Filed 12/26/23 (unmodified opn. attached)

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

CITY OF WHITTIER,

Plaintiff and Appellant,

v.

EVEREST NATIONAL 

INSURANCE COMPANY et al.,

Defendants and Respondents.

 B321450

 (Los Angeles County

 Super. Ct. No. 20NWCV00143)

 ORDER MODIFYING

 OPINION (NO CHANGE IN

 JUDGMENT)

THE COURT:

The opinion in the above-entitled matter filed on 

December 6, 2023 is modified as follows:

1. On page 28, in the paragraph continuing from the 

previous page, the final sentence, beginning “Section 533 thus 

does not bar indemnifying . . .”, is deleted.

2. On page 28, the first full paragraph, beginning, 

“Because the Rivera complaint alleged liability . . .” is deleted, 

and replaced with, “Although we conclude the Rivera complaint 
2

itself does not base liability on necessarily willful conduct, we 

express no opinion whether the insurers may defeat or reduce the 

City’s coverage claim by showing, for example, that the City’s 

conduct was in fact willful, and/or that some or all of the 

settlement is in fact allocable to willful conduct. The trial court 

may address such issues on remand should the parties wish to 

raise them.”

3. In the final paragraph of page 32, continuing onto 

page 33, the last two sentences are modified to read, “Everest 

did not assert this policy language in its motion for summary 

judgment to argue it defeats the City’s indemnification claim for 

the Rivera settlement, nor did it assert it on appeal. We thus 

express no opinion on that issue and nothing herein is intended 

to preclude such argument on remand or foreshadow how we 

would rule on it.”

There is no change in judgment. Respondent Everest 

National Insurance Company’s petition for rehearing is denied.

____________________________________________________________

 BENDIX, Acting P. J. WEINGART, J.

I would grant rehearing.

_________________________

 CHANEY, J. 
Filed 12/6/23 (unmodified opinion)

CERTIFIED FOR PARTIAL PUBLICATION†

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION ONE

CITY OF WHITTIER,

Plaintiff and Appellant,

v.

EVEREST NATIONAL 

INSURANCE COMPANY et al.,

Defendants and Respondents.

 B321450

 (Los Angeles County

 Super. Ct. No. 20NWCV00143)

APPEAL from a judgment of the Superior Court of 

Los Angeles County, Margaret Miller Bernal, Judge. Affirmed in 

part, reversed in part, and remanded.

† Pursuant to California Rules of Court, rules 8.1105(b) 

and 8.1110, this opinion is certified for publication, with the 

exception of part B of the Discussion. 
2

Woolls Peer Dollinger & Scher, Jeffrey A. Dollinger, 

H. Douglas Galt and Brian W. Walsh for Plaintiff and Appellant.

Selman Leichenger Edson Hsu Newman Moore, Sheryl W. 

Leichenger, Eldon S. Edson and Laura R. Ramos for Defendant 

and Respondent, Everest National Insurance Company.

Musick, Peeler & Garrett, Lawrence A. Tabb and Jennifer 

M. Kokes for Defendant and Respondent Starr Indemnity & 

Liability Company.

____________________________

This appeal presents a question of first impression: 

whether Insurance Code section 533 (section 533), under which 

“[a]n insurer is not liable for a loss caused by the wilful act of the 

insured,” bars indemnification for claims under Labor Code 

section 1102.5. Labor Code section 1102.5 prohibits, inter alia,

retaliation against employees for reporting activity they have 

reasonable cause to believe is unlawful, or for refusing to 

participate in activity that actually is unlawful. 

This is an important question whose answer will influence 

enforcement of our employment laws. How so? Retaliation 

claims are the most common employment claims in California.

For fiscal years 2016 through 2022, retaliation claims of all types 

were the majority of charges filed in California with the United 

States Equal Employment Opportunity Commission (EEOC). 

(See EEOC, FY 2009-2022 EEOC Charge Receipts for CA.)

1 In 

2019, retaliation was the most common basis for right-to-sue 

1 Available at 

<https://www.eeoc.gov/statistics/enforcement/charges-bystate/CA> (as of Nov. 16, 2023), archived at 

<https://perma.cc/Y5ZB-4P4Z>.
3

requests filed with the California Department of Fair 

Employment and Housing (DFEH). (DFEH, 2019 Annual Report,

at p. 9.)2

The availability of insurance is a key component of 

enforcing our employment laws and of an ordered workplace. 

The availability of insurance can ameliorate risk of collection 

against potentially judgment-proof employers while also 

providing expeditious compensation via settlement. Insurance 

also ameliorates financial risk to employers choosing to defend

employment claims they believe are weak. 

We decide this question upon the trial court’s grant of 

summary judgment against the insured City of Whittier (the 

City), in favor of its insurers, respondents Everest National 

Insurance Company (Everest) and Starr Indemnity & Liability 

Company (Starr). The City sought indemnification for settlement

of a lawsuit alleging retaliation under Labor Code section 1102.5.

In that lawsuit, police officers alleged retaliatory discipline when 

they objected to, and refused to comply with, a purported illegal

citation and arrest quota system and the use of shift averaging to 

compare officers’ arrest counts in evaluating their job 

performance. The trial court concluded the police officers’

complaint necessarily involved willful conduct, thus barring 

indemnification under section 533.

We disagree. As we explain in our Discussion, post, the 

parties rely on jurisprudence, first developed in underlying 

sexual molestation and assault cases, that equates “wilful” with 

inherently harmful or intentional. Because we conclude not all 

2 Available at <https://calcivilrights.ca.gov/wpcontent/uploads/sites/32/2020/10/DFEH_2019AnnualReport.pdf>

(as of Nov. 16, 2023), archived at <https://perma.cc/8867-L84N>.
4

Labor Code section 1102.5 claims involve necessarily willful 

conduct, but rather some involve conduct more akin to 

negligence, the trial court erred when it found to the contrary in 

granting summary judgment in favor of Everest and Starr.

In the unpublished portion of this opinion, we agree with 

Starr’s alternative argument that its specific policy language 

does not obligate it to indemnify the City for the settlement.

Accordingly, we reverse the judgment as to Everest, and 

affirm the judgment as to Starr under Starr’s alternative 

argument.

BACKGROUND

1. The insurance policies

a. The Everest policies

Everest issued four public entity excess liability insurance 

policies to the California Insurance Pool Authority (CIPA),

3 and 

included the City as a named insured and member agency. The 

policies provided coverage for employment practice liability of 

$10 million per “wrongful act” in excess of a retained limit of 

$1 million.

The policies stated, “We will pay on your behalf, the 

‘ultimate net loss,’ in excess of the ‘retained limit,’ that the 

insured becomes legally obligated to compensate others for 

loss arising out of your ‘employment practice liability wrongful 

3 CIPA is a “joint powers authority,” i.e., a group of 

member municipalities that agree to jointly exercise municipal 

powers such as, for example, contracting for group insurance. 

