This was an appeal from an order of the Superior Court of San Mateo County (California) which granted respondent insurer’s motion for a directed verdict in an action alleging breach of contract and the covenant of good faith and fair dealing surrounding indemnification and defense of a sexual harassment and wrongful termination suit. The defense party and their business lawyers presented evidence to jurors.
Overview
Appellants brought suit against respondent insurer alleging breach of contract and of the implied covenant of good faith and fair dealing under appellants’ general liability policy. The action arose after respondent refused to defend or indemnify appellants in a sexual harassment and wrongful termination action brought by appellants’ former employee. Appellants challenged the trial court’s determination that there was no duty to defend or indemnify since the acts of sexual harassment were intentional and willful misconduct by high managing agents of appellant corporation. The appellate court affirmed the trial court’s decision and held that appellants could not shift to respondent the costs of defending and settling the claim for sexual harassment and wrongful termination since the incidents at bar constituted intentional and willful acts. As such, the language of the insurance policy between the parties as well as Cal. Ins. Code § 533 barred indemnity and defense coverage.
Outcome
The appellate court affirmed the decision of the trial court and held that the acts of sexual harassment and wrongful termination at issue were intentional and willful acts for which defense and indemnification coverage was excluded by the language of the relevant insurance policy and state statute.
Procedural Posture
Respondents, the insured and others (the insured), sued appellant insurer for breach of a duty to defend the insured in an underlying action. After both sides moved for summary judgment, the Superior Court of San Diego County, California, granted the insured’s motion, and entered judgment for the insured. The insurer appealed.
Overview
A third party entered into a written lease agreement with the insured to lease certain property to open a car dealership. The third party was told that the prior tenant would vacate the property by a certain date. The agreement provided that the lease commencement date was subject to the prior tenant vacating the premises. The prior tenant was six weeks late in vacating the property, thus, preventing the third party from doing business during that time. The third party later sued the insured for, inter alia, breach of contract and misrepresentation. The insured tendered the defense to the insurer, which the insurer denied. The insured settled the underlying action, and then sued the insurer. The trial court entered a judgment for the insured. The court of appeals held that the undisputed facts established the absence of a potential for coverage under the relevant insurance policies and therefore the insurer had no duty to defend the insured in the underlying action. Thus, the trial court erred in granting the insured summary judgment and in denying the insurer’s summary judgment motion.
Outcome
The judgment was reversed and remanded.
