Mt. Hawley Insurance v. Lopez
215 Cal. App. 4th 1385
| Cal. Ct. App. | 2013Background
- Indictment filed Jan 6, 2010 charging Lopez with conspiracy, false statements, concealment, and falsification related to a liver transplant mix‑up.
- Mt. Hawley insured Lopez under a DCHS executive liability policy that included a defense obligation for covered claims.
- Policy defines Loss to include Defense Expenses and requires Mt. Hawley to defend any covered Claim “even if groundless, false or fraudulent.”
- Endorsements treated a criminal proceeding commenced by indictment as a “claim” under the policy.
- Mt. Hawley declined Lopez’s defense in Apr. 2010 and brought suit for a declaration of no defense/indemnity duty.
- Trial court granted Mt. Hawley summary judgment that section 533.5 barred defense; appellate court reversed and remanded to consider statutory interpretation and other issues.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 533.5(b) precludes defense of federal criminal actions | Lopez argues 533.5(b) does not apply to federal actions | Mt. Hawley argues 533.5(b) bars defense in all criminal actions | Ambiguity in statute; court proceeds to interpretation |
| How to interpret the statutory language of 533.5(b) | Interpreting narrowly to exclude federal prosecutions | Interpreting broadly to cover all criminal actions | Statute ambiguous; court analyzes history and purpose |
| Does legislative history support extending/limiting the statute to federal actions | History shows intended reach only to state/local UCL/FAL actions | History could support broader reach including criminal actions by state/local entities | Legislative history favors Lopez; statute interpreted to limit to UCL/FAL contexts with state/local entities |
| Is the court’s duty to defend based on policy text notwithstanding 533.5(b) | Policy promises defense for covered claims; 533.5(b) not a blanket preclusion | 533.5(b) precludes the duty to defend | Statutory interpretation controls; defense may be owed under policy in some contexts |
Key Cases Cited
- AIU Ins. Co. v. Superior Court, 51 Cal.3d 807 (Cal. 1990) (statutory interpretation; origins of 533.5(b))
- Bank of the West v. Superior Court, 2 Cal.4th 125 (Cal. 1992) (historical scope of 533.5(b))
- Bodell v. Walbrook Ins. Co., 119 F.3d 1411 (9th Cir. 1997) (interpretation of 533.5(b) scope; civil vs criminal actions)
- Jaffe v. Cranford Ins. Co., 168 Cal.App.3d 930 (Cal. App. 1985) (duty to defend vs. indemnity under section 533; earlier precedent)
- Mez Indus., Inc. v. Pac. Nat. Ins. Co., 76 Cal.App.4th 856 (Cal. App. 1999) (duty to defend notwithstanding indemnity limitations)