The U.S. Court of Appeals for the Ninth Circuit, despite recognizing "inconsistent authority" from California appellate courts, has predicted that the California Supreme Court would hold that an insured's subjective belief – no matter how reasonable – could not transform an intentional act into accidental conduct.
The Case
The Bear Yuba Land Trust sued Anthony Koenn and Crown Tree Services, Inc. (together, "Koenn") after Koenn allegedly removed trees from Bear Yuba's property under a belief that the trees belonged to a neighbor.
Koenn sought coverage for the lawsuit under a commercial general liability ("CGL") insurance policy issued by Atain Specialty Insurance Company.
Atain declined to defend Koenn, and Koenn sued.
The U.S. District Court for the Northern District of California granted summary judgment in favor of Atain, and Koenn appealed to the Ninth Circuit.
The Atain Policy
The Atain policy obligated Atain to defend claims for property damage caused by an:
occurrence
, defined as:
an accident.The Ninth Circuit's Decision
The Ninth Circuit affirmed.
In its decision, the circuit court explained that there was "inconsistent authority" among California court of appeal cases on whether an insured's reasonable belief, as allegedly was Koenn's in this case, transformed an intentional act into an accident. Cf. Fire Ins. Exch. v. Superior Court, 104 Cal. Rptr. 3d 534, 538-41 (Ct. App. 2010) (holding an intentional act cannot be an accident based on the insured's subjective beliefs), and Albert v. Mid-Century Ins.Co., 187 Cal. Rptr. 3d 211, 219 (Ct. App. 2015) (same), with Karpe v. Great Am. Indem. Co., 11 Cal. Rptr. 908, 911-12 (Ct. App. 1961) (holding an insured's dispatch of another's cow to the slaughterhouse was potentially accidental because the insured might have confused the cow for one of his own).
The Ninth Circuit then "predict[ed]" that the California Supreme Court would hold that an insured's subjective belief – no matter how reasonable – could not transform an intentional act into accidental conduct.
It reasoned that Karpe "appear[ed] to have been implicitly overruled" because Karpe equated negligence with accidental conduct, "which the California Supreme Court has subsequently rejected as overly simplistic." See, Delgado v. Interins. Exch. of Auto. Club of S. Cal., 211 P.3d 1083, 1091-92 (Cal. 2009). The Ninth Circuit also said that although the California Supreme Court ruled in Delgado that an insured's "unreasonable belief" could not turn a "purposeful and intentional act" into "an accident," California courts had recognized that Delgado's holding was "not limited to unreasonable beliefs."
By contrast, the circuit court said, "no California court has relied on Karpe for its holding that subjective belief may influence the accident analysis."
Finally, the Ninth Circuit decided that a potential for coverage did not exist "merely because California courts have interpreted the policy term 'accident' differently." Given that there was "no potential for coverage, Atain did not owe Koenn a duty to defend," the Ninth Circuit concluded.
FC&S Legal Comment
The circuit court's prediction notwithstanding, it remains to be seen whether the California Supreme Court, if and when faced with the issue, will agree. Stay tuned.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].