Certain Underwriters At Lloyd's London v. ConAgra Grocery Products Company

Published date21 July 2022
Subject MatterInsurance, Litigation, Mediation & Arbitration, Insurance Laws and Products, Personal Injury, Professional Negligence
Law FirmLewis Brisbois Bisgaard & Smith LLP
AuthorMr Michael Velladao and Monica Kalunian

(Insurance Code Section 553 Barring Coverage of Insured's Willful Acts Applied to Exclude Coverage of Successor Company's Liability Imposed for Conduct of Predecessor Company)

(July 2022) - In Certain Underwriters at Lloyd's London v. ConAgra Grocery Products Co., 77 Ca. App.5th 729 (April 19, 2022), the California First District Court of Appeal affirmed the trial court's entry of summary judgment in favor of insurers finding that Insurance Code section 533 applied to exclude coverage of ConAgra Grocery Products Company ("ConAgra") for an underlying judgment requiring it to pay $101,666,666 into a public fund established to abate lead paint used in homes constructed before 1950. ConAgra a was found liable as the successor to paint manufacturer, W.P. Fuller & Co. ("Fuller").

Insurance Code section 533 is imputed into liability insurance policies under California law and applies to exclude coverage for liability of an insured for its willful acts. The Court of Appeal explained the scope of Insurance Code section 533 as follows:

Section 533 provides that "[a]n insurer is not liable for a loss caused by the willful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured's agents or others." '"Section 533 is "an implied exclusionary clause which by statute is to be read into all insurance policies." (Shell Oil, supra, 12 Cal.App.4th at p. 749, quoting J. C. Penney Casualty Ins. Co. v. M. K. (1991) 52 Cal.3d 1009, 1019 [278 Cal. Rptr. 64, 804 P:2d 6891 (Penney).) The statute reflects a fundamental public policy of denying coverage for willful wrongs and discouraging willful torts.

(Penney, at pp. 1019-1021, fn. 8 and accompanying text.) '"The public policy against insurance for losses resulting from such [willful wrongful] acts is usually justified by the assumption that such acts would be encouraged, or at least not dissuaded, if insurance were available to shift the financial burden of the loss from the wrongdoer to the insurer ...."' (Downey Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 514 {78 Cal. Rptr. 2d 1421 (Downey), quoting American States Ins. Co. v. Borbor (9th Cir. 1987) 826 F.2d 888, 895 (Borbor): PPG Industries, Inc. v. Transamerica Ins. Co. (1999) 20 Cal.4th 310, 316, fn. 1. 317-318 [84 Cal. Rptr. 2d 455. 975 P.2d 652].) "As a statutory exclusion, section 533 is not subject to the rule of strict construction against an insurer; instead, we construe it according to the Legislature's intent, for which we refer first to the words of the statute. ([Penney], at p. 1020, fn. 9 and accompanying text.)" (Shell Oil, at p. 739.)

A "willful act" under section 533 means "an act deliberately done for the express purpose of causing damage or intentionally performed with knowledge that damage is highly probable or substantially certain to result." (Shell Oil, supra, 12 Cal.App.4th at p. 742; see Downey, supra, 66 Cal.App.4th at p. 500.) "Conduct for which the law imposes liability, and which is expected or intended to...

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