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Waller v. Truck Ins. Exchange, Inc.

Supreme Court of California

August 28, 1995, Decided

No. S042287.

Opinion

 [*10]  [**621]  [***372]    LUCAS, C. J. 

We granted review to decide the recurring issue [****3]  whether a commercial general liability insurer is required to defend a third party action that seeks incidental emotional distress damages caused by the insured's noncovered economic or business torts. The  [**622]   [***373]  Court of Appeal below concluded that allegations of incidental emotional distress damages flowing from noncovered causes of action fall outside the scope of a commercial (formerly called comprehensive) general liability (CGL) policy and present no potential for coverage under the policy. Accordingly, the Court of Appeal reasoned, ] because there is no potential for coverage, there is no duty to defend on the part of the insurer. ( Gray v. Zurich Insurance Co. (1966) 65 Cal. 2d 263 [54 Cal. Rptr. 104, 419 P.2d 168] [hereafter Gray].) The Court of Appeal also concluded that ] if the insurer is under no obligation to defend or indemnify the third party action, it cannot be found liable for either statutory bad faith ( Ins. Code, § 790.03) or breach of the implied covenant of good faith and fair dealing, for its denial of a defense. (See, e.g., Love v. Fire Ins. Exchange (1990) 221 Cal. App. 3d 1136, 1152 [271 Cal. Rptr. 246] [bad faith claim cannot [****4]  be maintained unless policy benefits are due].) As we explain, we affirm the Court of Appeal judgment.

FACTS

In 1985, defendant Truck Insurance Exchange, Inc. (hereafter T.I.E.) issued a CGL policy to plaintiff Marmac, Inc., a California corporation that  [*11]  provides engineering and design services to aerospace, pharmaceutical, and energy industries. The declarations page of the T.I.E. policy identified Marmac as the named insured, and contained an endorsement naming Lester Amey, among others, as a named insured. The policy was renewed in 1986, and was substantially identical (with typographical corrections) to the 1985 policy.

In pertinent part, the T.I.E. policy provided liability coverage for: "all damages which the insured becomes legally obligated to pay because of … bodily injury to any person, and … damage to property … to which this insurance applies, caused by an occurrence." The policy did not provide personal injury coverage to Marmac directors and officers and specifically excluded coverage for any insured for bodily injury to a named insured. The policy defined an "occurrence" "as an event, or series of events, including injurious exposure to conditions,  [****5]  proximately caused by an act or omission of the insured regardless of the number of persons, vehicles or objects affected by the act or omission which results, during the policy period, in bodily injury or property damage, neither expected nor intended from the standpoint of the insured." Defendant Farmers Insurance Exchange (Farmers), as T.I.E.'s adjuster, was responsible for handling claims filed by T.I.E. insureds.

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11 Cal. 4th 1 *; 900 P.2d 619 **; 44 Cal. Rptr. 2d 370 ***; 1995 Cal. LEXIS 4788 ****; 95 Daily Journal DAR 11663; 95 Cal. Daily Op. Service 6832

JAMES R. WALLER, JR., et al., Plaintiffs and Respondents, v. TRUCK INSURANCE EXCHANGE, INC., et al., Defendants and Appellants.

Subsequent History:  [****1]  As Modified on Denial of Rehearing October 26, 1995, Reported at: 1995 Cal. LEXIS 6619.

Prior History: Superior Court of Orange County, Nos. 52-35-77, 52-51-50 and 52-19-22, Byron K. McMillan, Judge. 1 

Disposition: The Court of Appeal's judgment should be affirmed.

CORE TERMS

insured, coverage, bodily injury, occurrence, economic loss, duty to defend, emotional, physical distress, lawsuit, property damage, damages, cause of action, allegations, emotional distress, cases, provide coverage, losses, tangible property, parties, waive, insurance policy, investors, no duty, denial letter, good faith, defenses, terms of the policy, policy language, give rise, shareholder

Insurance Law, Business Insurance, Commercial General Liability Insurance, Duty to Defend, Torts, Pain & Suffering, Emotional Distress, General Overview, Liability & Performance Standards, Good Faith & Fair Dealing, Coverage, Emotional Injuries, Obligations of Parties, Business & Corporate Compliance, Contracts Law, Types of Contracts, Covenants, Indemnification, Bad Faith & Extracontractual Liability, Refusals to Defend, Remedies, Costs & Attorney Fees, Business Torts, Exclusions, Economic Loss Exclusions, Policy Interpretation, Reasonable Expectations, Claim, Contract & Practice Issues, Occurrences, Fortuity Doctrine, Property Insurance, Property Claims, Unfair Competition, Fraud & Misrepresentation, Negligent Misrepresentation, Contracts Law, Measurement of Damages, Foreseeable Damages, Lost Profits, Types of Damages, Property Damages, Measurements, Intentional Acts, Question of Law, Contract Interpretation, Ambiguities & Contra Proferentem, Intent, Defenses, Ambiguities & Mistakes, Ambiguous Terms, Ordinary & Usual Meanings, Persons Insured, Third Parties, Accidental Injuries, Bodily Injuries, Civil Procedure, Appeals, Pleading & Practice, Pleadings, Supplemental Pleadings, Standards of Review, Governments, Courts, Judicial Precedent, Responses, Defenses, Demurrers & Objections, Waiver & Preservation of Defenses, Estoppel & Waiver, Policy Coverage Issues, Reservation of Rights, Notice to Insured Parties, Reservation of Rights, Consideration, Enforcement of Promises, Contract Formation, Burdens of Proof, Good Faith & Fair Dealing, Payments, Breach, Industry Practices, Unfair Business Practices, Claims Investigations & Practices