(See Gov. Code, § 6500 et seq.; The City of Oakland v. Williams

(1940) 15 Cal.2d 542, 547–548.)
5

act’. . . .” The policies defined “ ‘[u]ltimate net loss,’ ” as “the total 

sum . . . actually paid or payable due to a ‘claim’ or ‘suit’ for 

which you are liable either by a settlement to which we agreed or 

a final judgment, and shall include defense costs.” 

Under the policies, “ ‘[e]mployment practice liability 

wrongful act’ ” included “ ‘retaliation.’ ”

b. The Starr policies

Starr issued two public entity excess liability policies to 

CIPA and included the City as a named insured. Like the 

Everest policies, the Starr policies provided coverage for 

employment practice liability of $10 million per “wrongful act” in 

excess of a retained limit of $1 million. The policies provided, 

“We will pay on your behalf sums in excess of the retained limit 

that the insured becomes legally obligated to pay for damages to 

compensate others for loss arising out of your employment 

practice liability wrongful act . . . .” Again like the Everest 

policies, the Starr policies included “retaliation” in the definition 

of “[e]mployment practice liability wrongful act.” 

2. Underlying lawsuit

On March 3, 2015, six officers in the Whittier Police 

Department, including Joseph Rivera (the Rivera plaintiffs), filed 

a complaint against the City in the Los Angeles County Superior 

Court. (Rivera et al. v. City of Whittier, No. BC574443.) The 

complaint alleged the police department instituted “an unlawful 

citation and arrest quota in violation of California Vehicle Code 

sections 41600 et seq. on its officers, and illegally compared 

officers using shift averaging as a means of determining a 

benchmark for performance.” The complaint further alleged the

police department “retaliated against those [who] refused to 
6

participate in and/or reported the unlawful citation and arrest 

quota,” including, inter alia, “negative language and/or 

documentation being placed in [plaintiffs’] personnel packages 

about their refusal to comply with the unlawful quota, 

unwarranted counseling sessions, unwarranted increased 

scrutiny, unwarranted transfers, [and] disparaging comments 

made about them.” We provide more information about the 

allegations in our Discussion, post.

The City notified Everest and Starr about the Rivera

action, advising that the plaintiffs sought damages exceeding 

$1 million and there was a potential for coverage under the 

insurers’ policies.

Prior to trial, the City’s counsel notified the insurers of an 

upcoming mediation session and demanded that they attend. 

Everest’s and Starr’s coverage counsel attended the mediation, at 

which the City negotiated a settlement with the Rivera plaintiffs 

and agreed to pay $3 million to resolve the action. Neither 

Everest nor Starr consented to the settlement. 

The City paid the $3 million, and the Rivera action never 

went to trial or resulted in a judgment. On December 24, 2019, 

counsel for CIPA and the City tendered the Rivera settlement to 

Everest and Starr for indemnity under their respective policies. 

The insurers denied the request for indemnity. 

3. The instant lawsuit

On February 26, 2020, the City filed this action against 

Everest and Starr, asserting causes of action for declaratory 

relief, breach of contract, and bad faith. The City alleged the 

insurers owed a duty to indemnify the City in connection with the 

Rivera settlement. The parties stipulated to referring to a referee 
7

all issues pertaining to the City’s causes of action for declaratory 

relief and breach of contract. 

The insurers each moved for summary judgment, and the 

City moved for summary adjudication. As relevant to this 

appeal, the insurers contended retaliation claims under Labor 

Code section 1102.5 can be established only through proof of an 

employer’s willful acts, and section 533 therefore barred 

indemnity. Starr argued in the alternative that its policy 

required indemnification only of “damages,” which did not 

include amounts paid in prejudgment settlement. In its motion, 

the City contended section 533 did not bar indemnity and 

therefore the insurers were in breach of the insurance contracts.

In a statement of decision, the referee agreed with the 

insurers, finding no triable issue existed as to whether the 

insurers owed the City indemnification of the Rivera settlement. 

The referee reasoned that section 533 prohibits coverage for loss 

caused by an insured’s willful act, and whistleblower retaliation 

under Labor Code section 1102.5 “ ‘can only be established by 

evidence of an employer’s motive and intent to violate or 

frustrate’ California’s Whistleblower laws.” The referee granted 

the insurers’ motions for summary disposition and denied the 

City’s motion. 

The trial court adopted the referee’s statement of decision 

as its own. At the City’s request, the court dismissed without 

prejudice the cause of action for breach of the covenant of good 

faith and fair dealing, which was neither addressed nor resolved 

by the various motions for summary disposition. The court then 

entered judgment for the insurers. 

The City timely appealed. 
8

STANDARD OF REVIEW

A motion for summary judgment “shall be granted if all the 

papers submitted show that there is no triable issue as to any 

material fact and that the moving party is entitled to a judgment 

as a matter of law.” (Code Civ. Proc., § 437c, subd. (c); see 

Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843.) We

review the trial court’s summary judgment rulings de novo. 

(Barber v. Southern California Edison Co. (2022) 80 Cal.App.5th 

227, 241.)

DISCUSSION

A. Section 533 Does Not Bar Coverage of the Rivera

Settlement

The trial court concluded section 533 bars the insurers from 

indemnifying the City for the settlement of the Rivera plaintiffs’ 

claims under Labor Code section 1102.5. We first set forth the 

relevant statutes and case law applying section 533.

1. Relevant statutes

a. Labor Code section 1102.5

Labor Code section 1102.5 “provides whistleblower 

protections to employees who disclose wrongdoing to authorities” 

(Lawson v. PPG Architectural Finishes, Inc. (2022) 12 Cal.5th 

703, 709 (Lawson)), as well as to employees who refuse to 

participate in illegal activities (see Nejadian v. County of 

Los Angeles (2019) 40 Cal.App.5th 703, 718 (Nejadian)).

Labor Code section 1102.5, subdivision (b) states, in 

relevant part: “An employer . . . shall not retaliate against an 

employee for disclosing information . . . to a government or law 
9

enforcement agency, to a person with authority over the 

employee or another employee who has the authority to 

investigate, discover, or correct the violation or noncompliance, or 

for providing information to, or testifying before, any public body 

conducting an investigation, hearing, or inquiry, if the employee 

has reasonable cause to believe that the information discloses a 

violation of state or federal statute, or a violation of or 

noncompliance with a local, state, or federal rule or 

regulation . . . .”

Labor Code section 1102.5, subdivision (c) states, in 

relevant part: “An employer . . . shall not retaliate against an 

employee for refusing to participate in an activity that would 

result in a violation of state or federal statute, or a violation of or 

noncompliance with a local, state, or federal rule or regulation.”

To prevail on a claim under Labor Code section 1102.5, a 

plaintiff must prove “that he engaged in protected activity,” such 

as a disclosure under subdivision (b) or a refusal to participate 

under subdivision (c), “that he was subjected to adverse 

employment action by his employer, and that there was a causal 

link between the [protected activity] and the adverse action.” 

