J.C. Penney opinion also says:  “Whether other types of wrongdoing are also excluded from coverage as a matter of law by section 533 is not before us.”  (J.C. Penney Casualty Ins. Co. v. M.K., supra, 52 Cal.3d at p. 1028, 278 Cal.Rptr. 64, 804 P.2d 689, fn. omitted.)   In her supplemental brief filed after retransfer, counsel for Jennifer O. submitted that J.C. Penney was further narrowed in Horace Mann:  “Now, in light of Horace Mann, J.C. Penney must be properly understood to refer to proven or criminal molestation as opposed to merely alleged molestation.”  (Supp.Brief filed 5/28/93, p. 10, fn. 9.)   We reject this contention.

The Supreme Court's observations do not foreclose the Court of Appeal from considering whether “other types of wrongdoing” are excluded from coverage by section 533.   The California Supreme Court's opinions “․ are binding upon and must be followed by all state courts of California.”  (Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455, 20 Cal.Rptr. 321, 369 P.2d 937.)   One of the institutional functions of the California Supreme Court is to articulate general rules for future cases.   That court then applies its pronouncements to the specific case before it.   It cannot definitively say how it would apply its pronouncements to the myriad of situations not yet before it.  (See People v. Superior Court (Marks) (1991) 1 Cal.4th 56, 65–66, 2 Cal.Rptr.2d 389, 820 P.2d 613.)

One of the institutional functions of the Court of Appeal is to apply the Supreme Court's pronouncements to the specific case then before it.   In performing this function, the Court of Appeal must apply the Supreme Court's statements of law “․ wherever the facts of a case are not fairly distinguishable from the facts of the case in which ․ [the California Supreme Court] has declared the applicable principle of law.”  (People v. Triggs (1973) 8 Cal.3d 884, 891, 106 Cal.Rptr. 408, 506 P.2d 232.)   This is a judgment call for the Court of Appeal.  (See, e.g., Fire Ins. Exchange v. Altieri, supra, 235 Cal.App.3d at p. 1357, 1 Cal.Rptr.2d 360.)

There is no duty to defend acts and statements which are “inseparably intertwined” with the actual molestation.   Valenta's post-molestation acts and statements cannot reasonably be deemed to be negligent.   No triable issue of material fact was presented on this issue.   Farmers had no duty to defend Valenta.   Respondent court erroneously denied Farmers' motion for summary judgment.3

Let a writ of mandate issue directing respondent court to set aside its September 28, 1992 order denying Farmers motion for summary judgment and to enter an order granting the motion.

FOOTNOTES

1.   Insurance Code section 533 provides:  “An insurer is not liable for a loss caused by the wilful act of the insured;  but he is not exonerated by the negligence of the insured, or of the insured's agents or others.”

2.   Penal Code section 288(a) provides:  “Any person who shall willfully and lewdly commit any lewd or lascivious act including any of the acts constituting other crimes provided for in Part 1 of this code upon or with the body, or any part or member thereof, of a child under the age of 14 years, with the intent of arousing, appealing to, or gratifying the lust or passions or sexual desires of that person or of the child, shall be guilty of a felony and shall be imprisoned in the state prison for a term of three, six, or eight years.”

3.   This opinion should not be interpreted so as to preclude the duty to defend in other situations where the insured's conduct, or lack of it, is not “inseparably intertwined” with child molestation.   For example, had Jennifer O. suffered damages as a result of Valenta's negligent failure to physically maintain his home where Jennifer O. was residing there would be a duty to defend.

YEGAN, Associate Justice.

STONE, P.J., and GILBERT, J., concur.

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