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Problem:

Alice is a policy holder for uninsured/under-insured motorist losses with insurer A; Bob has most likely no insurance coverage for intentional losses he caused at least not to property damages with insurer B.

Bob intentionally rams Alice’s vehicle on a public road; insurer B denies intentionality on behalf of Bob, and declines liability; however, not on the grounds that Bob is not covered for intentional losses.

Alice reports the matter to her insurer, and they assume liability, but once they receive the denial not based on lack of coverage, insurer A denies liability. Now the onus is on Alice to prove that Bob did not, in fact, not have coverage, and was “uninsured” by a reasonably clear standard.

This could be met by a showing that it would be illegal for insurer B to insure Bob since neither insurer A or Bob owes a duty to Alice to reveal their contract.

In fact, all laws in effect at the time of entering into the contract is, as if by reference, cited in the contract itself therefore, the public policy would, by the operation of law, void a provision that would allow such a coverage.

ADDITIONAL FACTS: Bob is bankrupt, and insurer B denies liability on alleged facts based on evidence it will not share absent a court order that which it interprets so as to conclude Alice is at fault instead of admitting on Bob's behalf a finding of intentional wrongdoing, and deny liability on the basis of lack of coverage.

Questions:

Is it against public policy to insure a motorist for intentional property damage caused by the insured with their vehicle to another’s property excluding covering any damage to the property of the insured?

Is it, in the State of California or is it prohibited by federal law? And if so, what laws or precedent prohibits it?

Primarily interested in the above jurisdictions, but any other would be interesting for comparison!

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  • 1
    You probably can't insure against willful acts as such. You might be able to insure against unforeseen consequences of willful acts though.
    – grovkin
    Commented Feb 1, 2022 at 4:01
  • That is basically what’s spelled out in case law in California — see my answer.
    – kisspuska
    Commented Feb 1, 2022 at 4:03
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    I mean it's not an insurance contract at that point. It's an option contract. You would be buying a right to be paid for committing an act. It wouldn't matter that it would be someone else getting paid because they would be paid to satisfy your liability to them.
    – grovkin
    Commented Feb 1, 2022 at 4:29
  • 2
    I looked at my own Colorado uninsured motorist policy, and it explicitly says that it covers the case when the other driver had insurance but their insurer denies coverage. There's no limitation based on the reason for such denial. So if Alice's policy is similar (not sure what California requires), then it seems that the question is moot and Insurer A simply has to pay up. Commented Feb 1, 2022 at 5:27
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    Do you mean 790.03(h)(5)? That deals with unfair business practices. So your question isn't about who is actually liable for the crash, but is about whether B is likely to get in trouble with the Insurance Commissioner over their conduct here? Commented Feb 1, 2022 at 6:18

3 Answers 3

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My findings so far are:

It does appear to be against public policy at least in California and Oregon.

In California outlawed statutorily — Ins. Code § 533 provides:

“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.”

Also on point is Civ. Code, § 1668:

“All contracts which have for their object, directly or indirectly, to exempt anyone from responsibility for his own fraud, or willful injury to the person or property of another, or violation of law, whether willful or negligent, are against the policy of the law."

Affirmed, for e.g., in Tomerlin v. Canadian Indem. Co., 61 Cal.2d 638, 39 Cal. Rptr. 731, 394 P.2d 571 (Cal. 1964)

“[A]n insurer may not indemnify against liability caused by the insured's wilful wrong (Civ. Code, § 1668; Ins. Code, § 533; see, e.g., Abbott v. Western Nat. Indem. Co. (1958) 165 Cal.App.2d 302, 305 [ 331 P.2d 997])”

In Oregon, Outlawed by case law:

“Despite variations in the language of the policies, this court has interpreted various policy provisions excluding insurance coverage for intentionally-caused injuries similarly. [...] For an exclusion from insurance coverage for intentional conduct to apply, "[i]t is not sufficient that the insured's intentional, albeit unlawful, acts have resulted in unintended harm; the acts must have been committed for the purpose of inflicting the injury and harm before either a policy provision excluding intentional harm applies or the public policy against insurability attaches." [Citation.]” Ledford v. Gutoski, 319 Or. 397, 877 P.2d 80 (Or. 1994)