(See Manavian v. Department of Justice (2018) 28 Cal.App.5th 

1127, 1141 (Manavian).) For purposes of the statute, an adverse 

employment action is one that “ ‘materially affects the terms, 

conditions, or privileges of employment.’ [Citations.]” (Francis v. 

City of Los Angeles (2022) 81 Cal.App.5th 532, 541.)

b. Section 533

Section 533 of the Insurance Code 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.” This section is “ ‘an implied 
10

exclusionary clause which by statute is to be read into all 

insurance policies.’ [Citations.]” (J. C. Penney Casualty Ins. Co. 

v. M. K. (1991) 52 Cal.3d 1009, 1019 (J. C. Penney).) “As a 

statutory exclusion, section 533 is not subject to the rule of strict 

construction against an insurer.” (Shell Oil Co. v. Winterthur 

Swiss Ins. Co. (1993) 12 Cal.App.4th 715, 739 (Shell Oil).)

A “wilful act” under section 533 means “an act deliberately 

done for the express purpose of causing damage or intentionally 

performed with knowledge that damage is highly probable or 

substantially certain to result.” (Shell Oil, supra, 12 Cal.App.4th 

at p. 742.) Section 533 also “precludes indemnification, whether 

or not the insured subjectively intended harm, if the insured 

seeks coverage for an intentional, wrongful act that is inherently 

and necessarily harmful.” (Shell Oil, at pp. 740–741.) The 

statute “does not preclude coverage for acts that are negligent or 

reckless.” (J. C. Penney, supra, 52 Cal.3d at p. 1021.) 

Section 533 reflects a fundamental public policy of denying 

coverage for willful wrongs and discouraging willful torts. 

(J. C. Penney, supra, 52 Cal.3d at pp. 1019–1020, fn. 8 & 1021.) 

“ ‘The public policy against insurance for losses resulting from 

such [wilful wrongful] acts is usually justified by the assumption 

that such acts would be encouraged, or at least not dissuaded, if 

insurance were available to shift the financial burden of the loss 

from the wrongdoer to the insurer. . . .’ [Citation.]” (Downey 

Venture v. LMI Ins. Co. (1998) 66 Cal.App.4th 478, 514.) 

Accordingly, parties cannot contract for coverage precluded by 

section 533. (J. C. Penney, at pp. 1019–1020, fn. 8.)

2. Case law applying section 533

We have found no case in California or elsewhere 

addressing whether section 533 bars coverage of claims under 
11

Labor Code section 1102.5. The trial court and the insurers 

analogize to B & E Convalescent Center v. State Compensation 

Ins. Fund (1992) 8 Cal.App.4th 78 (B & E Convalescent Center)

and federal district court cases applying it, all of which address 

retaliation claims in contexts other than Labor Code 

section 1102.5. B & E Convalescent Center, in turn, relies on 

J. C. Penney, supra, 52 Cal.3d 1009 and Fire Ins. Exchange v. 

Altieri (1991) 235 Cal.App.3d 1352 (Altieri). We summarize each 

case in turn.

a. J. C. Penney

J. C. Penney, a foundational case on the application of 

section 533, concerned whether that statute barred coverage of 

claims arising from the sexual molestation of a five-year-old girl.4 

(J. C. Penney, supra, 52 Cal.3d at p. 1014.) The parties seeking 

coverage were the victim and her mother, who had won a 

$500,000 judgment against the molester and sought payment 

from the molester’s homeowner’s liability insurer. (See ibid.) 

The mother and child argued “that even an intentional and 

wrongful act is not excluded from coverage unless the insured 

acted with a ‘preconceived design to inflict injury.’ ” (Id. at 

p. 1019.) They contended “psychiatric testimony shows that 

molesters . . . often intend no harm despite the depravity of their 

acts, and that the molestation is often a misguided attempt to 

display love and affection for the child.” (Ibid.) 

Our Supreme Court rejected these arguments, stating, “No 

rational person can reasonably believe that sexual fondlings, 

penetration, and oral copulation of a five-year-old child are 

4 The high court noted the lack of legislative history for 

section 533. (J. C. Penney, supra, 52 Cal.3d at p. 1020.)
12

nothing more than acts of tender mercy.” (J. C. Penney, supra, 

52 Cal.3d at p. 1019.) Although “section 533 does not preclude 

coverage for acts that are negligent or reckless,” “[t]here is no 

such thing as negligent or even reckless sexual molestation. The 

very essence of child molestation is the gratification of sexual 

desire. The act is the harm. There cannot be one without the 

other. Thus, the intent to molest is, by itself, the same as the 

intent to harm. (Id. at p. 1021; see id. at p. 1026 [“Some acts are 

so inherently harmful that the intent to commit the act and the 

intent to harm are one and the same.”].) Accordingly, the insurer 

could deny coverage without showing the molester subjectively

intended to inflict harm, “because child molestation is always

intentional, it is always wrongful, and it is always harmful.” (Id.

At p. 1025.)

The court clarified the holding of Clemmer v. Hartford 

Insurance Co. (1978) 22 Cal.3d 865,

5 the case relied upon by the 

mother and child for the proposition that section 533 applies only 

when the tortfeasor acts with a “ ‘preconceived design to inflict 

injury.’ ” (J. C. Penney, supra, 52 Cal.3d at p. 1023.) As the J. C.

Penney court explained, at issue in Clemmer was whether the 

tortfeasor had the “mental capacity to commit the wrongful act,”

that is, “whether he was legally sane” when he shot and killed his 

employer. (Ibid.) Clemmer’s use of the phrase “ ‘preconceived

design to inflict injury’ ” referred not to the tortfeasor’s subjective 

intent to cause injury, but his mental capacity to intend the 

wrongful act itself. (See ibid.) Clemmer therefore did not 

support the mother and child’s argument that the molester’s 

5 Clemmer later was overruled on other grounds by Ryan 

v. Rosenfeld (2017) 3 Cal.5th 124.
13

intent to cause harm was relevant to section 533 analysis. (See 

J. C. Penney, at p. 1023.)

J. C. Penney explained that the mother and child’s 

argument, “[p]roperly understood,” went not to the molester’s 

intent, but to his motive, which mother and child contended was 

“something akin to a misguided show of affection.” (J. C. Penney, 

supra, 52 Cal.3d at p. 1026.) But “[m]otive is irrelevant for 

purposes of section 533. Motive is relevant only to the different 

question of whether the conduct was wrongful, thereby giving 

rise to liability.” (J. C. Penney, at p. 1026.) As an example, the 

court posited a person who “intentionally shoot[s] another person 

in the head at point-blank range. Obviously, the insured (if sane) 

intends to injure. Whether the conduct is wrongful, however, will 

depend on the insured’s motive.” (Ibid.) If the motive is selfdefense and “a court finds that the insured acted justifiably, it 

necessarily follows that the insured did not act wrongfully,” in 

which case “there is no liability, and the application of section 

533 is not at issue.” (J. C. Penney, at p. 1026.) Because “[t]here 

is no motive that can justify sexual molestation,” however, the 

molester’s “professed motive is . . . entirely beside the point for 

purposes of section 533.” (J. C. Penney, at p. 1027.)

b. Altieri

In Altieri, a teenage minor struck a schoolmate in the face, 

causing serious injuries. (Altieri, supra, 235 Cal.App.3d at 

p. 1354.) The victim sued the teenage minor and his parents for 

personal injury. The parties stipulated to a judgment in an 

amount assuming coverage under the defendants’ homeowners 

policy. The carrier then brought a declaratory relief action. 

