In a brief memorandum opinion, the Ninth Circuit found the policy's intentional acts exclusion was ambiguous. Berns v. Sentry Select Ins. Co., 2016 U.S. App. LEXIS 13684 (9th Cir. July 27, 2016).
The insured's employee misappropriated company files. The employee was scolded and terminated. She then sued the insured. The tender to Sentry was denied based upon the policy's intentional acts exclusion.
The district court granted summary judgment to Sentry. On appeal, Sentry argued that"intentional" unambiguously meant "voluntary and deliberate". Given California precedent interpreting the term "intentional," the Ninth Circuit found this position untenable. The exclusion precluded coverage for "[a]ny dishonest, malicious, fraudulent, criminal or intentional act." Sentry's position that the term "intentional" broadly applied to any "voluntary" or "deliberate" act conflicted with common principles of policy interpretation. Where general words followed an enumeration of specific items, the general words were read as applying only to other items akin to those specifically enumerated. Here, the term "intentional" followed far more specific words ("dishonest," "malicious," "fraudulent," and "criminal") that described particularly blameworthy conduct. The term "intentional'" had to be read in light of these terms and therefore required some sort of wrongful conduct, not just any purposeful act.
Further, California cases inconsistently interpreted the term "intentional." Some cases adopted Sentry's broad interpretation of the term. Others adopted the insured's view that "intentional" required a specific intent to cause harm. The California Supreme Court had written that the word "intentional" may have a "built-in ambiguity." Gray v. Zurich Ins. Co., 419 P.2d 168, 174 (Cal. 1966).
The court therefore rejected Sentry's interpretation of the exclusion. Construing the ambiguity in favor of the insured, the "intentional" acts exclusion applied only if the insured acted with a specific intent to wrongfully inflict injury. Because the insured may not have acted with the requisite intent in terminating the employee to come within the exclusion, Sentry had a duty to defend.
The district court's order granting summary judgment to Sentry was reversed and the matter was remanded for further proceedings.
Thanks to co-Damon Key blogger, Mark Murakami, for flagging this case.