Case Name: TRANSPORT INDEMNITY COMPANY, Plaintiff and Respondent, v. AEROJET GENERAL CORPORATION, Defendant and Appellant
Court: Court of Appeal of the State of California
Jurisdiction: California
Decision Date: 1988-07-20
Citations: 202 Cal. App. 3d 1184
Docket Number: No. C002974
Parties: TRANSPORT INDEMNITY COMPANY, Plaintiff and Respondent, v. AEROJET GENERAL CORPORATION, Defendant and Appellant.
Judges: 
Reporter: California Appellate Reports, Third Series
Volume: 202
Pages: 1184–1194

Head Matter:
[No. C002974.
Third Dist.
July 20, 1988.]
TRANSPORT INDEMNITY COMPANY, Plaintiff and Respondent, v. AEROJET GENERAL CORPORATION, Defendant and Appellant.
Counsel
Rogers, Joseph, O’Donnell & Quinn and Martin Quinn for Defendant and Appellant.
Porter, Scott, Weiberg & Delehant and Russ J. Wunderli for Plaintiff and Respondent.

Opinion:
Opinion
MARLER, J.
The sole issue before the court is whether an insurance company providing workers' compensation and employers' liability coverage has a duty to defend or indemnify an insured employer who is sued for allegedly aggravating an employee's injuries. The trial court decided there was no duty to defend or indemnify as a matter of law and granted the insurance company's motion for summary judgment. The insured employer appeals. We shall reverse.
In 1984 Aerojet General Corporation (Aerojet) was sued by Robert Andrade and George Landis, two former employees, for fraudulent concealment of the nature and extent of work-induced injuries, thereby aggravating those injuries. Landis later died, and his wife commenced a wrongful death action with similar allegations.
The lawsuits of Andrade and the Landises thus sought to avoid the exclusivity of workers' compensation remedies (Lab. Code, § 3601, 3602), by alleging actions under Johns-Manville Products Corp. v. Superior Court (1980) 27 Cal.3d 465 [165 Cal.Rptr. 858, 612 P.2d 948, 9 A.L.R.4th 758]. The California Supreme Court in Johns-Manville recognized an exception to workers' compensation remedies where an employer's fraudulent concealment aggravated an employee's injuries. (Id., at p. 469.) The JohnsManville exception is codified in Labor Code section 3602, subdivision (b)(2). (Foster v. Xerox Corp. (1985) 40 Cal.3d 306, 309 [219 Cal.Rptr. 485, 707 P.2d 858].)
Transport Indemnity Corporation (TIC), Aerojet's insurer under two workers' compensation and employers' liability policies, defended Aerojet in the underlying actions under a reservation of rights and commenced this declaratory relief action to have its duty to defend or indemnify decided by the court.
TIC moved for summary judgment alleging the underlying suits were based on allegations of Aerojet's wilful acts and so were excluded from policy coverage by Insurance Code section 533, relieving TIC from any duty to defend or indemnify as a matter of law. Insurance Code section 533 (hereafter section 533) states, "[a]n insurer is not liable for a loss caused by the wilful act of the insured; . . ."
The court granted TIC's motion for summary judgment with the following statement: "Defendant Aerojet General Corporation has no potential liability under the three underlying complaints except for fraudulent concealment under the Johns-Manville theory of liability which, if found, would constitute a wilfull [szc] act under Insurance Code Section 533 as a matter of law." Aerojet appeals from the summary judgment in favor of TIC.
Discussion
A motion for summary judgment must 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); Pacific Architects Collaborative v. State of California (1979) 100 Cal.App.3d 110 [166 Cal.Rptr. 184].) "The summary judgment procedure, inasmuch as it denies the right of the adverse party to a trial, is drastic and should be used with caution. (Eagle Oil & Ref Co. v. Prentice (1942) 19 Cal.2d 553, 556 [122 P.2d 264].)" (Mann v. Cracchiolo (1985) 38 Cal.3d 18, 35 [210 Cal.Rptr. 762, 694 P.2d 1134].)
The issue we confront is whether, as a matter of law, an employer's aggravation of injuries by fraudulent concealment (Johns-Manville, supra, 27 Cal.3d 465; Lab. Code, § 3602, subd. (b)(2)) is necessarily a wilful act under section 533, thus precluding coverage. If allegations of an employer's aggravation of injuries by fraudulent concealment do not necessarily equate to allegations of a wilful act under section 533, there is a potential for insurance coverage in the underlying actions and there is a duty to defend. (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 275-277 [54 Cal.Rptr. 104, 419 P.2d 168]; CNA Casualty of California v. Seaboard Surety Co. (1986) 176 Cal.App.3d 598, 605 [222 Cal.Rptr. 276]; Cal-Farm Ins. Co. v. TAC Exterminators, Inc. (1985) 172 Cal.App.3d 564, 580 [218 Cal.Rptr. 407]; Jaffe v. Cranford Ins. Co. (1985) 168 Cal.App.3d 930, 934, 936 [214 Cal.Rptr. 567]; State Farm Fire & Casualty Co. v. Drasin (1984) 152 Cal.App.3d 864, 867 [199 Cal.Rptr. 749].) Any doubt whether a duty to defend exists must be resolved in favor of the insured. (CNA Casualty of California v. Seaboard Surety Co., supra, 176 Cal.App.3d at p. 607; citing Eichler Homes, Inc. v. Underwriters at Lloyd's, London (1965) 238 Cal.App.2d 532, 538 [47 Cal.Rptr. 843].)
