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Golden Eagle Insurance Co. v. Century Surety Company12/8/2003
n Mullen v. Glens Falls Ins. Co., supra, 73 Cal.App.3d 163 (Mullen), the court rejected the contention that Century advances here. In that case, the underlying third-party complaint alleged that the insureds' son, while operating a car, had struck the third party. (Id. at pp. 165-168.) These allegations indicated that the incident fell outside the coverage of the pertinent policy, which contained an exclusion for damages arising from operation of an automobile. (Ibid.) However, the insurer also received a report indicating that the alleged incident involved a scuffle outside the car at a service station. (Ibid.) The insurer nonetheless declined to provide a defense, citing the automobile operation exclusion. (Ibid.) A judgment against the insureds' son grounded upon an intentional assault was subsequently entered in the third party action. (Id. at p. 168.)
Thereafter, the insureds sued the insurer for its failure to defend their son. (Mullen, supra, 73 Cal.App.3d at p. 168.) During this suit, the third party testified in deposition that the son had attacked him with a tire iron, saying, "`I am going to kill you.'" (Ibid.) In view of this testimony and other facts, the trial court concluded that the insurer had not been obligated to defend the insureds' son. (Ibid.)
On appeal, the insurer in Mullen, like Century, contended that it had assumed the risk of liability in declining to provide a defense, but it had not incurred any such liability. The insurer argued that there had never been any potential for policy coverage because the son had committed a willful, unprovoked assault, and thus coverage was barred under Insurance Code section 533. (Mullen, supra, 73 Cal.App.3d at pp. 172-174.)
The court in Mullen rejected this contention and reversed the judgment in the insurer's favor. (Mullen, supra, 73 Cal.App.3d at p. 174.) It observed that the insurer, "without having all of the facts before it," had refused to provide a defense, even though the facts in its possession did not conclusively preclude the potential for coverage. (Id. at p. 173.) To permit insurers to escape liability under such circumstances, it reasoned, would permit insurers to refuse to defend "on the slightest provocation and then resort to hindsight for the justification." (Id. at p. 173.) In addition, it reasoned that an insurer's duty to defend is triggered when the facts in the insurer's possession establish a potential for coverage, and this duty does not dissolve simply because it turns out that there was in fact no coverage. (Id. at p. 174.)
The court in Perkins v. Allstate Ins. Co., supra, 63 F.Supp.2d 1164, also rejected the contention that Century advances. In Perkins, the insured's automobile insurance policy contained a resident relative exclusion clause that denied coverage to relatives residing in the insured's household. The insured became incarcerated, and he permitted a friend to drive his car. (Id. at pp. 1166-1167.) When the friend drove the insured's wife on an errand, they were involved in an accident, and the wife subsequently sued the insured and his friend. (Ibid.) Although the insurer was aware that the insured was imprisoned, it declined to defend the insured on the basis of the resident relative exclusion, relying on case authority indicating that inmates do not change their residence due to incarceration. (Id. at p. 1170.)
The court in Perkins concluded that the insurer had violated its duty to defend, reasoning that the proper test for residence under the exclusion hinged on facts not known by the insurer when it refused to defend its insured, for example, the length of the inmate's term of imprisonment. (Perkins v. Allstate Ins. Co., supra, 63 F.Supp.2d at pp. 11
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