background, we do not set it forth except as necessary to understand this disposition. 3 2. The district court erred in relying on an exclusion in the policy for a

claim “involving any deliberately fraudulent act or omission or any willful

violation of any statute or regulation,” to conclude that § 533 did not apply.The

court reasoned that because the exclusion required “a final and non-appealable

adjudication” to establish such an act and Markel had not provided “any final and

non-appealable judgment demonstrating a willful act,” Markel could invoke neither

the exclusion nor § 533. However, application of § 533 is a matter of statutory

construction, not of contract interpretation.

Section 533 “reflects a fundamental public policy of denying coverage for

willful wrongs and discouraging willful torts.” Certain Underwriters at Lloyd’s

London v. ConAgra Grocery Prods. Co., 292 Cal. Rptr. 3d 712, 719–20 (Ct. App.

2022); see also Cal. Amplifier, Inc. v. RLI Ins. Co., 113 Cal. Rptr. 2d 915, 926 (Ct.

App. 2001) (“Liability arising from intentional and inherently or predictably

harmful conduct cannot be covered by liability insurance.”). “Because the

exclusion embodied in section 533 is a statute, the normal rules of contract

interpretation do not apply. Rather, the rules of statutory construction control.”

Downey Venture v. LMI Ins. Co., 78 Cal. Rptr. 2d 142, 154 n.32 (Ct. App. 1998).

Thus, any ambiguities are not construed against the insurer. Instead, the statutory

language is construed “so as to effectuate the legislative purpose and intent. . . .

4 [T]hat legislative purpose is both clear and unequivocal. It is to deny insurance

coverage for wilful wrongs.” Id.

Section 533’s application therefore does not depend on the policy’s

exclusion for a “deliberately fraudulent act or omission or any willful violation of

any statute or regulation.” Rather, “[s]ection 533 creates a statutory exclusion

which is read into every insurance policy.” Marie Y. v. Gen. Star Indem. Co., 2

Cal. Rptr. 3d 135, 153 (Ct. App. 2003). The policy’s requirement of a judgment

establishing a wilful act for the exclusion to apply is not pertinent to the § 533

analysis.

A wilful act for purposes of § 533 means “either ‘an act deliberately done

for the express purpose of causing damage or intentionally performed with

knowledge that damage is highly probable or substantially certain to result.’”

Downey, 78 Cal. Rptr. 2d at 155 (quoting Shell Oil Co. v. Winterthur Swiss Ins.

Co., 15 Cal. Rptr. 2d 815, 832 (Ct. App. 1993)). A wilful act also “includes an

intentional and wrongful act in which ‘the harm is inherent in the act itself.’” Id.

(quoting J.C. Penney Cas. Ins. Co. v. M.K., 804 P.2d 689, 698 (Cal. 1991)).

California courts have found that § 533 precludes coverage of litigation

when the allegations of the underlying complaint can be established only by

showing wilful misconduct. See, e.g., Marie Y., 2 Cal. Rptr. 3d at 153–54 (because

5 “sexually molesting a dental patient after rendering her unable to resist by giving

her nitrous oxide is a ‘wilful act’ under section 533,” and “this is the precise

conduct originally alleged against [the insured], the original complaint on its face

demonstrates that section 533 bars coverage for his conduct”); Downey, 78 Cal.

Rptr. 2d at 157–59 (where underlying action for malicious prosecution against the

insured was settled, examining elements of malicious prosecution and holding that

§ 533 precluded indemnification because “the commission of this tort constitutes a

wilful act within the meaning of section 533”); Coit Drapery Cleaners, Inc. v.

Sequoia Ins. Co., 18 Cal. Rptr. 2d 692, 695, 697 (Ct. App. 1993) (where

underlying action for sexual harassment and wrongful termination was settled, the

court reviewed the allegations of the complaint and held that coverage for the costs

of defending and settling the claim was barred by the policy and by section 533

because there was “no credible argument that this alleged wrongful conduct could

be anything other than intentional and willful”); B & E Convalescent Ctr. v. State

Comp. Ins. Fund, 9 Cal. Rptr. 2d 894, 897 (Ct. App. 1992) (where underlying

action for wrongful termination was settled, examining the allegations of the

underlying action and holding that, “[a]s 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

6 substantial public policies, . . . there is no potential for coverage under the

employer’s liability policy because Insurance Code section 533 precludes any duty

to indemnify”).

Thus the court’s task is to examine the allegations in the underlying

complaint to determine whether those allegations necessarily involve a wilful act

within the meaning of § 533. The district court did not do so here. We therefore

remand for the district court to make this determination in the first instance.

In light of our remand, we decline to consider the parties’ other contentions

on appeal. We reverse the grant of Markel’s summary judgment motion on the

professional liability exclusion, reverse the denial of Markel’s summary judgment

motion as to § 533, and remand for the district court to make the appropriate

determination on Markel’s summary judgment motion as to the application of §

533. Markel is awarded its costs on appeal.

REVERSED and REMANDED.

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