A "wilful act" as the term is used in section 533, is conduct "more blameworthy than the sort of misconduct involved in ordinary negligence, and something more than the mere intentional doing of an act constituting such negligence." (Russ-Field Corp. v. Underwriters at Lloyd's (1958) 164 Cal.App.2d 83, 96 [330 P.2d 432]; citations omitted.) Similarly, a wilful act within the meaning of section 533 is more than conduct amounting to conscious or reckless disregard of the safety of others. (Peterson v. Superior Court (1982) 31 Cal.3d 147, 158 [181 Cal.Rptr. 784, 642 P.2d 1305].) Indeed, the clear line of authority in this state is that even an act which is "intentional" or "wilful" within the meaning of traditional tort principles is not a "wilful act" under section 533 unless it is done with a "preconceived design to inflict injury." (Clemmer v. Hartford Insurance Co. (1978) 22 Cal.3d 865, 887 [151 Cal.Rptr. 285, 587 P.2d 1098]; California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 32 [221 Cal.Rptr. 171]; United States Fid. & Guar. Co. v. American Employer's Ins. Co. (1984) 159 Cal.App.3d 277, 285-286 [205 Cal.Rptr. 460].) "More specifically, as the court in Capachi v. Glens Falls Ins. Co. (1963) 215 Cal.App.2d Supp. 843, 849 [30 Cal.Rptr. 323], pointed out, 'the word "wilful" as used in [§ 533] may be said to connote an act done with malevolence.' Other courts have suggested that the culpability contemplated within the term 'wilful tort' as used in section 533 is synonymous with 'malice in fact,' i.e., a wish to vex, annoy, or injure another person. (See, e.g., City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31, 36, fn. 3 [151 Cal.Rptr. 494].)" (California Shoppers, Inc. v. Royal Globe Ins. Co., supra, 175 Cal.App.3d at p. 32.)
Our question thus narrows to whether a Johns-Manville cause of action unavoidably includes a preconceived design to inflict injury or a malicious intent to injure. We conclude it does not.
In Johns-Manville the predominant issue before the Supreme Court was whether or not, under the workers' compensation law, "an employee is barred . . . from prosecuting an action at law against his employer for the intentional torts of fraud and conspiracy in knowingly ordering the employee to work in an unsafe environment, concealing the risk from him, and, after the employee had contracted an industrial disease, deliberately failing to notify the state, the employee, or doctors retained to treat him, of the disease and its connection with the employment, thereby aggravating the consequences of the disease." (27 Cal.3d at p. 468.) To put the issue and the holding of the case more succinctly, the Johns-Manville majority stated, "We conclude that while the workers' compensation law bars the employee's action at law for his initial injury, a cause of action may exist for aggravation of the disease because of the employer's fraudulent concealment of the condition and its cause." (Id., at p. 469.)
In his search for a resolution of the issue, Justice Mosk analyzed earlier cases finding exceptions to the exclusive remedy of a workers' compensation proceeding for industrial injury. He concluded, "While we do not purport to find in them a tidy and consistent rationale, we perceive in Magliulo, Meyer and Unruh, a trend toward allowing an action at law for injuries suffered in the employment if the employer acts deliberately for the purpose of injuring the employee or if the harm resulting from the intentional misconduct consists of aggravation of an initial work-related injury." (Johns-Manville, supra, 27 Cal.3d at p.476; italics added.) Of the two types of exception, Johns-Manville was the latter. The former necessitates an intent to injure, the latter clearly does not.
Indeed, the only allegation regarding the employer's intent alleged by the plaintiff in Johns-Manville was not an intent to injure but the "intent to induce plaintiff to continue to work in a dangerous environment." (27 Cal.3d at p. 470.) The Supreme Court nevertheless found the employer's deliberate concealment of the existence of the employee's industrial injury and its connection with the employment with the intent to induce plaintiff to continue to work in a dangerous environment was sufficient basis for an action at law to recover damages for aggravation of the initial injury. (Id., at p. 478.)
The Supreme Court did not limit the right to bring an action to those cases where the intent to induce plaintiff to continue to work in a dangerous environment or where the intentional misconduct is motivated by a specific intent to injure. In fact, it is reasonable to speculate the intentional misconduct of Johns-Manville might actually be motivated by the employer's desire to avoid the cost of eliminating the danger to the employees, to avoid adverse media attention, or to prevent mass employee resignations, in other words—to profit, rather than to intentionally inflict injury on an ignorant employee.
