Mother And Son Entitled To Separate Insurance Coverage

In dealing a blow to the insurance industry, the California Supreme Court, in Minkler v. Safeco Ins. Co., recently held that the existence of a “separate insurance” clause in a homeowners’ policy precluded the insurer from asserting the policy’s intentional acts exclusion to deny coverage for the mother (the named insured) based on the alleged intentional conduct of the son (also deemed “an insured” because he was a relative resident of the named insured’s household).  Specifically, the Supreme Court answered “no” to the certified question asked by the United States Ninth Circuit Court of Appeal: “Where a contract of liability insurance covering multiple insureds contains a severability clause, does an exclusion barring coverage for injuries arising out of the intentional acts of ‘an insured’ bar coverage for claims that one insured negligently failed to prevent the intentional acts of another insured?”

In 2003,  Scott Minkler sued Betty Schwartz and her son David,  alleging that David,  Scott’s Little League coach, had sexually molested Scott over a period of several years.  Scott asserted multiple causes of action against David, including sexual battery and intentional infliction of emotional distress.  Scott also asserted a cause of action for negligent supervision against Betty, based on allegations that David molested Scott in Betty’s home with her knowledge and that she failed to take reasonable steps to stop her son from doing so.  Scott’s lawsuit was tendered under a series of homeowners policies issued by Safeco.  In response to the tender, Safeco cited the intentional acts exclusion to deny the claim as to both David and Betty.  Specifically, Safeco argued that its policy did not cover the named homeowner, Betty, for liability stemming from the intentional sexual molestation committed by her son.  Safeco claimed that the policy excluded coverage for intentional acts of “an insured” and since David was an insured because he was a relative resident in Betty’s house, there was no coverage under the homeowner’s policy.

Justice Marvin Baxter, writing for the unanimous Supreme Court, disagreed and stated that the policy was unclear because it contained a severability-of-interests clause that provided “separate insurance” to each insured.  The high court reasoned that under California law, ambiguous insurance contract terms must be interpreted in favor of what a policyholder would reasonably expect and thus, concluded that “a reasonable interpretation of the severability language simply contradicts any inference that a coverage exclusion for the intentional acts of ‘an insured’ — i.e., one insured among several — would bar coverage for all others, such that all must sink or swim together.”  “The severability clause stated that ‘[t]his insurance‘ (italics added) was ’separately’ applicable to ‘each insured.’  The broad reference to separate application of ‘this insurance’ suggested . . . that each person the policies covered would be treated, for all policy purposes, as if he or she were the sole person covered — i.e., that in effect, each insured had an individual policy whose terms applied only to him or her.”  (Emphasis in original.)

Although coverage for David’s intentional acts was properly denied, Betty “had no reason to expect that David’s residence in her home, and his consequent status as an additional insured on her homeowners policies, would narrow her own coverage, and the protection of her separate assets, against claims arising from his intentional acts.”