(Ibid.) The trial court, relying on Clemmer, ruled section 533 

did not apply absent proof the teenager intended not only to 
14

strike his schoolmate, but also to cause the serious injuries. 

(Ibid.)

The Court of Appeal reversed, relying on J. C. Penney. 

(Altieri, supra, 235 Cal.App.3d at p. 1357.) The court framed the 

issue as “whether [the teenager’s] actions in assaulting [the 

schoolmate] were inherently harmful.” (Id. at p. 1359.) In 

making that determination, the teenager’s alleged subjective 

intent not to hurt his schoolmate badly was irrelevant. (Ibid.) 

His motive was “relevant only to the issue of whether his conduct 

was wrongful in the first instance.” (Ibid.) Because it was 

undisputed the teenager did not act in self-defense, his motive 

was irrelevant to the coverage issue. (Ibid.) “He may not have 

intended to hurt [the schoolmate] ‘bad’ but he did intend, without 

any legal justification, to hit him. [The teenager’s] conduct was 

inherently harmful and wrongful,” and thus “an uninsurable 

willful act under section 533.” (Altieri, at pp. 1359–1360.) 

c. B & E Convalescent Center

B & E Convalescent Center involved an insured employer’s 

declaratory relief, breach of contract, and bad faith claims 

against State Compensation Insurance Fund arising out of that 

Fund’s refusal to defend the employer in an employee’s wrongful 

termination claim. (B & E Convalescent Center, supra, 8 

Cal.App.4th at p. 83.) The Court of Appeal applied J. C. Penney

and Altieri to hold there was no potential for coverage and 

therefore no duty to defend because section 533 bars coverage for 

an employee’s claims, inter alia, for wrongful termination and 

violation of the Fair Employment and Housing Act (Gov. Code, 

§ 12940 et seq.; FEHA). (B & E Convalescent Center, at pp. 83–

84, 98.) 
15

The employee alleged she had been fired for “refus[ing] to 

carry out instructions to interfere with the efforts of a union 

which had sought to organize the employees,” and for “refus[ing] 

the demands of her employer that she systematically 

terminate . . . employees and replace them with employees of 

Filipino national origin, who, the employers believed, would be 

less likely than others to vote for the union.” (B & E 

Convalescent Center, supra, 8 Cal.App.4th at p. 84.) The 

appellate court characterized this claim as a “Tameny” action for 

“wrongful termination in contravention of a fundamental public 

policy,” in this case “retaliation for [the employee’s] refusal (1) to 

engage in antiunion activity violative of the [National Labor 

Relations Act] and (2) to participate in discriminatory 

employment practices violative of the FEHA.” (B & E 

Convalescent Center, at pp. 90, 92; see Tameny v. Atlantic 

Richfield Co. (1980) 27 Cal.3d 167.)6 The employee further 

alleged that, in violation of FEHA, she had been “terminated on 

the basis of her gender, age, and ethnic origin, in that she was a 

woman over 60 years of age and of English national origin and 

was replaced by a man, younger than she, and of Filipino 

descent.” (B & E Convalescent Center, at pp. 84–85.)

The court concluded the employee’s claims alleged willful 

conduct: “A termination affirmatively undertaken with the 

intent to interfere with protected labor union rights or 

6 Labor Code section 1102.5, subdivision (c) similarly 

prohibits retaliation against an employee for refusing to 

participate in an activity that violates a state or federal statute, 

rule, or regulation. That subdivision, however, had not yet been 

enacted at the time of B & E Convalescent Center. (See Stats. 

2003, ch. 484, § 2.)
16

discriminate on the basis of gender, age, or ethnic origin cannot 

be the result of negligence. An affirmative act which can only 

violate the law when it is accompanied by such an impermissible 

motivation necessarily involves willful and intentional 

misconduct.” (B & E Convalescent Center, supra, 8 Cal.App.4th 

at p. 95.)

The court summarized J. C. Penney and Altieri, stating

that under those cases “section 533 precludes indemnification by 

insurance for any ‘intentional and wrongful act if the harm is 

inherent in the act itself.’ ” (B & E Convalescent Center, supra, 

8 Cal.App.4th at p. 98.) “A termination of employment for which 

a tort action will lie under Tameny and its progeny is such an 

act.” (Ibid.) 

The court then explained how the employee’s claims alleged 

acts that were intentional, inherently harmful, and wrongful. “It 

is well established and generally self-evident that the act of 

terminating an employee is an intentional act.” (B & E 

Convalescent Center, supra, 8 Cal.App.4th at p. 98.) Also, “it can 

hardly be denied that a termination from employment in 

violation of antidiscrimination statutes or other fundamental and 

substantial public policies is inherently harmful. It does not 

require extensive discussion to demonstrate the devastating 

impact of the loss of a job, whether from a financial, psychological 

or emotional point of view. When that occurs in the context of an 

employer’s discrimination against an employee’s sex, age, race or 

national origin or in an effort to defeat nationally established 

rights to bargain collectively, it is devastating not only to the 

employee but to the body politic as well.” (Ibid.) 

As to the question of whether the employee had alleged 

wrongful conduct as that term was used in J. C. Penney and 
17

Altieri, the court noted that Tameny actions redress “ ‘a discharge 

[that] clearly violated an express statutory objective or 

undermined a firmly established principle of public policy.’ 

[Citation.]” (B & E Convalescent Center, supra, 8 Cal.App.4th at 

p. 98.) “A civil action under Tameny serves ‘firmly established,’ 

‘fundamental,’ and ‘substantial’ public policies that are ‘embodied 

in the state Constitution.’ [Citations.]” (Id. at p. 99.)

The court concluded, “Under any reasonable criterion, a 

termination in violation of such public policies must be 

held wrongful as a matter of law. As we have pointed out, such 

claim can only be established by evidence of an employer’s motive 

and intent to violate or frustrate the law(s) declaring or 

establishing fundamental public policy. It would be 

unreasonable, mischievous and improper if section 533, which 

reflects the ‘fundamental public policy of denying coverage for 

willful wrongs’ [citation], were construed in any way other than 

to deny insurance coverage in the most certain and unambiguous 

terms for willful and intentional acts that contravene 

‘fundamental policies that are delineated in constitutional or 

statutory provisions’ [citation].” (B & E Convalescent Center,

supra, 8 Cal.App.4th at p. 99.)

d. Federal district court cases

In Markel American Ins. Co. v. G.L. Anderson Ins. Services, 

Inc. (E.D. Cal. 2010) 715 F.Supp.2d 1068, the district court ruled

that section 533 barred coverage of an employee’s claims for 

retaliation and wrongful termination in violation of public policy. 

