California Insurance - Intentional Battery Committed By Insured Exercising a Mistaken Right to Self-Defense Triggers Insurer’s Defense Obligation
Delgado v. Interinsurance Exchange of Auto. Club of Southern California, Case No. B191272 (Cal. Ct. App. 2 Dist., May 24, 2007).
California’s Second District Court of Appeal held that the potential for coverage, and a corresponding duty to defend, existed where a complaint alleged a claim for an intentional tort (battery) coupled with allegations that
defendant believed that he was acting in self defense and had negligently and excessively exercised that right.
In Delgado the defendant kicked the plaintiff (a minor) and struck him in the nose while the two were standing on the sidewalk across the street from the defendant’s residence because the defendant believed he and
his family were in danger. As a result of sustaining multiple physical injuries, the plaintiff asserted two separate claims against the defendant - one for intentional tort, and the other, negligence in the excessive use of force
in asserting a perceived right of self-defense.
The defendant tendered the complaint to his homeowner’s insurer, whose policy provided $100,000 liability coverage. The insurer denied coverage on the grounds that (1) there was no “occurrence,” since an intentional,
unprovoked attack could not be considered an accident, and (2) the defendant’s conduct was intentional, and thus within the wilful acts exclusion incorporated into every California insurance policy via Insurance Code Section
533.
Thereafter, the plaintiff and defendant settled the underlying action, and stipulated on the record before the court that defendant’s use of force constituted a “negligent use of excessive force in the exercise of the
defendant’s right of self-defense.” Judgment in the amount of $150,000 on the negligence claim was entered in the underlying action. The defendant paid the plaintiff $25,000 together with an assignment of rights against
the insurer for breach of contract and bad faith, and the plaintiff brought suit against the insurer.
The insurer demurred to the plaintiff’s original and first amended complaints. The trial court sustained demurrers to both, ultimately sustaining the demurrer to the first amended complaint without leave to amend and dismissing
the suit. In making its ruling, the trial court characterized the settlement and stipulated judgment as “contrived” in an effort to expose the insurer to liability, that “merely framing the incident in terms
of negligence is not conclusive of the duty to defend,” and that characterizing assault and battery as an ‘accident’ is disingenuous at best.’” (Citations omitted.) The court also observed that
the plaintiff failed to allege any facts showing why the underlying defendant perceived him to be an imminent threat or to show why the underlying defendant believed that he was acting in self-defense.
The California Court of Appeal reversed. The Court found that the underlying complaint pled facts showing that there was a potential for coverage under the policy. Specifically, the plaintiff's second cause of action
alleged that the defendant acted in self-defense and that the plaintiff’s injuries were therefore caused by unintentional conduct. The Court noted that the insurer did not have any extrinsic facts to eliminate this potential
for coverage, and further observed that California courts have previously recognized that claims for excessive or unreasonable use of self-defense are not necessarily intentional or wilful conduct.
The Court further held that the insurer’s refusal to defend constituted bad faith as a matter of law. The Court analyzed whether the insurer’s conduct was insulated from bad faith liability via the “genuine dispute”
doctrine, observing that it was not entirely clear whether the doctrine applied at all in third party cases involving the duty to defend. The Court drew a distinction between coverage disputes that turn on legal issues and those
that turn on the resolution of disputed factual issues, concluding that the genuine dispute doctrine would likely apply in the duty to defend context only to those cases in which coverage turned on disputed legal issues. If an insurer
raises a legitimate legal issue as to its liability and turns out to be incorrect, so long as its legal position was reasonable, its denial of a defense obligation would at most give rise to a breach of contract claim.
But, in the case of a factual coverage dispute, it is the very existence of disputed facts that establishes the duty to defend. In the case before it, the Court concluded that the unresolved factual dispute that created a defense
obligation was whether the underlying defendant was or was not acting in self defense – whether his conduct was intentional or not. That unresolved factual dispute both gave rise to the insurer’s defense obligation
and established bad faith as a matter of law when the insurer denied the underlying defendant’s tender of his defense.