J. C. Penney Casualty Insurance v. M. K.

BROUSSARD, J.

I dissent.

Our courts have long enforced insurance contracts for intentional and criminal acts causing injury. Rather than read Insurance Code section 533 (hereafter section 533) as precluding insurance for any willful act of the insured causing injury, such as intentionally speeding or running a red light, this court has interpreted the provision as only prohibiting enforcement of contracts insuring a person from losses intentionally caused. Thus in Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 887 [ 151 Cal.Rptr. 285 , 587 P.2d 1098 ], this court pointed out the “clear line of authority in this state to the effect that even an act which is ‘intentional’ or ‘willful’ within the meaning of traditional tort principles will not exonerate the insurer from liability under Insurance Code section 533 unless it is done with a ‘preconceived design to inflict injury.’ [Citations.]” (Accord, Peterson v. Superior Court (1982) 31 Cal.3d 147, 158-159 [ 181 Cal.Rptr. 784 , 642 P.2d 1305 ]; California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 32-33 [221 Cal.Rptr. 171]; Allstate Ins. Co. v. Overton (1984) 160 Cal.App.3d 843, 849 [ 206 Cal.Rptr. 823 ]; City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 36, fn. 3 [ 151 Cal.Rptr. 494 ].)

The majority repudiate Clemmer . They hold that section 533 prohibits a person from insuring against conduct that is “inherently harmful.” (Maj. opn., ante, at p. 1026.) The opinion’s construction of the provision finds no support in the language of the provision. Such a construction fails to give sufficient consideration to the interest and rights of the innocent victims of child abuse and other crimes. The construction flies in the face of our constitutional command for the “enactment of comprehensive provisions and laws ensuring a bill of rights for victims of crime . . . .” (Cal. Const., art. I, § 28, subd. (a).) In addition, the majority’s construction opens a Pandora’s box such that insureds and insurers cannot know which promises of the insurer are enforceable.

The majority hold that the insured’s intent to harm must be inferred from acts of child molestation because they are inherently harmful. (Maj. opn., *1030 ante, at p. 1026.) In view of the undisputed expert testimony in this case as well as some others that the child molester may have intended no harm, the majority appear to be practicing psychiatry without a license and doing a terrible job of it.

I

Section 533 provides in its entirety: “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.”

The first portion of the section is reasonably subject to two constructions. First, it may be read as providing that if the insured’s liability is predicated upon an intentional act, i.e., the insured intended to do the act that resulted in the loss, insurance coverage is prohibited. Such a construction has long been rejected by the courts. This would mean that if the insured intended to drive above the speed limit, there could be no insurance. The majority do not dispute that this is not the proper construction of the code section even when the act is criminal. (See maj. opn., ante, at pp. 1020-1021; Merced Mutual Ins. Co. v. Mendez (1989) 213 Cal.App.3d 41, 50 [ 261 Cal.Rptr. 273 ]; Meyer v. Pacific Employers Ins. Co. (1965) 233 Cal.App.2d 321, 327 [ 43 Cal.Rptr. 542 ].) When speeding or reckless driving causes an accident, it is ordinarily clear that the insured did not intend to cause the loss and that the insured should be permitted to purchase insurance against the loss.

The second plausible construction of the language of the section is that the word “wilful” in the section relates to the caused loss or that the “act” referred to as a “wilful act” is an act intended to cause the loss. This is the construction placed on the section by Clemmer v. Hartford Insurance Co., supra, 22 Cal.3d 865, 887 , and the authorities it relied upon and those subsequently relying upon it. (See, e.g., Peterson v. Superior Court, supra, 31 Cal.3d 147, 158-159 ; Allstate Ins. Co. v. Overton, supra, 160 Cal.App.3d 843, 849 ; Congregation of Rodef Shalom v. American Motorists Ins. Co. (1979) 91 Cal.App.3d 690, 695 [ 154 Cal.Rptr. 348 ] et seq.; Escobedo v. Travelers Ins. Co. (1964) 227 Cal.App.2d 353, 360 [ 38 Cal.Rptr. 645 ]; Walters v. American Ins. Co. (1960) 185 Cal.App.2d 776, 783 [ 8 Cal.Rptr. 665 ].) It is also the construction of the Court of Appeal in the instant case.

While the language of section 533 is subject to the above two constructions, it is not reasonably subject to the construction the majority place upon it. The test of noninsurability is “wilful” under the code section whether it relates to “act” or “loss.” In short, the test necessarily relates to intent. There is nothing in the 100-year-old code section (Code Amends. 1873-1874, ch. 612, § 242, p. 256) which warrants the conclusion that the *1031 test should be whether the act is “inherently harmful,” precluding insurability of unintended injuries.

Not only are the words of the code section contrary to the majority’s test, but the principle established by the section furnishes no support for the test. The fact that section 533 provides for a distinction between “wilful” and negligent injuries does not authorize this court to adopt a vague test based on the degree of blameworthiness. All criminal conduct which may result in loss of our most precious asset, liberty, is harmful; but, as pointed out above, the majority do not dispute that section 533 does not bar insurance on the basis of criminality. The section does not establish a relative blameworthy test and does not permit this court to refuse to enforce insurer promises on a theory of blameworthiness.

