Opinion
B209616
08-02-2011
CENTURY-NATIONAL INSURANCE CO., Plaintiff and Respondent, v. JESUS GARCIA et al., Defendants and Appellants.
Beverly Hills Associates and Stephen M. Losh for Defendants and Appellants Jesus Garcia and Theodora Garcia. Haight, Brown & Bonesteel, Valerie A. Moore and Christopher Kendrick for Plaintiff and Respondent Century-National Insurance Company.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication i ordered published for purposes of rule 8.1115.
(Los Angeles County Super. Ct. No. BC379522)
APPEAL from a Judgment of the Superior Court of Los Angeles County. Maureen Duffy-Lewis, Judge. Reversed.
Beverly Hills Associates and Stephen M. Losh for Defendants and Appellants Jesus Garcia and Theodora Garcia.
Haight, Brown & Bonesteel, Valerie A. Moore and Christopher Kendrick for Plaintiff and Respondent Century-National Insurance Company.
Jesus Garcia, Sr. and Theodora Garcia appeal judgment on their cross-complaint against Century-National Insurance Company. The Garcia's son Jesus, Jr. deliberately set fire to the Garcia's home, and Century-National sought a declaration that coverage was excluded for the intentional acts of "any insured;" the Garcias cross-claimed for breach of contract, bad faith, and reformation. The trial court sustained Century-National's demurrer without leave to amend, concluding that the policy language defining "any insured" to include relatives precluded recovery for the intentional acts of Jesus Garcia, Jr. We initially affirmed the judgment, but after granting review, the Supreme Court reversed and remanded it to this Court for further proceedings. We now reverse the judgment and remand the matter to the trial court.
FACTUAL BACKGROUND AND PROCEDURAL HISTORY
Jesus Garcia, Sr. and his wife Theodora Garcia were Century-National's named insureds under a fire insurance policy on their home. On May 2, 2007, a fire occurred at the Garcia's home, and on May 3, 2007, the Garcias filed a claim with Century National.
To avoid confusion, because the defendants share the same last name, we refer to them by their first names.
The insurance adjuster inspected the premises and suspected arson. Century National retained a qualified fire investigator, who determined that the fire started in the bedroom of the Garcia's son Jesus, Jr. shortly after he had been in the bedroom. The investigator ascertained the fire was intentionally set with the use of a small amount of accelerant applied to the floor and bed that was ignited with a small open flame, such as would be found on a cigarette lighter or a match. Century-National concluded the fire was the result of arson. Jesus, Jr. pleaded no contest to arson charges (Pen Code, § 451, subd. (b)) and was sentenced to five years.
At the time of the fire, the Garcias were insured by Century-National under a policy which excluded coverage for "Intentional Loss, meaning any loss arising out of any act committed by or at the direction of any insured having the intent to cause a loss," and also excluded coverage for losses caused by "Dishonesty, Fraud, or Criminal Conduct of any insured." An "insured" was defined as "you and the following persons if permanent residents of the residence premises. . . . [¶] Your relatives. . . ."
On October 22, 2007, Century-National filed its complaint for declaratory relief, seeking a declaration that it had no duty to pay the Garcia's claim because the loss resulted from the intentional or criminal acts of an insured.
On December 3, 2007, the Garcias filed their cross-complaint for breach of contract, breach of the covenant of good faith and fair dealing, and reformation. They alleged that Jesus, Jr. was not a named insured on the policy and did not have an insurable interest in the property, although they alleged he was their son and lived at the property at the time of the loss. The Garcias further alleged that Century-National's definition of intentional loss violated Insurance Code section 2071 because the policy used the words "any insured" rather than "the insured," and thereby denied the Garcias insurance coverage.
All statutory references herein are to the Insurance Code unless otherwise noted.
Century-National demurred to the cross-complaint, contending that wrongdoing by the insured barred coverage and bad faith does not lie where there is a genuine dispute of law. In particular, Century-National argued that although the Garcias allege Century-National should indemnify them because they did not set the fire, the policy provided that coverage was excluded for any insured who engaged in intentional or criminal conduct. Century-National pointed out under sections 2071 and 533, exclusion of coverage applied to "innocent co-insureds," citing Fire Insurance Exchange v. Altieri (1991) 235 Cal.App.3d 1352 (Altieri)and Watts v. Farmers Insurance Exchange (2002) 98 Cal.App.4th 1246 (Watts).
The Garcias opposed Century-National's demurrer, contending that the Insurance Code required an insurance policy to refer to "the insured," not "any insured," and that the current trend in case law was to resolve any conflict between policy language and statutory language in favor of innocent co-insureds, citing Sager v. Farm Bureau Mutual Ins. Co. (Iowa 2004) 680 N.W.2d 8, 11. The Garcias also argued any legal dispute was not genuine, but had been manufactured by Century-National.
