Procedural Posture

In an underlying action, employees of a subcontractor sued plaintiff insured, a janitorial services contractor, alleging false imprisonment and labor violations. The insured then sought a declaration that defendant insurer had a duty to defend the underlying action pursuant to a commercial general liability (CGL) policy. The Superior Court of Fresno County, California, entered summary judgment for the insurer, and the insured appealed.

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Overview

The underlying complaint asserted that the insured falsely imprisoned workers by locking them inside stores at night while they were working. The insurer argued that there was no duty to defend that action because the policy contained an exclusion for employment-related practices liability (EPL). Under the policy's terms, the exclusion was applicable whether the insured was liable “as an employer or in any other capacity.” The court of appeal reversed summary judgment for the insured. Applying the general rules of contract interpretation found in Civ. Code, §§ 1636, 1638, as well as rules specific to insurance exclusions, the court held that there was no unmistakable meaning to the term “as an employer or in any other capacity,” especially in context. The other language of the EPL exclusion related to employment situations; thus, a reasonable understanding of that category of claims was that it related to actual, former, or prospective employment and did not apply where the insured was not the employer or former employer or prospective employer of the third-party claimant. The EPL exclusion did not apply to claims by employees of an independent contractor.

Outcome

The court reversed the decision of the trial court.

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