What a Difference the Word ‘Accident’ Makes in Sexual Assault Coverage Cases

Disparate coverage results for sexual assault claims turned on a one word difference in “personal injury” policy definitions in Gonzalez v. Fire Ins. Exchange (2015) ____Cal.App.4th ____, decided by the Six District California Court of Appeal on February 5, 2015.

Stephen Rebagliadi was insured under his parents’ two insurance policies, a Fire Insurance Exchange (Fire) homeowner’s policy and a Truck Insurance Exchange (Truck) personal umbrella policy. Jessica Gonzalez sued Stephen Rebagliadi and nine other members of the D Anza College baseball team claiming they had gotten her drunk and sexually assaulted her. Rebagliadi tendered the case for defense and both Fire and Truck refused, because the complaint did not allege accidental conduct, and the two policies excluded coverage for intentional conduct it did allege. The homeowner’s policy insured Rebagliadi for damages he must pay because of bodily injury, property damage, or personal injury only if that injury or damage resulted from an “accident.” The umbrella policy, on the other hand, insured Rebagliadi for personal injury damages whether or not the conduct causing those damages was accidental. The same policy defined personal injury as any injury arising from wrongful detention, defamation or invasion of privacy, all offenses implicated by the factual allegations of Gonzalez’s complaint.

Based on well-established precedent holding that sexual assault is never an “accident”, the Court of Appeal upheld Fire’s coverage denial and a summary judgment in Fire’s favor. The court pointed out the disparate burdens of insured and insurer in seeking summary judgment on the duty to defend. To prevail on that issue, a policyholder need show only that the claim against him may fall within coverage; the insurer must prove that it cannot fall within coverage. If there is no potential for coverage, there is no duty to defend, and since intentional acts are not accidents, even if they cause unintended harm, Fire was justified in not defending Rebagliadi.

However, since the umbrella policy, which required Truck to defend covered claims if no other policy did, omitted any “accident” requirement in defining personal injury coverage under that policy, there was a potential for coverage of the allegations of false imprisonment, slander per se and invasion of privacy. Accordingly, Truck owed Rebaglaidi a duty to defend him.

Having found that the complaint raised the potential for personal injury coverage, the court turned to Truck’s contention that its policy exclusions defeated that potential. With regard to exclusions, the burden of establishing their application is placed upon the insurer to show conclusively an exclusion applies barring coverage. The exclusion for sexual molestation the court found did not defeat all coverage, because the complaint alleged some of the misconduct in the disjunctive, stating that Rebagliadi “and/or” each of the other defendants caused her injury. Therefore, her complaint raised the possibility that the other defendants and perhaps not Rebagliadi committed the physical act of assaulting Gonzalez. In fact, the court pointed out, the complaint suggested the possibility that Rebagliadi may not have engaged in sexual assault himself, but was present in the room while it took place and may thereafter have disparaged Gonzalez’s reputation by slandering her after the incident. Without an accident requirement, such conduct fell directly within the ambit of Truck’s personal injury coverage and gave rise to a duty to defend Rebagliadi.

The court also invoked the rule that the duty to defend turns on the allegations of the complaint plus whatever additional information is known by the insurer at the time of the tender of the complaint for defense, and therefore the fact that Rebagliadi later admitted touching Gonzalez at the party was not relevant to the duty to defend unless it was known at the time Rebagliadi tendered his defense to Truck.

Other exclusions were similarly unavailing to Truck, including the exclusion for damages either expected or intended from the standpoint of the insured, the court pointing out that the exclusion, the equivalent of Insurance Code § 533 which provides a statutory exclusion to an insurer for a loss caused by the willful act of the insured, requires a preconceived designed to inflict injury. Since Rebagliadi denied any wrongdoing at the time of the tender and Truck submitted no evidence to the contrary, Truck had not met its burden on the exclusion.

The same was held true for the criminal acts exclusion since there was no extrinsic evidence at the time of the tender that conclusively demonstrated Rebagliadi assaulted Gonzalez and therefore violated the law.

Fire and Truck claimed that Gonzalez’s complaint, including her causes of action for negligence and slander, were inseparably intertwined with the underlying sexual assault and therefore must be excluded from coverage on that basis. The Court of Appeal rejected the argument, saying that it disagreed that the cases establish a blanket rule that if a cause of action is related to sexual molestation it must be excluded from coverage. Unlike some of the earlier cases, Gonzalez’s complaint did not necessarily set forth allegations that were inseparably intertwined with Rebagliadi’s purported sexual assault. After all, Gonzalez’s complaint raised the possibility that other individuals, not Rebagliadi, perpetrated the assault, making the inseparability principle inapplicable to him in this case.

Wolf is a partner in the Los Angeles office of the nationwide law firm of Lewis Brisbois Bisgaard & Smith LLP. He served as law clerk to Presiding Court of Appeal (later Supreme Court) Justice Otto M. Kaus and since 1970, Wolf has specialized in insurance coverage advice and litigation.