The court sustained the demurrer without leave to amend, finding that (1) the policy defined "any insured" to include relatives of the insured, (2) courts generally interpret policies which exclude coverage for criminal or intentional acts to exclude coverage of innocent co-insureds (Altieri, supra, 235 Cal.App.3d at p. 1361), and (3) section 533 expressly sets forth California's public policy of denying coverage for willful wrongs. The court entered judgment on the cross-complaint, and Century-National dismissed its complaint.
On appeal, this court affirmed the judgment. (B209616, December 2, 2009.) The Garcias petitioned for review in the Supreme Court, which granted their petition and, on February 17, 2011, reversed. (Century-National Insurance Co. v. Jesus Garcia et al., February 17, 2011, S179252.) We will now reverse and remand the matter to the trial court.
DISCUSSION
I. STANDARD OF REVIEW.
Because the function of a demurrer is to test the sufficiency of a pleading as a matter of law, we apply the de novo standard of review in an appeal following the sustaining of a demurrer without leave to amend. (Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal.App.4th 1413, 1420.) We assume the truth of the allegations in the complaint, but do not assume the truth of contentions, deductions, or conclusions of law. It is error for the trial court to sustain a demurrer if the plaintiff has stated a cause of action under any possible legal theory, and it is an abuse of discretion for the court to sustain a demurrer without leave to amend if the plaintiff has shown there is a reasonable possibility a defect can be cured by amendment. (California Logistics, Inc. v. State (2008) 161 Cal.App.4th 242, 247.)
II. THE POLICY EXCLUSIONS AT ISSUE ARE UNENFORCEABLE.
The Garcias argue that Century-National's policy violates sections 533 and 2071, which they contend require policy language to refer to "the insured," not "any insured;" they assert that because they had no role in Jesus, Jr.'s conduct, they are innocent co-insured entitled to indemnity. (See Watts, supra, 98 Cal.App.4th 1246.)
The Garcia's Century National policy defined insured as a relative of the named insured and excluded coverage for intentional loss. The Garcias have admitted Jesus, Jr.'s conduct was intentional. As a result, the policy language would exclude coverage here. The Garcias argue that plain policy language violates section 2071, which they contend in its fraud provisions also applies to intentional and criminal acts and specifies the language "the insured." They also assert that Century-National cannot rely on section 2080 pertaining to riders because its policy used the "any insured" terminology in the main policy, not in a rider. Finally, they argue the policy similarly violates section 533's reference to "the insured."
Insurance Code section 2070 provides that "[a]ll fire policies on subject matter in California shall be on the standard form, and, except as provided by this article shall not contain additions thereto. No part of the standard form shall be omitted therefore except that any policy providing coverage against the peril of fire only, or in combination with coverage against other perils, need not comply with the provisions of the standard form of insurance policy or section 2080; provided, that coverage with respect to the peril of fire, when viewed in its entirety, is substantially equivalent or more favorable to the insured than that contained in such standard form of fire insurance policy."
Section 2071 sets forth the standard form fire insurance policy for the State of California, and its standard provisions relating to concealment and fraud provide that "[t]his entire policy shall be void if, whether before or after a loss, the insured has willfully concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof, or the interest of the insured therein, or in case of any fraud or false swearing by the insured relating thereto." (§2071, emphasis added.) Under section 2080, "[e]xcept as otherwise provided in this article, clauses imposing specified duties and obligations upon the insured and limiting the liability of the insurer may be attached to the standard form. Such clauses shall be in the rider or riders attached to the standard form of policy and shall be in type as provided in Section 2073."
The Supreme Court examined the policy exclusions of coverage for losses caused by intentional acts or criminal conduct by any insured on which Century-National relied. The Court concluded that such a clause, when applied to an innocent insured, is unenforceable.
"The question is whether the Century-National policy provides coverage that is at least as favorable to the insureds as the coverage provided in the standard form. Under the Century-National policy, the intentional acts exclusion bars coverage for property losses sustained by insureds who are innocent of wrongdoing. But under the standard form, which must be read as including section 533's exclusion for losses caused by 'the willful act of the insured' (italics added), innocent insureds would not be barred from coverage. Thus, under section 2070, it cannot be said that the coverage provided by the Century-National policy, 'with respect to the peril of fire, when viewed in its entirety, is substantially equivalent to or more favorable to the insured than that contained in such standard form fire insurance policy.'"
As the application of the exclusion results in "coverage that is not at least substantially equivalent" to the standard form policy, we reverse. The trial court erred in sustaining the demurrer.
DISPOSITION
The judgment is reversed and the cause remanded for further proceedings consistent with this opinion. Appellants are to recover their costs on appeal.
We concur:
ZELON, J.
PERLUSS, P. J.
JACKSON, J.