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    The language in Pennsylvania precedent sounds like it says that you don't lose coverage just because you are driving a getaway car in a bank robbery. It doesn't mean that you won't lose coverage if you hit someone willfully, only that you won't lose coverage if you hit someone accidentally during a crime. This is unlike California'a 1668 (which you cited), which says "willful or negligent."
    – grovkin
    Commented Feb 1, 2022 at 3:56
  • Thanks for that clarification, I'll edit! "Negligent" seems to describe "violation of law", and not "willful injury to the person or property of another".
    – kisspuska
    Commented Feb 1, 2022 at 4:34
  • If the purpose of mandatory liability insurance is to ensure that people who are injured get paid even if the people causing the injury are judgment-proof, saying that an insurance company doesn't have to pay an injured person for deliberate actions would undermine that objective. Note that a liability company should not indemnify someone who causes deliberate damage, but should instead pursue recovery against them at least as aggressively as the injured party would in the absence of insurance, but I don't see what's wrong with ensuring that innocent injured parties get paid.
    – supercat
    Commented Apr 27, 2022 at 19:55
  • @supercat I think you're missing the point: Those insured and injured will get paid this way; this is how they can get paid even if the other party acted willfully. The second point: Yes, and no. They don't "indemnify" the deliberate actor, they merely reimburse their own insured, and then they have the opportunity to sue.
    – kisspuska
    Commented Apr 30, 2022 at 8:43
  • @kisspuska: If Bob deliberately injures Alice, would Alice be regarded as "the insured" by Bob's liability insurance company?
    – supercat
    Commented May 1, 2022 at 1:53
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Probably, but the issue doesn't arise

No legitimate insurance company would offer such a policy because it exposes them to an almost certain loss: the only person who would want such a policy is a person who was planning to cause damage.

And since insurance is highly regulated in California, and everywhere else, legitimate insurers are all you get.

However, that just begs the question ...

For the scenario you present, Alice is not interested in Bob's arrangement with his insurer. Bob caused the damage to Alice's property (willfully or negligently), therefore, Bob has a liability to Alice. Whether Bob's insurer will indemnify Bob is a matter of complete indifference to her (as a matter of law - if the insurer accepts liability, things will be easier but the legal issues don't change).

Similarly, the refusal of Bob's insurer to assume liability does not affect whether Alice can claim on her insurance. Alice's insurer should cover her and seek recompense from Bob.

However, that just begs the other question ...

Is it against public policy to insure a motorist for intentional property damage caused by the insured with their vehicle to another’s property excluding covering any damage to the property of the insured?

Intentional damage to property can be a perfectly normal and legal thing to do. For example, builders intentionally damage buildings, utility companies intentionally damage roads and footpaths, rescue services intentionally damage property by cutting people out of cars. All of these people carry insurance that will respond if they are negligent and cause other damage but who pays for the damage otherwise is usually a matter of contract or statutory law.

However, I think you mean not just intentional but unlawful. If so, it's complicated.

Common law "public policy" and even statutory prohibitions like the one you quote in your answer from Claifornia are not clear-cut and depend on circumstances.

For example, imagine your car has stalled on a railway level crossing and the lights start to flash. I intentionally ram your car with mine pushing us both through the level crossing to safety. There is no doubt that I willfully caused damage to your property but I did not act unlawfully because I have the defence of necessity - plus, I'm a hero. Depending on the exact wording of the policy, I may or may not be covered by my insurance but if I were, an argument by the insurer that they were statutorily barred from paying is likely to fail.

Different jurisdictions fall on different sides of the "public interest" argument with some prohibiting such contracts, others allowing them and, others allowing indemnity for legal defences and damages but not state levied fines (e.g. in the case of directors and officers liability cover).

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  • It’s not as regulated as it may seem, I can assure you. But, yes, it would be nuts for them to do so, but what I’m hoping to know is whether I’m there is case law on this. I could look up and past precedent prohibiting liability insurance against punitive damage awards which resonates with the question, but it is not as broad as an affirmative answer to this would need to be.
    – kisspuska
    Commented Feb 1, 2022 at 0:42
  • Insurance companies are required to have an evidentiary threshold no higher than set by a “reasonably clear” standard yet they will be literally happy to dispute what they see with their own eyes.
    – kisspuska
    Commented Feb 1, 2022 at 0:46
  • Added a hypo for the issue!
    – kisspuska
    Commented Feb 1, 2022 at 1:08
  • (+1 because the answer looked a lot less correct after the changes I made after the question was submitted,)
    – kisspuska
    Commented Feb 1, 2022 at 3:14
  • Agreed, based on my research, self-defense is an exception to the exclusionary clause, and I am sure that necessity would be treated similarly. The problem with the scenario outlined in the question is insurer A once having received the denial on the grounds asserted by insurer B makes it plausible for ins. A to assert insurer B admits coverage, and by that, it excludes Alice's coverage under her policy against un- and underinsured motorists. The objective is for Alice to exercise her right under Ins. Code §§ 790-790.15 in that insurer A promptly, fairly & equitably pay under her policy.
    – kisspuska
    Commented Feb 1, 2022 at 5:13
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Is it against public policy to insure a motorist for intentional property damage caused by the insured with their vehicle to another’s property excluding covering any damage to the property of the insured?

