Court Rules on Coverage and Exclusion Provisions in Liability Policies

Publish Date:Mar 10, 2015
Last week, the California Court of Appeal handed down a decision on coverage and exclusion provisions in two liability insurance policies.

Last week, the California Court of Appeal handed down a decision on coverage and exclusion provisions in two liability insurance policies.  

Gonzalez v. Fire Insurance Exchange, which was published by the Sixth Appellate District on March 4, 2015, involved a homeowners’ policy and a personal umbrella policy. Stephen Rebagliati’s parents purchased a homeowners policy and a personal umbrella policy.  The homeowners’ policy covered liability for bodily injury or personal injury resulting from an occurrence. The policy defined “occurrence” as “an accident.”  The umbrella policy stated that it would pay for personal injury resulting from an occurrence.  In regard to personal injury, the policy did not use the term “accident” and defined “occurrence” as “offenses committed during the policy period.” The umbrella policy set forth a number of exclusions, including molestation of any person by any insured individual. 

Jessica Gonzalez alleged that she was invited to a party by several members of a college baseball team, including Rebagliati. Gonzalez alleged that once she arrived at the party, she was given shots of hard liquor and then was assaulted by a number of men as she lay unconscious in a room. She charged that some of the men in the room took videos, photographs, and cheered while the assault took place. 

Gonzalez filed a complaint against Rebagliati and nine other individuals. The complaint alleged 15 causes of action, including false imprisonment, sexual battery, rape, invasion of privacy, and slander.    

Rebagliati sought insurance coverage for his defense through his parents’ homeowners and umbrella policies. The insurers refused to defend Rebagliati. The insurers were sued for bad faith. The companies moved for summary judgment, arguing that they had no duty to defend Rebagliati. The trial court granted the insurers’ motions for summary judgment.

The Court of Appeal affirmed the trial court’s ruling on the homeowners’ policy but reversed the trial court’s grant of the motion for summary judgment relating to the umbrella policy. 

The Court of Appeal explained that an insurer must defend a suit which seeks damages potentially within the coverage of the policy.  In regard to the homeowners’ policy, the court concluded that there was no potential coverage because the policy only covered injuries resulting from accidents and Gonzalez’s complaint failed to allege accidental conduct by Rebagliati. Gonzalez failed to carry her burden to show that any of her causes of action had the potential to fall within the homeowners’ policy’s coverage.  Thus, the trial court did not err in granting the insurer’s motion for summary judgment on the homeowners’ policy.

The Court of Appeal reached a different conclusion on the umbrella policy. The umbrella policy did not require personal injury incidents to be accidents. As a result, some of the causes of action in Gonzalez’s complaint raised the potential for coverage. However, the umbrella insurer argued that the policy’s exclusions precluded coverage. The court pointed out that while the insured has the initial burden to show that a claim may be covered by a policy, when it comes to exclusions the burden is switched. It is up to the insurer to conclusively show that an exclusion to the policy bars coverage. 

The insurer relied on the molestation exclusion to the policy. The court responded that whether the sexual molestation exclusion barred coverage for some of Gonzalez’s claims was not clear. The court observed, “In fact, her complaint suggests the possibility that Rebagliati may not have engaged in the sexual assault, but was present in the room while the assault took place and may have thereafter disparaged Gonzalez’s reputation by slandering her after the incident. The complaint indicates Rebagliati may be held liable for damages resulting from his alleged slander, false imprisonment, or invasion of Gonzalez’s privacy arising from molestation undertaken by the other named defendants in the civil lawsuit. Therefore, the sexual molestation exclusion does not apply, because it only excludes coverage for damages arising from an act of molestation by the insured, an individual acting on behalf of the insured, an individual performing volunteer services on behalf of an insured, or an employee of an insured. There is no evidence the other defendants acted on behalf of Rebagliati such that their molestation of Gonzalez would fall under this exclusion.”       

The court analyzed the other exclusions which the insurer contended barred coverage and concluded that the insurer failed to meet its burden to demonstrate that an exclusion applied. The Court of Appeal remanded the case to the trial court with the direction to deny the umbrella insurer’s motion for summary judgment. 

A copy of the Court of Appeal’s opinion is available at


Copyright © 2018 by the Property Casualty Insurers Association of America
1415 L St., Suite 670, Sacramento, CA 95814
phone: 916-449-1370, fax: 916-449-1378