(Markel, at p. 1077.) The employee alleged she was terminated 

for “complain[ing] about sexual harassment in the work place.” 

(Ibid.) Citing B & E Convalescent Center, the district court 

found, “A termination affirmatively undertaken with the intent 
18

to interfere with sexual discrimination laws and in violation of 

public policy cannot be the result of negligence because liability 

‘necessarily involves willful and intentional misconduct’ based 

upon impermissible motivation. [Citation.] A termination in 

violation of FEHA or public policy can ‘only be established by 

evidence of an employer’s motive and intent to violate or frustrate 

the law(s) declaring or establishing fundamental public policy.’ 

[Citation.]” (Markel, at p. 1077.) 

In Valley Imaging Partnership Medical Group, L.P. v. RLI 

Insurance Co. (C.D. Cal. Sept. 14, 2007, No. CV 06-4595 ABC 

(PLAx)) [2007 WL 9734496],

7 the district court relied on B & E 

Convalescent Center to conclude section 533 barred coverage of an 

arbitration award for a claim of retaliation, specifically an 

employee’s termination after she gave a deposition in a sexual 

harassment lawsuit brought by another employee. (Valley 

Imaging, at pp. *1, *3.)8 The district court stated that the 

arbitrator’s decision was based “almost entirely” on the 

individual defendant’s admission in the arbitration that the 

employee was terminated for giving a deposition in support of 

another employee’s sexual harassment case. (Valley Imaging, at 

7 Unpublished federal opinions have persuasive value and 

are not subject to California Rules of Court, rule 8.1115, which 

governs citation to unpublished California opinions. (See Harris 

v. Investor’s Business Daily, Inc. (2006) 138 Cal.App.4th 28, 34.)

8 Valley Imaging does not specify the statutory basis for 

the retaliation claim at issue. The arbitration award for which 

the insured sought indemnity, however, relied on CACI 2505, the 

jury instruction for retaliation under FEHA. (See Lomeli v. 

Valley Imaging Partnership (Super. Ct. Los Angeles County, 

Dec. 15, 2005, No. BC311065) [2005 WL 6298989].) 
19

p. *4.) The court reasoned, “Like wrongful termination claims, a 

retaliation claim necessarily entails proof of a ‘wilful act’ 

under section 533. A plaintiff must prove that the employer took 

some sort of adverse employment action because of protected 

activity. An employer cannot be liable for negligent, or even 

reckless, conduct, and there can be no legal ‘justification’ for 

retaliatory actions.” (Valley Imaging, at p. *3.)

3. Claims under Labor Code section 1102.5 do not 

necessarily involve willful conduct under 

section 533

Given the significant number of retaliation cases in our 

courts and importance of insurance in resolving those cases and 

securing compensation for injured employees, we tread carefully

in applying the above jurisprudence to a new category of claims.

We agree with B & E Convalescent Center, Markel, and 

Valley Imaging that the alleged or proven acts of the employers 

in those cases were willful under section 533. To the extent, 

however, those cases can be read more broadly to assert that any

retaliation against an employee engaging in protected conduct is 

per se willful under section 533, we disagree.

 Although Labor Code section 1102.5 encompasses the sort 

of misconduct in B & E Convalescent Center, Markel, and Valley 

Imaging, in which employers punished employees who either 

reported clearly unlawful conduct or refused to participate in it,

the statute is not limited to such obviously intentional 

misconduct. Indeed, it is conceivable an employer could be found 

liable under Labor Code section 1102.5 despite making concerted 

and reasonable efforts to avoid violating the law.

This is best illustrated by claims brought under 

subdivision (c) of Labor Code section 1102.5. Unlike 
20

subdivision (b) of that section, which protects an employee’s right 

to report what the employee has reasonable cause to believe is a 

violation of the law, subdivision (c) addresses the situation in 

which an employee does not merely report, but refuses to comply 

with an employer’s directives. (Lab. Code, 1102.5, subd. (c) [“An 

employer . . . shall not retaliate against an employee for refusing 

to participate in an activity that would result in a violation” of 

law].) The law is less protective of employees in this 

circumstance—whereas an employee’s disclosures are protected

under subdivision (b) so long as the employee has reasonable 

cause to believe the conduct at issue is illegal, an employee is 

protected under subdivision (c) only if the activity in which the 

employee refuses to participate is actually illegal. (Nejadian, 

supra, 40 Cal.App.5th at p. 719.) 

Thus, in a trial on a claim under Labor Code section 1102.5, 

subdivision (c), the court must “ ‘determine the legal question 

whether the identified activity would result in a violation or 

noncompliance with [an] identified statute, rule, or regulation

. . . .’ [Citation.]” (Zirpel v. Alki David Productions, Inc. (2023) 

93 Cal.App.5th 563, 573.) If that question is one of first 

impression, an employer might not discover it has “retaliate[d]” 

against an employee for purposes of Labor Code section 1102.5, 

subdivision (c) until the claim is brought to trial and a court has 

determined the activity the employer directed the employee to 

perform does, in fact, violate a statute, rule, or regulation.

Further, liability under Labor Code section 1102.5, 

subdivision (c) does not require proof of bad faith, malice, or 

punitive intent on the part of the employer. To prove the 

employer’s intent to retaliate, a plaintiff need only show that the 

protected activity—for example, the employee’s refusal to 
21

participate in unlawful activity—was a “contributing factor” to 

the adverse employment action. (Lab. Code, § 1102.6; Lawson, 

supra, 12 Cal.5th at p. 712; see Manavian, supra, 28 Cal.App.5th 

at p. 1141 [plaintiff must show “a causal link between the 

[protected activity] and the adverse action”].) This means an 

employer can be held liable for an adverse employment action 

against an employee who refuses to participate in an unlawful 

activity even if the employer honestly believes the activity is

lawful and acts not to punish, but to mitigate the harm to the 

employer’s business from what it believes is an insubordinate 

employee.

Labor Code section 1102.5, subdivision (c) thus creates the 

potential for the following scenario: 

Faced with what appears to be an insubordinate employee, 

an employer evaluates the legality of the activity in which the 

employee refuses to participate, for example by consulting with 

counsel, reviewing guidance from a trade association, or other 

similar efforts. The activity’s legality is unclear under the 

applicable statute, rule, or regulation, and has never been 

decided by a court. The employer therefore makes its best 

determination and concludes the activity is legal. The employer 

so informs the employee, the employee continues to refuse to 

participate in the activity, and the employer fires the employee to 

prevent further disruption of its business. The employee sues, 

and the trial court decides as a matter of first impression that the 

activity in which the employee refused to participate violates a 

statute, rule, or regulation. It is not a defense to the employee’s 

claim that reasonable minds could differ as to the legality of the 

activity. Under this scenario and the statute, the employer has 
22

retaliated against an employee for engaging in protected conduct, 

and the employee is entitled to backpay among other remedies.

