New California Supreme Court Decision: Minkler v. Safeco

June 18, 2010

In a new decision by the California Supreme Court, Minkler v. Safeco, wherein contrary to established California law on the application of policy exclusions referring to "an" or "any" insured as opposed to "the" insured, which the court acknowledged, the court decided that the distinction should not apply in this matter involving an intentional acts exclusion due to the separation of insureds clause in the Conditions section of the policy at issue. As a result, the court found that insureds other than the actual molester would have coverage for the damages flowing from those intentional acts of the co-insured, finding that each insured was entitled to have his/her coverage evaluated separately as if he/she was the only insured, the net effect rendering the "an" qualification without any impact.

The court does note that there are exclusions using "an" or "any" to which this separation of insureds analysis would not necessarily apply, and, importantly, commented that the insurance company could have limited the wording of the Separation of Insureds clause so that it clearly indicated that it was meant to only apply to liability limits - providing its own suggested re-wording.

The Clause from the CG 0001 10 01 form, for example, is quoted below. Based on this wording for example, under the Minkler decision, 7.b. would appear to be given the effect of having the policy coverages apply to each person, without regard to any other, and without application of the "any" or "an" limitations that are common in various exclusions and applied to all insureds, not just the one seeking coverage.

7. Separation Of Insureds

Except with respect to the Limits of Insurance, and any rights or duties specifically assigned in this Coverage Part to the first Named Insured, this insurance applies:

a. As if each Named Insured were the only Named Insured; and

b. Separately to each insured against whom claim is made or "suit" is brought.

That said, each policy is unique based on its terms and conditions and each loss is unique based on its facts.

I would anticipate that this decision will have underwriters immediately working on endorsements to modify or limit their Separation of Insureds clauses, including those at ISO, and that claims departments should expect to have prior denials of coverage re-tendered for reevaluation as happened when Montrose, Presley and other significant decisions were handed down. For open matters with coverage analysis pending, this decision needs to be considered and applied to the facts of the loss and particular policy language.

We here at Murchison & Cumming are in the process of analyzing the scope and possible effects of this decision ourselves. If you or your underwriters have any questions, please feel free to contact me or my partner, Bryan M. Weiss. Just as we have worked with underwriters in the past to draft Montrose, terrorism and other endorsements responsive to developing law or events, so do we expect to be doing the same with this issue, given the far-reaching potential impact of this decision.