We do not consider the Supreme Court's decisions in Foster v. Xerox Corp., supra, 40 Cal.3d 306 and Cole v. Fair Oaks Fire Protection Dist. (1987) 43 Cal.3d 148 [233 Cal.Rptr. 308, 729 P.2d 743] to compel a different conclusion.
In Foster v. Xerox Corp., supra, the Supreme Court concluded a plaintiff could state a cause of action under Johns-Manville, as codified by Labor Code section 3602, subdivision (b)(2), without alleging affirmative misrepresentations by the employer (40 Cal.3d at pp. 309-311), provided the plaintiff alleged the employer knew of the industrial injury and that work aggravated it and concealed that knowledge from the employee. (Id., at p. 312.) The court did not state a plaintiff must allege an intent to injure to state a cause of action for aggravation of industrial injuries by fraudulent concealment.
In Cole v. Fair Oaks Fire Protection Dist., supra, the Supreme Court considered whether an employee could maintain a civil action for intentional infliction of emotional distress against his employer and fellow employee when the conduct complained of caused total, permanent, mental and physical disability compensable under workers' compensation. The court concluded an employee's claim based on conduct normally occurring in the workplace is within the exclusive jurisdiction of the Workers' Compensation Appeals Board. (43 Cal.3d at p. 151.)
Both Cole and Foster rely on Johns-Manville. (Cole, supra, 43 Cal.3d at pp. 157-161; Foster, supra, 40 Cal.3d at pp. 310-311.) Neither repudiates the two exceptions to workers' compensation remedies identified by JohnsManville, one of which requires an intent to injure and one of which does not.
TIC argues nevertheless a Johns-Manville cause of action requires a specific intent to injure the employee, citing Roberts v. Pup TV' Taco Driveup (1984) 160 Cal.App.3d 278, 283 [206 Cal.Rptr. 533], which in turn cites Williams v. International Paper Co. (1982) 129 Cal.App.3d 810, 818-819 [181 Cal.Rptr. 342]. These cases are, however, simply illustrative of the first type of exception mentioned in Johns-Manville, i.e., intentional misconduct requiring an intent to injure, and not the second type, i.e., fraudulent concealment resulting in aggravation of a prior injury.
The cause of action here is a properly pleaded cause of action under Johns-Manville and Labor Code section 3602, subdivision (b)(2) and does not involve a "preconceived design to inflict injury." Section 533 does not prohibit coverage, nor does TIC's policy itself. TIC, therefore, has an obligation to defend Aerojet. The trial court erred in granting summary judgment for TIC on the basis of section 533.
In its motion for summary judgment TIC also asserted summary judgment should be granted because exclusion (e) of the insurance policy limits coverage to claims or suits brought within three years of the end of the policy and the time limit was not met here. The trial court's order granting summary judgment does not mention exclusion (e). The parties have not briefed on appeal the applicability of exclusion (e). We shall, therefore, reverse and remand this matter to the trial court for further consideration consistent with this opinion.
Disposition
The judgment is reversed and the case remanded to the superior court for further proceedings consistent with this opinion.
Sparks, J., concurred.
Labor Code section 3602 states in pertinent part: "(a) Where the conditions of compensation set forth in Section 3600 concur, the right to recover such compensation is, except as specifically provided in this section and Sections 3706 and 4558, the sole and exclusive remedy of the employee or his or her dependents against the employer .[[[] (b) An employee, or his or her dependents in the event of his or her death, may bring an action at law for damages against the employer, as if this division did not apply, in the following instances:. . . [1J] (2) Where the employee's injury is aggravated by the employer's fraudulent concealment of the existence of the injury and its connection with the employment, in which case the employer's liability shall be limited to those damages proximately caused by the aggravation. The burden of proof respecting apportionment of damages between the injury and any subsequent aggravation thereof is upon the employer."
The parties assert that Andrade's suit was dismissed, although the record does not independently verify this. Also, there is no indication if the wrongful death action has been completed or resolved.
TIC's policies do not contain any express exclusion of coverage for wilful acts. However, section 533, which excludes insurer liability for wilful acts of the insured, is an implied provision of exclusion in every insurance contract. (Allstate Ins. Co. v. Overton (1984) 160 Cal.App.3d 843, 849 [206 Cal.Rptr. 823].)
These cases are: Unruh v. Truck Insurance Exchange (1972) 7 Cal.3d 616 [102 Cal.Rptr. 815, 498 P.2d 1063]; Magliulo v. Superior Court (1975) 47 Cal.App.3d 760 [121 Cal.Rptr. 621]; Meyer v. Graphic Arts International Union (1978) 88 Cal.App.3d 176 [151 Cal.Rptr. 597]; Azevedo v. Abel (1968) 264 Cal.App.2d 451 [70 Cal.Rptr. 710]; and Ramey v. General Petroleum Corp. (1959) 173 Cal.App.2d 386 [343 P.2d 787].)