No Liability Insurance Coverage for Wilful & Intentional Conduct by Insured

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Successor Corporation Responsible for Acts of Predecessor

Posted on April 26, 2022 by Barry Zalma

Insurers Need Not Indemnify Insured for Intentional Public Nuisance

A public nuisance suit in which a number of former manufacturers of lead paint were ordered to pay $1.15 billion into a fund to be used to abate the public nuisance created by interior residential lead paint in 10 California jurisdictions. The question presented to the Court of Appeal was whether the trial court correctly determined that ConAgra Grocery Products Company (ConAgra), as successor to paint manufacturer W.P. Fuller & Co. (Fuller), was not entitled to indemnity from its insurers.

In Certain Underwriters At Lloyd’s London et al. v. Conagra Grocery Products Company et al., A160548, California Court of Appeals, (April 19, 2022) resolved the dispute over the application of California Insurance Code Section 533’s prohibition of coverage for intentional acts whether written into the contract of insurance or not.

Section 533 provides that: "[a]n 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.” Section 533 is an implied exclusionary clause which by statute is to be read into all insurance policies. [J.C. Penney Casualty Ins. Co. v. M.K. (1991) 52 Cal.3d 1009, 1019 (Penney)] The statute reflects a fundamental public policy of denying coverage for willful wrongs and discouraging willful torts."

An insurer’s duty to indemnify is determined by the actual basis of liability imposed on the insured. Since the findings establishing that liability also establish the willful act required for application of section 533, ConAgra’s position is untenable.

ZALMA OPINION

Insurance, by definition, only provides indemnification to an insured for contingent or unknown events. California, by enacting Section 533 added to every contract of liability insurance an exclusion for the wilful act of the insured. Since the underlying actions established that the acts complained of – intentionally selling lead-based paint for use in dwellings – with knowledge of its danger, established that the conduct was wilful and excluded by Section 533.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, is available at http://www.zalma.com and [email protected].

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