Liability is proper in this scenario—the employee, having

opposed the employer’s unlawful directives, should not bear the 

burden of the employer’s mistake in believing those directives 

were lawful. It does not follow, however, that the employer, 

despite acting in good faith and taking reasonable steps to avoid 

violating the law, has nonetheless engaged in intentional, 

inherently harmful, and “wilful” conduct depriving the employer 

of insurance under section 533. 

The employer’s conduct in our scenario is not comparable to 

that in B & E Convalescent Center, where the employer retaliated 

against the employee for refusing to engage in activity that was 

illegal under clearly established law. Although whistleblower 

protections themselves are clearly established, the illegality of 

the underlying conduct the whistleblower is resisting may not be. 

In B & E Convalescent Center the employer had the 

“impermissible motivation” “to interfere with protected labor 

union rights or discriminate on the basis of gender, age, or ethnic 

origin.” (Supra, 8 Cal.App.4th at p. 95.) The employer in our 

posited scenario, in contrast, does not intend to interfere with the 

employee’s right not to engage in unlawful conduct, because the 

employer reasonably does not know the conduct is unlawful. 

Further, the employer’s motivation for the adverse employment 

action is not revenge or punishment, but prevention of further 

harm to its business from a recalcitrant employee.

Doctrinally, the employer’s conduct in our scenario is closer 

to negligence than intentional misconduct. The employer intends 

the act—the adverse employment action—but not the 

consequence—a violation of the employee’s rights under Labor 
23

Code section 1102.5, rights that do not become clear until a court 

has decided the legality of the conduct in which the employee 

refused to participate.

Our scenario shares characteristics with disparate impact 

discrimination, a workplace tort courts have deemed 

“unintentional” and not subject to the indemnity prohibition of 

section 533. (See Save Mart Supermarkets v. Underwriters at 

Lloyd’s London (N.D. Cal. 1994) 843 F.Supp. 597, 606; accord, 

Melugin v. Zurich Canada (1996) 50 Cal.App.4th 658, 665 [citing 

Save Mart Supermarkets with approval].) A plaintiff may prove 

disparate impact discrimination without showing the employer 

had an intent to discriminate—instead, the plaintiff must show 

“that regardless of motive, a facially neutral employer practice or 

policy, bearing no manifest relationship to job requirements, in 

fact had a disproportionate adverse effect on members of the 

protected class.” (Guz v. Bechtel National, Inc. (2000) 24 Cal.4th 

317, 354, fn. 20; accord, Mahler v. Judicial Council of California

(2021) 67 Cal.App.5th 82, 112.) Thus, the employer’s wrongdoing 

appears not at the time it institutes the policy or practice, but in 

a subsequent retrospective analysis of the impact of that policy or 

practice. 

Similarly, a plaintiff may prevail under Labor Code 

section 1102.5 even if the employer had good reason to believe the 

activity in which it ordered the plaintiff to engage was lawful, so 

long as, in retrospect, a court determines the activity was in fact 

unlawful.9

9 We recognize an employer might institute an ostensibly 

neutral policy or practice with the intention of disproportionately 

impacting a protected group, just as an employer might 
24

Applying section 533 in our scenario also would not 

comport with section 533’s purpose “to prevent insurance 

coverage from encouragement of wilful tort.” (Tomerlin v. 

Canadian Indemnity Co. (1964) 61 Cal.2d 638, 648.) This 

purpose is evident in situations like that of B & E Convalescent

Center, in which an employer should not be able to shield itself 

from the costs of liability for intentional conduct it knows, or with 

minimal investigation should know violates well-established 

principles of public policy. If applied universally to all retaliation 

claims, even those against employers acting mistakenly but in 

good faith, section 533 becomes a shackle, preventing employers 

from dealing with insubordinate employees for fear of having to 

face a retaliation claim without the protection of liability 

insurance. This does not serve the purposes of section 533.

4. The Rivera complaint alleged nonwillful bases 

for liability

The Rivera complaint asserted a single cause of action 

under Labor Code section 1102.5, without express reference to 

any particular subdivision of that statute. The complaint alleged, 

however, retaliation for the Rivera plaintiffs’ refusal to 

participate in a purportedly unlawful quota system, thus alleging 

liability under Labor Code section 1102.5, subdivision (c). 

intentionally violate Labor Code section 1102.5 by punishing an 

employee for refusing to participate in activity the employer 

knows is illegal. Our point is that neither tort necessarily 

requires proof of an intent to violate the employee’s rights, and 

therefore, an employer acting without intent to harm could still 

be liable.
25

At paragraph 25, the complaint averred the police 

department “imposed an unlawful citation and arrest quota in 

violation of California Vehicle Code sections 41600 et seq. on its 

officers, and illegally compared officers using shift averaging as a 

means of determining a benchmark for performance. [The 

department] thereafter retaliated against those [who] refused to 

participate in and/or reported the unlawful citation and arrest 

quota.” (Italics added.) At paragraph 27, the complaint alleged, 

“For refusing to meet the unlawful quota, and for speaking out 

against it, Plaintiffs were retaliated against,” including “negative 

language and/or documentation being placed in their personnel 

packages about their refusal to comply with the unlawful quota.” 

(Italics added.) At paragraph 36, “Defendants . . . retaliated 

against Plaintiff[s] for disclosing information to the City of 

Whittier and the Whittier Police Department and/or refusing to 

engage in the illegal activity . . . . Plaintiffs disclosed that they 

were required to illegally fulfill a traffic citation quota and were 

illegally compared to other officers using shift averaging as a 

means of determining a benchmark for performance . . . .

Alternatively or during the same time, Plaintiffs refused to 

participate in fulfilling traffic citation quotas in violation of 

[Vehicle Code sections 41600 et seq.]” (Italics added.) At 

paragraph 38, “A motivating factor for the Defendants to engage 

in the foregoing adverse employment actions against Plaintiffs 

was to retaliate for the Plaintiffs’ refusal to engage in illegal 

activity and their engaging in the protected activities of disclosing 

information to the City of Whittier and the Whittier Police 

Department . . . .” (Italics added.) 

Under these allegations, the City could be found liable if 

(1) a court found the City policy at issue violated a statute, 
26

regulation, or rule and (2) the City subjected the Rivera plaintiffs 

to adverse employment actions because of their refusal to comply 

with that policy. The Rivera plaintiffs would not have to prove 

the City knew or should have known the City policy was illegal,

or acted maliciously, punitively, or in bad faith, nor could the 

City avoid liability by establishing it reasonably believed the 

alleged policy was legal.