It may be true that as to any particular act of misconduct causing injury, the act is more blameworthy when done with intent to injure than when done intentionally but without intent to injure. In this light, section 533, which prohibits insurance for intentionally injurious acts but extends insurance to negligent acts, is a statute designed to prohibit insurance for the more reprehensible conduct. But it does not follow that all acts done with intent to injure are more blameworthy than all negligent acts. Some negligent acts, depending on the consequences, may be viewed as more blameworthy than some intentional conduct. Most people would agree that the drunken driver who negligently kills four pedestrians is more blameworthy than the person who, intending to injure, intentionally strikes another on the arm, a battery, without permanent or even lasting injury. Conduct causing injury by chance is blameworthy conduct when there is negligence. Section 533 requires that insurance extend to repugnant and reprehensible conduct of the insured causing injury, including criminal conduct, and furnishes no basis for a vague test discriminating between criminal conduct.

A vague test based on degrees of blameworthiness would be so difficult to administer justly that it should be rejected out-of-hand. Attempting to draw a line between misdemeanors or between felonies on the basis of reprehensibility or repugnance on a case-by-case basis can only bring confusion and uncertainty to insurance law.

In any event, we rejected such a test in Peterson v. Superior Court, supra, 31 Cal.3d 147, 158-159 . In that case we held that an intoxicated driver could be liable for punitive damages when it is shown that he performed an act from which he knows, or should know, it is highly probable that harm will result. Obviously, punitive damages are permitted only in cases involving the most reprehensible and repugnant conduct. In addition to the great likelihood of harm, which in fact occurred, the conduct was criminal. While *1032 we held that punitive damages may not be indemnified, we also held that section 533 would not be applicable to bar indemnification of compensatory damages for conduct involving an extreme degree of blameworthiness.

A “wilful” act or loss is a reference to subjective intent, and, absent a clear showing of legislative intent to the contrary, it cannot reasonably be interpreted to establish tests of “inherently harmful.” In short, the test established by the majority opinion finds no support in the language of the code section and must be rejected for this reason alone. To read “inherently harmful” into this straightforward statute can only be categorized as judicial legislation. 1

Since there is no history or strong public policy indicating that the Legislature inadvertently used the language it chose, the plain language of the code section should end the case.

Moreover, even if there was some ambiguity in the language of the code section permitting it to be reasonably construed to prohibit insurance of “inherently harmful” conduct, considerations of the interests and rights of the innocent victims of child abuse and other crimes should preclude our doing so.

Liability insurance serves two functions in our society. It not only provides a fund that the wrongdoer may resort to in order to meet his just obligation, but also provides compensation for the victims of wrongful and criminal conduct. Often, the wrongdoer’s insurance is the only way the innocent victims of crime, including child molestation, may recover compensation for medical expenses, their disabilities and their injuries. Particularly as to child molesters, the wrongdoers are likely to be incarcerated for lengthy periods of time (see Pen. Code, §§ 288, subd. (a), 1170.1), and there is little likelihood that a judgment recovered against the wrongdoer can be collected out of the wrongdoer’s earnings. The wrongdoer will ordinarily be faced with substantial legal expenses depleting whatever assets he may have had. Liability insurers ordinarily pay to the innocent victim rather than the insured, so there is little danger that the wrongdoer insured will fatten his pocket from the insurance.

Concern for the innocent victims of crime outweighs the policy of deterrence or penalizing the wrongdoer and strongly militates against an *1033 interpretation expanding section 533’s prohibition of insurance coverage. (Fischer, The Exclusion From Insurance Coverage Of Losses Caused By The Intentional Acts Of The Insured: A Policy In Search Of A Justification (1990) 30 Santa Clara L. Rev. 95 , 96-99; Grellmann, Insurance Coverage For Child Sexual Abuse Under California Law: Should Intent To Harm Be Specifically Proven Or Imputed As A Matter Of Law? (1988) 18 Sw. U. L.Rev. 171, 173-179.)

If there were any doubt as to the proper balance of competing policies, it is set at rest by our Constitution. Article I, section 28, subdivision (a) commands the “enactment of comprehensive provisions and laws ensuring a bill of rights for victims of crime.” When we indulge in judicial legislation, we should observe the mandates of our Constitution applicable to legislation.

The majority point to some out-of-state authorities which have denied liability coverage for child molestation under the wording of the policies involved, and to some permitting liability. (Maj. opn., ante, at p. 1027; compare MacKinnon v. Hanover Ins. Co. (1985) 124 N.H. 456 [ 471 A.2d 1166 ] [permitting recovery] with Vermont Mutual Ins. Co. v. Malcolm (1986) 128 N.H. 521 [ 517 A.2d 800 ] [denying coverage].) Those cases are not concerned with a statutory prohibition on insurance but with the interpretation of contract provisions. 2 In a related situation, we have recognized that a psychiatrist’s malpractice insurance might apply in a case charging sexual misconduct. (Waters v. Bourhis (1985) 40 Cal.3d 424, 433-436 [ 220 Cal.Rptr. 666 , 709 P.2d 469 ].)