Insurance companies are not permitted to indemnify their insured for their insured's intentional tortious acts.

But, if the loss is otherwise covered by the insurance policy of someone other than the person who committed the intentional act (e.g. an employer of Bob with its own insurance) and the person whose insurance policy covers the loss has an insurable interest (e.g. because they have potential liability as an employer for Bob's on the job acts), that wouldn't usually be barred by law or public policy (unless the employer directed Bob to take the intentional act).

Is it, in the State of California or is it prohibited by federal law? And if so, what laws or precedent prohibits it?

California law, although every U.S. jurisdiction has this rule rooted in English common law as other answers show.

Other

UIM insurance should cover Alice if Bob's insurer doesn't provide coverage due to an exclusion for intentional acts. But, UIM insurance only has a duty to pay if Bob lacks insurance, so his insurer's coverage decision is material to Alice's claim against her own insurer.

The insurance policies of both sides and the basis for Bob's insurer's denial of coverage should be disclosed in Alice's litigation with Bob suing for money damages.

Typically, Alice would file a declaratory judgment action against her own insurer, either separately or as a co-defendant in the action against Bob, to assure her that either Bob's insurance or her own, will cover the risk in a consistent manner. Often, the declaratory judgment action would be resolved by a stipulation based upon a special verdict in the suit against Bob determining if it is liable for battery or for mere negligence.

Typically, Bob's insurer would provide a defense to him subject to a reservation of rights (determined in a separate declaratory judgment action between Bob and his insurance company), notwithstanding its provisional denial of coverage, unless the evidence of his intent was unequivocally clear (e.g. a statement he made to his insurance company that his acts were intentional). The evidence provided to his insurance company that it used to deny his claim would be obtainable by discovery and admissible in Alice's lawsuit against Bob.

Also, even if Alice's UIM insurer did pay her right away, Alice would probably have to either sue Bob (subject to an insurance company lien at the insurance company's expense) or the insurance company would sue Bob for enforcement of its subrogation claim against Bob standing in Alice's shoes with cooperation from Alice that she would be contractually obligated to provide to her insurance company in that lawsuit (assuming in either case that Bob has some assets other than the insurance policy to pursue).

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  • "But, UIM insurance only has a duty to pay if Bob lacks insurance, so his insurer's coverage decision is material to Alice's claim against her own insurer." I disagree in the instant fact pattern. It is immaterial so long as insurer A does not dispute and/or comes to a conclusion that the act was intentional. Once "[that fact has] become reasonably" (Ins. Code § 790.03(h)(5), by the operation of law, insurer A may not deem insurer B to have had coverage regardless of what Bob or insurer B contends. It was an import fact here that insurer A agreed on Bob's intentionality.
    – kisspuska
    Commented Feb 1, 2022 at 21:22
  • If the UIM admits intentional act and by virtue of that, non-coverage, and is denying coverage, then Alice's insurer loses the dec action brought by Alice on summary judgment. Also, while Bob's insurer can't pay Bob, suppose Bob is on the job and covered by Bob's employer's insurance. Bob's employer isn't necessarily barred from coverage by Bob's intentional acts for coverage of its own respondiat superior liability. I think a court would be hesitant to speculate on "reasonable clear" when this information would be disclosed at the outset in a lawsuit against Bob.
    – ohwilleke
    Commented Feb 1, 2022 at 21:28
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    @kisspuska This isn't how the public policy against insuring intentional acts works. The employer is protecting itself against its employee's unauthorized bad acts for which it has legal responsibility. The employer's liability isn't for intentional acts (except in the rare case where Bob is acting at his employer's instruction). The employer has vicarious strict liability for Bob and that liability is insurable.
    – ohwilleke
    Commented Feb 1, 2022 at 21:41
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    I think I'm getting to see your point!
    – kisspuska
    Commented Feb 1, 2022 at 21:49
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    Let us continue this discussion in chat.
    – ohwilleke
    Commented Feb 2, 2022 at 1:45

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