Legal Blog

California Court Finds No Coverage Where Facts Determining Covered and Uncovered Claims Are “Inseparably Intertwined”

Red pencil hovering over "INSURANCE COVERAGE" typed in bold letters on a white piece of paper.In United Talent Agency v. Markel Am. Ins. Co., 2023 WL 6449399 (C.D. Cal. Sept. 29, 2023), the United States District Court for the Central District of California held that the plaintiff / insured was not entitled to coverage from the defendant/insurer where the “gravamen” of the underlying lawsuit was rooted in alleged “intentional” conduct.

In the underlying lawsuit, Creative Artists Agency (“CAA”) alleged that United Talent Agency (“UTA”) deliberately interfered with CAA’s economic relationships, asserting ten different causes of action – seven which required proof of wilful conduct and three of which required a lesser degree of culpability for CAA to prevail. UTA ultimately settled with CAA and sued Markel American Insurance Company (“Markel”) for indemnification under a management liability insurance policy UTA had purchased from Markel.

Toward reaching the decision that UTA was not entitled to indemnification for its settlement of the CAA lawsuit, the Court in UTA v. Markel emphasized:

CAA’s claims for intentional interference with contractual relations, inducing breach of contract, intentional interference with prospective economic advantage, conspiracy to breach fiduciary duty, aiding and abetting breach of fiduciary duty, conspiracy to breach duty of loyalty, and aiding and abetting breach of duty of loyalty all necessarily required proof of “wilful” conduct.

Applying California law in general, and California Insurance Code § 533 (“Section 533”) in particular, the Court held that because liability for each of the foregoing seven claims necessarily required proof of “wilful” conduct, coverage under the Markel insurance policy was barred by Section 533. To this end, Section 533 states, “[a]n 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.”

As explained by the Court in UTA v. Markel, for conduct to qualify as “wilful” under Section 533:

it must be “an act deliberately done for the express purpose of causing damage,” an act “intentionally performed with knowledge that damage is highly probable or substantially certain to result,” or “an intentional and wrongful act in which the harm is inherent in the act itself.” (quoting Downey Venture v. LMI Ins. Co., 66 Cal. App. 4th 478, 500 (1998)).

The three remaining causes of action that CAA had asserted against UTA (breach of fiduciary duty, breach of the duty of loyalty, and violation of section 17200) could conceivably be sustained based on alleged conduct that has a lower degree of culpability than what would be required to establish “wilful” conduct under Section 533. The Court found, however, that any facts supporting liability under any of the three claims would have been “so closely related to [the] intentional misconduct as to constitute the same course of conduct for purposes of Insurance Code section 533.” (quoting State Farm Gen. Ins. Co. v. Mintarsih, 175 Cal. App. 4th 274, 289 (2009)). Thus, the Court held, “even if CAA could have hypothetically proceeded on claims without a showing of “wilful” conduct, the facts supporting liability based on less culpable conduct would have been “`inseparably intertwined’ with the intentional conduct described … in the [underlying] complaint.” The Court thus concluded that any liability to CAA would have unavoidably originated from intentional and willful conduct by UTA, and therefore, there was no coverage for UTA under the Markel insurance policy.

There are a number of things an insured, like UTA in the above case, could do to maximize the likelihood of obtaining coverage for underlying claims and lawsuits. If you have insurance coverage or claim-related questions or needs, please feel free to contact me for a consultation.


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Warren A. Koshofer is a principal in the firm’s Commercial Litigation, Environmental, and Insurance practice groups. Mr. Koshofer focuses his practice on business, commercial, environmental, insurance, intra-company, real estate, and toxic tort construction-related litigation matters, as well as on due diligence, indemnification, and risk management relating to commercial or industrial real estate transactions or company mergers and acquisitions involving such real estate assets and/ or potential environmental liabilities. He represents clients at the state, federal, trial, and appellate court levels, including Fortune 100 companies, partnerships, and high-profile individuals. He also handles matters before administrative law courts, regulatory agencies, and alternative dispute resolution forums nationwide. Mr. Koshofer has consistently been recognized by Martindale Hubbell as an AV (preeminent) peer-rated attorney and by Super Lawyers and Who’s Who in Law.