B & E Convalescent Center v. State Compensation Insurance Fund

B & E Convalescent Center (B & E) appeals from the summary judgment entered against it and in favor of defendant and respondent State Compensation Insurance Fund (State Fund) on B & E’s action for declaratory relief, breach of contract, and insurance bad faith. The sole issue on appeal is whether, as a matter of law, State Fund was obligated to defend B & E for the claims asserted in an action brought by Dorothy Bryson (Bryson), a former employee of B & E, in which she alleged wrongful termination and related causes of action, including a violation of the Fair Employment and Housing Act (Gov. Code, § 12940 et seq.; FEHA).

As the employee’s claims in the underlying action against the insured employer consist solely of willful misconduct involving the intentional termination of the employee in violation of fundamental and substantial public policies, including those expressed in California’s antidiscrimination statutes, there is no potential for coverage under the employer’s liability policy because Insurance Code section 533 precludes any duty to indemnify. Under such circumstances and in the absence of any contrary provisions in the policy, the insured employer can have…