We cannot conclude based on the allegations in the Rivera 

complaint that the City policy with which the Rivera plaintiffs 

refused to comply was clearly illegal such that the City

reasonably could not have believed otherwise. Vehicle Code 

section 41602 prohibits a police department from “establish[ing] 

any policy requiring any peace officer or parking enforcement 

employees to meet an arrest quota.” An arrest quota is “any 

requirement regarding the number of arrests made, or the 

number of citations issued, by a peace officer, or parking 

enforcement employee, or the proportion of those arrests made 

and citations issued by a peace officer or parking enforcement 

employee, relative to the arrests made and citations issued by 

another peace officer or parking enforcement employee, or group 

of officers or employees.” (Veh. Code, § 41600.) An officer’s 

“number of arrests or citations issued,” however, “may . . . be 

considered in evaluating the overall performance of a peace 

officer” if it is not “the sole criterion for promotion, demotion, 

dismissal, or the earning of any benefit provided by” the 

department. (Id., § 41603.)10

10 Vehicle Code section 41603 provides, in its entirety, “No 

state or local agency employing peace officers or parking 

enforcement employees engaged in the enforcement of this code 
27

The interplay between Vehicle Code sections 41602 and 

41603 creates a potential for ambiguity as to whether “shift 

averaging” and setting performance benchmarks by comparing 

officers’ arrest counts, as alleged in the Rivera complaint, is 

unlawful. Again, under Vehicle Code section 41603, a police 

department properly can consider an officer’s arrest count when 

evaluating performance, including by comparing it to other 

officers’ arrest counts, so long as there is no requirement the 

officer achieve a certain number of arrests (which arguably would 

be a quota), and so long as the department considers other 

criteria in addition to arrest count. Conceivably, therefore, a 

department reasonably could believe it could impose an arrest 

count benchmark based on shift averages if that benchmark was 

but one of several factors considered in evaluating performance. 

A court, however, might disagree. Consistent with our 

conclusion in the previous section of the Discussion, the police

department in that circumstance would be liable under Labor 

Code section 1102.5, subdivision (c), but would not have acted 

willfully. As the City argues, a “belief that Vehicle Code 

section 41603 specifically allowed the number of arrests to be 

considered in evaluating the overall performance of a peace 

shall use the number of arrests or citations issued by a peace 

officer or parking enforcement employees as the sole criterion for 

promotion, demotion, dismissal, or the earning of any benefit 

provided by the agency. Those arrests or citations, and their 

ultimate dispositions, may only be considered in evaluating the 

overall performance of a peace officer or parking enforcement 

employees. An evaluation may include, but shall not be limited 

to, criteria such as attendance, punctuality, work safety, 

complaints by civilians, commendations, demeanor, formal 

training, and professional judgment.”
28

officer . . . necessarily means that there was no ‘specific intent to 

wrongfully inflict injury.’ ” The Rivera complaint’s allegations do 

not preclude this scenario, and therefore allege a theory under 

which the Rivera plaintiffs could prevail without proof of willful 

conduct. Section 533 thus does not bar indemnifying the City for

settlement of such a claim.

Because the Rivera complaint alleged liability under 

subdivision (c) of Labor Code section 1102.5, we need not decide 

whether violations of other subdivisions of that statute are 

necessarily willful under section 533, and express no opinion on 

that question.

B. Starr’s Policy Language Providing Coverage for 

“Damages” Does Not Require It To Indemnify the 

Rivera Settlement

Starr argues its policy language does not require it to 

indemnify the City for the Rivera settlement, because the policies

provide coverage only for “damages,” and a settlement is not 

“damages.” Starr raised this argument below, but the trial court 

did not reach it, ruling instead in Starr’s favor under section 533. 

We now reach that alternative argument and agree with Starr.

1. Relevant case law

In Certain Underwriters at Lloyd’s of London v. Superior 

Court (2001) 24 Cal.4th 945, commonly referred to as Powerine

after the real party in interest, our Supreme Court interpreted a 

provision in the standard comprehensive general liability 

insurance policy requiring indemnity for “ ‘sums that the insured 

becomes legally obligated to pay as damages.’ ” (Id. at p. 951.) 

The court concluded that provision limited the insurer’s duty to 

indemnify to “money ordered by a court.” (Ibid.) Accordingly, the 
29

insurer did not have to indemnify the insured for “expenses 

required by an administrative agency pursuant to an 

environmental statute,” in that case costs imposed by

environmental agencies for clean-up and abatement of 

contaminated sites. (Id. at pp. 951–952, 954.)

County of San Diego v. Ace Property & Casualty Ins. Co.

(2005) 37 Cal.4th 406 (County of San Diego) involved an insured 

seeking indemnification “for expenses incurred . . . in responding 

to an administrative agency order requiring it to remediate 

environmental contamination,” as well as “sums expended . . . to 

settle related third party property damage claims outside the 

context of a lawsuit.” (Id. at p. 410.) The policy at issue was not 

a standard comprehensive policy, as in Powerine, but a 

nonstandard excess third party liability policy. (Ibid.) The policy 

language, as characterized by the court, required the insurer to 

indemnify “ ‘for all sums which the insured is obligated to pay by 

reason of liability imposed by law or assumed under contract or 

agreement,’ arising from ‘damages’ caused by personal injuries or 

the destruction or loss of use of tangible property.” (Id. at p. 411.) 

Our high court held Powerine controlled even as to this

nonstandard policy, and thus indemnity of “ ‘damages’ ” was 

limited to “ ‘money ordered by a court.’ ” (County of San Diego, 

supra, 37 Cal.4th at pp. 410–411.) Quoting Powerine, the court 

explained, “ ‘[T]he duty to indemnify “entails the payment of 

money” [citations],’ ‘has as its purpose “to resolve liability . . . 

after liability is established” [citations],’ and ‘can arise only after 

damages are fixed in their amount [citations].’ [Citation.]” (Id.

at p. 417.) The term “ ‘damages,’ ” “both in its legal and 

commonly understood or ‘ “ordinary and popular sense,” ’ is 

limited to ‘money ordered by a court.’ ” (Ibid.) “ ‘[O]ne 
30

would not speak of any “sum that the insured becomes legally 

obligated to pay as damages” apart from any order by a court. . . . 

That is because, as a sum that the insured becomes legally 

obligated to pay, “damages” presuppose an institution for their 

ordering, traditionally a court, albeit no longer exclusively. 

[Citations.] “Damages” do not constitute a redundancy to a “sum 

that the insured becomes legally obligated to pay,” but a 

limitation thereof.’ [Citation.]” (Ibid.)

Accordingly, because the policy required indemnification 

only of “damages,” “costs and expenses associated with 

responding to administrative orders to clean up and abate soil or 

groundwater contamination outside the context of a governmentinitiated lawsuit seeking such remedial relief, and property 

buyout settlements negotiated with third party claimants outside 

the context of a court suit, do not fall within the literal and 

unambiguous coverage terms of the . . . insuring agreement.” 

(County of San Diego, supra, 37 Cal.4th at p. 421.)