In sum, the language of section 533 prohibits liability insurance for intentional injury but cannot reasonably be interpreted to prohibit insurance for “inherently harmful” conduct generally, and concerns for the innocent victims of crime militate against adoption of a rule prohibiting insurance.

II

Upon analysis, the majority theory that we must infer intent to harm from child abuse fares no better. We cannot properly infer from child molestation the intent to harm as a matter of law in the face of an overwhelming record establishing that there was no intent to harm or even in the absence of such a record. Penal Code section 288, subdivision (a) *1034 provides: “Any person who shall willfully and lewdly commit any lewd or lascivious act including any of the acts constituting other crimes provided for in Part 1 of this code upon or with the body, or any part or member thereof, of a child under the age of 14 years, with the intent of arousing, appealing to, or gratifying the lust or passions or sexual desires of that person or of the child, shall be guilty of a felony . . . .” (Italics added.) It is clear from the italicized portion of the code section that child molestation under the section is based on the intent of the wrongdoer and that the wrongdoer may be guilty of the crime on the basis of gratifying his lust or sexual desires without regard to those of the victim. Until today, at least, neither harm to the child nor intent to harm the child was an element of the offense. Accordingly, the insured’s guilty plea to one count of child molestation does not establish intent to injure.

The physical acts of child molestation are not detailed in the statute; rather, the crucial factor is the intent of the actor. The physical acts may be of a wide variety, including acts which are commonly engaged in for medical or hygienic purposes by parents, siblings, and pediatricians. However, when such acts are done with the specified intent, the conduct is criminal. The point is illustrated by the instant case where 25 of the acts of child molestation occurred while the insured was playing with the child. He touched or fondled her vaginal area while she was fully clothed. Absent criminal intent, the physical conduct would be entirely innocent. I cannot agree that the physical conduct is “inherently harmful” or that we must as a matter of law infer from such conduct, even when coupled with an intent to gratify sexual desires, that there was an intent to harm.

The expert testimony was all to the effect that there was no intent to harm. The majority opinion quotes the statements from other cases that such testimony “flies ‘in the face of all reason, common sense, and experience’ and is ‘inherently incredible.’ ” (Maj. opn., ante, at p. 1028.) There is nothing in our record to justify this shocking attack on the science of psychiatry. Neither the majority opinion nor the cited authorities provide any empirical evidence for such an attack, and the experience involved is that of child molesters and those who work with child molesters, not judges. In the absence of experience, judges should not undertake to practice psychiatry. The opinion also states that the psychiatric testimony was “irrelevant” {ibid.) but, as pointed out above, much of the physical conduct was not inherently harmful. It consisted of physical acts which, if done without criminal intent, would be lawful and innocent and not harmful at all. I do not find any reasonable basis to reject the expert testimony, and we should not do so.

*1035 III

In cases of child molestation there is a danger that juries, out of outrage at the conduct of the molester, will inflate damages in an effort to punish him. The danger that juries may award excessive damages, however, does not justify withholding insurance benefits from the innocent victim of the crime. Our legal system in many situations has dealt with the problem of excessive damages. The jury in molestation cases should be carefully instructed that compensatory damages must compensate for the injury suffered and may not be used to punish the wrongdoer. Further, trial judges are authorized and fully competent to deal with excessive awards.

In my view, the language of section 533 and consideration of the rights of innocent victims of crime require that we should adhere to the unanimous opinion in Clemmer v. Hartford Ins. Co., supra, 22 Cal.3d 865 , the authorities upon which it relied and the cases which have followed it. We should continue to hold that “even an act which is ‘intentional’ or ‘willful’ within the meaning of traditional tort principles will not exonerate the insurer from liability under Insurance Code section 533 unless it is done with a ‘preconceived design to inflict injury.’ ” ( 22 Cal.3d at p. 887 .) When the expert testimony establishes that there was no intent to harm, we should permit the jury to give effect to it and should reject the claim that intent to harm must be inferred as a matter of law from child molestation.

When insurers have collected premiums and agreed to indemnify liability imposed for child molestation, we should require them to perform their promises. The interests and rights of the innocent victims of child abuse preclude our exonerating such insurers.

The majority tell us that they decide only the wrongdoing before us, child molestation. (Maj. opn., ante, at p. 1028.) However, we can only expect that insurers will deny coverage in all or substantially all cases involving criminal conduct. All criminal conduct is “repugnant and reprehensible,” and it will be for the courts to determine whether the particular conduct is so “repugnant and reprehensible” as to preclude insurance coverage.

Contrary to the suggestion in the majority opinion (maj. opn., ante, at p. 1027, fn. 15), the case of Vermont Mutual may not be read as overruling MacKinnon. Vermont Mutual does not cite or mention MacKinnon . The bases of both decisions were the policy provisions. Not only were they decided closely in time but Justice Souter, the author of the Vermont Mutual opinion, was the trial judge in MacKinnon .