Like a number of states, California prohibits insurers from indemnifying policyholders for liability based on intentional conduct that was committed with the intent to cause harm, although it does not bar a defense against such claims. California’s public policy is codified in Insurance Code Section 533, which 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.”
A significant body of law has elucidated the rules for application of Section 533. Reckless or grossly negligent conduct generally does not trigger application of the statute. Nor, with very limited exceptions, does the mere fact that a policyholder intended the act that caused the harm bring the conduct within Section 533. Instead, the policyholder must have intentionally performed a liability-producing act for the express purpose of causing harm or with knowledge that harm was highly probable or substantially certain to result. Fraud and malicious prosecution are common examples. Section 533, however, does not bar coverage for intentionally harmful acts based solely on vicarious liability.Continue reading “California Corner: California’s Bar on Coverage for Willful Acts under Insurance Code Section 533—Don’t Assume It Applies”
Welcome to “California Corner,” dedicated to posts authored by our new team of Insurance Recovery attorneys based in our Los Angeles office. Partner Linda Kornfeld, who serves as vice chair of the Insurance Recovery group, Partner David Thomas and Of Counsel Julia Holt focus on national and California-specific issues, including property and weather-related business interruption issues, data breach and privacy issues, and professional liability, asbestos, and environmental liabilities. Their clients include telecommunications companies, universities, real estate developers, manufacturers, and nonprofit organizations around the country. We hope you find their perspectives informative and insightful!