In Powerine and County of San Diego, the insureds were 

seeking indemnification of expenditures and settlements outside 

the context of a lawsuit. In Aerojet-General Corp. v. Commercial 

Union Ins. Co. (2007) 155 Cal.App.4th 132 (Aerojet-General), the 

Third District Court of Appeal applied those holdings to 

settlements within the context of a lawsuit. (Id. at p. 143.) 

Aerojet-General concerned insurers’ duty to indemnify 

settlements reached in lawsuits brought by various “ ‘water 

entities’ ” to recover “costs arising out of the alleged 

contamination of groundwater in the San Gabriel Valley.’ ” 

(Aerojet-General, supra, 155 Cal.App.4th at p. 136.) The policies 

at issue required the insurers to indemnify “ ‘all sums which the 

[insured] shall become legally obligated to pay, or by final 
31

judgment be adjudged to pay, to any person or persons as 

damages . . . .’ ” (Id. at p. 137.)

The Court of Appeal concluded that the limitation of 

indemnity to “ ‘damages’ ” excluded settlements. (AerojetGeneral, supra, 155 Cal.App.4th at pp. 143–144.) The court 

explained, “There can be no dispute that the term ‘damages’ as 

interpreted in [Powerine] and used in liability insurance 

indemnity provisions means only money ordered by a court to be 

paid. The term has a clear and literal meaning, and, having been 

construed consistently by the Supreme Court as money ordered 

by a court to be paid, the term cannot be held to be ambiguous.” 

(Id. at p. 143, citing County of San Diego, supra, 37 Cal.4th at 

p. 423.) Because a court did not order Aerojet to pay damages, 

nor did the parties seek “for the terms of the agreement to be 

entered as the judgments in the lawsuits,” “[n]othing in the 

record indicates the court ordered Aerojet to pay any sum of 

money. Accordingly, the settlement costs are outside the scope of 

indemnity coverage in [the insurers’] policies.” (Aerojet-General, 

at p. 144.)

The court rejected the argument that “the phrase ‘money 

ordered by a court’ refers generally to any monies paid to resolve 

a lawsuit as distinguished from monies paid in response to an 

administrative order.” (Aerojet-General, supra, 155 Cal.App.4th 

at p. 144.) “The clause means what it says: money ordered by a 

court.” (Ibid.) The court also rejected the argument that its 

holding “defeats the public policy favoring settlements.” (Id. at 

p. 145.) “If contractual language in an insurance contract is clear 

and unambiguous, it governs, and we do not rewrite it ‘for any 

purpose.’ ” (Ibid., quoting Powerine, supra, 24 Cal.4th at pp. 967, 

968.)
32

2. Analysis

Starr’s policy states, “We will pay on your behalf sums in 

excess of the retained limit that the insured becomes legally 

obligated to pay for damages to compensate others for loss arising 

out of your employment practice liability wrongful act . . . .” This 

language is materially identical to that of the policies in Powerine

and Aerojet-General, in which the courts held the term “damages” 

to be limited to money ordered by the court. As in AerojetGeneral, the record here does not indicate the trial court ordered 

the City to pay any money to the Rivera plaintiffs, nor were the 

terms of the settlement entered as a judgment. Under the 

reasoning and holding of Aerojet-General, Starr was not required 

to indemnify the City for the Rivera settlement.

The City does not address Starr’s alternative argument 

either in its opening brief or reply, and therefore provides no 

basis for us to deviate from Aerojet-General’s holding. We agree 

with Starr that Aerojet-General controls and Starr has no duty to 

indemnify the City for the Rivera settlement. 

Unlike Starr’s policy, Everest’s policy language describing 

the scope of coverage does not use the term “damages,” the key 

term in Powerine, County of San Diego, and Aerojet-General. 

Instead, it states Everest will pay “the ‘ultimate net loss’ . . . that 

the insured becomes legally obligated to compensate others . . . .” 

“ ‘Ultimate net loss,’ ” in turn, is defined as “the total sum . . . 

actually paid or payable due to a ‘claim’ or ‘suit’ for which you are 

liable either by a settlement to which we agreed or a final 

judgment, and shall include defense costs.” Everest does not 

assert this policy language on appeal to argue it defeats the City’s 

indemnification claim for the Rivera settlement. We thus express 
33

no opinion on that issue and nothing herein is intended to 

foreshadow how we would rule on it.

DISPOSITION

The judgment in favor of Starr Indemnity & Liability 

Company is affirmed. The judgment in favor of Everest National 

Insurance Company is reversed and the matter remanded for 

further proceedings. The City of Whittier shall pay Starr’s costs 

on appeal, and Everest shall pay Whittier’s costs on appeal.

CERTIFIED FOR PARTIAL PUBLICATION.

BENDIX, Acting P. J.

I concur:

WEINGART, J.
CHANEY, J., Concurring and Dissenting. 

I agree with the majority’s holding with respect to Starr.

With respect to Everest, the majority ably marshals the 

case law concerning application of Insurance Code section 533 

(section 533) to Labor Code retaliation claims and concludes that 

some claims under Labor Code section 1102.5 may not involve 

willful conduct within the meaning section 533. The possibility 

that section 533 may not bar insurance for the Rivera plaintiffs’ 

claims precludes summary judgment on this issue. (Maj. opn.

ante, at p. 28.) I agree with this holding as well.

However, rather than reverse the judgment as to Everest 

and remand the matter I would invite supplemental briefing on a 

potentially dispositive issue of law: Whether the Everest policies 

themselves precluded coverage.

The Everest policies provided coverage for sums that the 

City of Whittier became “legally obligated” to pay third parties. 

But here, the City never became legally obligated to pay the 

Rivera plaintiffs anything, it voluntarily (and over Everest’s 

objection) paid a settlement. The policy language read as a whole 

does not extend the indemnification obligation to the unapproved 

settlement of claims. On the contrary, the policies provided that 

only approved settlements would be covered. Because the City 

was not legally obligated to settle the underlying lawsuit, the 

Everest policies afforded no coverage for the settlement. 

We may affirm a grant of summary judgment on any 

ground supported by the record (Jimenez v. County of Los Angeles

(2005) 130 Cal.App.4th 133, 140) if it is a “ ‘ground that the 

parties had an adequate opportunity to address in the trial 

court’ ” (Thurston v. Midvale Corp. (2019) 39 Cal.App.5th 634, 

639). The majority observes in the unpublished portion of the 
2

opinion that Everest does not assert on appeal that policy 

language itself defeats the City’s indemnification claim for the 

Rivera settlement, thus giving the City no opportunity to rebut 

such an argument. In that circumstance, I believe the economical 

course is not to reverse the Everest judgment but to request 

supplemental briefing on this issue pursuant to Government 

Code section 68081 (before rendering a decision based upon an 

unbriefed issue the court shall afford the parties an opportunity 

to present their views on the matter through supplemental 

briefing).

Pursuant to the above reasoning, I would affirm the 

judgment as to Starr and invite supplemental briefing as to 

Everest.

CHANEY, J.