Court Opinion

ID: 9797862
Source: CourtListenerOpinion
Date Created: 2023-08-31 04:31:02.042152+00
Date Added: 2024-06-11T08:59:16.888629
License: Public Domain

MORENO, J.
I concur with the result. I also concur in the majority’s conclusion that the coverage provision is unambiguous in this case. But I do not agree with the majority’s conclusion that courts are forbidden from employing public policy when determining how insurance policy clauses are to be interpreted and enforced. The majority quotes from Certain Underwriters at Lloyd’s of London v. Superior Court (2001) 24 Cal.4th 945, 968 [103 Cal.Rptr.2d 672, 16 P.3d 94] (Lloyd’s of London), for the proposition that “ ‘we do not rewrite any provision of any contract, including [an insurance] policy, for any purpose.’ ” (Maj. opn., ante, at p. 1078.) Lloyd’s of London in turn quotes Linnastruth v. Mut. Benefit etc. Assn. (1943) 22 Cal.2d 216, 218 [137 P.2d 833] for the proposition that parties to an insurance contract having the ‘“general[] free[dom] to contract as they please.’” (Lloyd’s of London, supra, 24 Cal.4th at p. 968.) Linnastruth in fact states that “parties may contract as they please so long as they do not violate the law or public policy” and that this principle “is applicable to insurance contracts.” (Linnastruth, supra, 22 Cal.2d at p. 218, italics added.)
Notwithstanding the categorical statements of the majority and of Lloyd’s of London, it is still true that we will not enforce terms of contracts that *1081violate public policy. The public policy in question may sometimes be based on statute (see, e.g., Wildman v. Government Employees Ins. Co. (1957) 48 Cal.2d 31 [307 P.2d 359]) but does not necessarily have to be—it can be based on other policies perceived to be contrary to the public welfare. (See Atschul v. Sayble (1978) 83 Cal.App.3d 153, 162 [147 Cal.Rptr. 716] [court refuses to enforce fee-for-referral agreements among attorneys as contrary to public policy].) We have never held that this principle is inapplicable to insurance contracts. (See AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821-822 [274 Cal.Rptr. 820, 799 P.2d 1253] [general contract principles are applicable to insurance contracts].)
Indeed, in some instances, courts have modified or supplemented language in insurance policies on essentially public policy grounds. For example, courts have held that, notwithstanding clauses in insurance policies that require the insured’s cooperation and timely notice of a claim to an insurer, breach of those terms would not serve as a defense to insurance coverage if the insurer has not been prejudiced thereby. (Northwestern Title Security Co. v. Flack (1970) 6 Cal.App.3d 134, 140 [85 Cal.Rptr. 693]; Campbell v. Allstate Ins. Co. (1963) 60 Cal.2d 303, 306 [32 Cal.Rptr. 827, 384 P.2d 155].)
The argument in favor of the Court of Appeal’s and the insured’s position takes the above principles as a point of departure. The Court of Appeal reasoned that there are compelling public policy grounds not to enforce the “actual collapse” limitation at issue here when it would preclude coverage for imminent collapse. As the court stated: “The notion that in the absence of coverage for imminent collapse an insured may wait until the full or partial actual collapse of a building simply to ensure coverage is troubling indeed. The actual collapse of a building or any part of a building can tragically result in serious injury or loss of human life, as well as substantial property damage. A requirement that an insurer provide coverage when collapse is imminent clearly is in the best interests not only of the insured and the insured’s visitors but also of the insurer. Rectifying the problem prior to an actual collapse may well save lives and money. Moreover, our holding does not unduly burden the insurer because its liability is limited for a loss that is imminent, and, thus, soon to occur anyway. Surely, an insurer’s exposure to liability will be far greater in the event of an actual collapse, [f] Any holding to the contrary would encourage property owners to risk serious injury or death or greater property damage simply to ensure that coverage would attach. We cannot and will not sanction such a result. We therefore conclude that notwithstanding the language of the collapse provision, public policy mandates that State Farm afford Rosen coverage for the imminent collapse of his decks.”
*1082The Court of Appeal’s reasoning is not without force. An insurance policy that clearly establishes a financial incentive to maintain a hazardous condition injurious to the public may well be contrary to public policy. This case is therefore distinguishable from those cases cited by the majority in which enforcement of a policy exclusion would not create such a perverse incentive but merely retard the accomplishment of some worthwhile goal, such as cleanup of hazardous wastes. (See, e.g., Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857 [77 Cal.Rptr.2d 107, 959 P.2d 265].)
The Court of Appeal’s reasoning is, however, ultimately unpersuasive. In determining whether a contract ■ violates public policy, courts essentially engage in a weighing process, balancing the interests of enforcing the contract with those interests against enforcement. (Bovard v. American Horse Enterprises, Inc. (1988) 201 Cal.App.3d 832, 840-841 [247 Cal.Rptr. 340], citing Rest.2d Contracts, § 178.) But the cases make clear that the judicial power to declare public policy in the context of contract interpretation and enforcement should be exercised with great caution. “ ‘ “ ‘The power of the courts to declare a contract void for being in contravention of sound public policy is a very delicate and undefined power, and, like the power to declare a statute unconstitutional, should be exercised only in cases free from doubt.’ [Citation.] . . . ‘No court ought to refuse its aid to enforce a contract on doubtful and uncertain grounds. The burden is on the [one challenging the contract] to show that its enforcement would be in violation of the settled public policy of this state, or injurious to the morals of its people.””” (Bovard v. American Horse Enterprises, Inc., supra, 201 Cal.App.3d at p. 839.)
In this case, there is a strong public policy in favor of allowing insurers to enforce unambiguous policy provisions, thereby encouraging stability in the insurance industry and allowing insurers the benefit of the bargain created by such unambiguous language. On the other hand, the extent of the danger to the public that the Court of Appeal and plaintiff identify is very much in doubt. The argument that literal enforcement of the policy provision at issue will create substantial financial incentives to allow decks to collapse so as to injure the public ignores the existence of various countervailing disincentives. These include the tort duty imposed on property owners not to injure others through their property’s hazardous conditions, as well as the strong interest in keeping oneself, one’s family, and persons invited onto one’s property, free from harm. Nor can we say with confidence that the Court of Appeal’s conclusion is correct that its holding would ultimately benefit the insurer—the insurer is in a far better position to make that determination. Given these doubts, and given the strong policy in favor of enforcing *1083unambiguous terms, I cannot say the insured has carried its burden of demonstrating that public policy compels us to invalidate or reinterpret the “actual collapse” provision of this insurance policy.
Kennard, J., and Werdegar, J., concurred.