Collin v. American Empire Insurance

JOHNSON, J., Concurring and Dissenting.

I concur with the judgment, but not necessarily the full rationale, of the majority’s affirmance of the trial court on the cross-appeal. I respectfully dissent, however, as to the majority’s reversal of the trial court’s judgment in favor of the Collins on the “conversion” cause of action.

This will be a brief dissent because the majority and I agree on much of the law. I do not read the majority opinion to hold a “conversion” cause of action can never be an “accident” for purposes of insurance coverage. Rather, I understand the majority decision to be based on a fact-specific determination—that the Collins are bound by the terms of the default judgment they obtained and this judgment specifically included the element this particular conversion involved an intent to damage, destroy and deprive the Collins of their property.

True, there is some language in the majority opinion which some might read to suggest a “conversion” is never an “accident” and, therefore, never covered under a typical accident insurance policy. However, I have too high a regard for my colleagues to believe they could accept such an absurd *822notion. The tort of “conversion” is one of those which embraces a broad spectrum of conduct and mental states. At one extreme, it includes the intentional thief or even violent robber. At the other, it imposes liability on the mistaken, but not even negligent, person who in good faith and without fault ends up with someone’s else’s property.

“ ‘The foundation for the action of conversion rests neither in the knowledge nor the intent of the defendant. It rests upon the unwarranted interference by defendant with the dominion over the property of the plaintiff from which the injury to the latter results. Therefore, neither good nor bad faith, neither care nor negligence, neither knowledge nor ignorance, are the gist of the action.’ [Citations.] [fl] It follows that mistake, good faith, and due care are ordinarily immaterial, and cannot be set up as defenses in an action for conversion. [Citations.]” (5 Witkin, Summary of Cal. Law (9th ed. 1988) Torts, § 624, p. 718, italics in original.)

At and near the latter end of the spectrum, there are many “conversions” which qualify as “accidents” within any reasonable reading of any insurance coverage clause. (See, e.g., Poggi v. Scott (1914) 167 Cal. 372, 375 [139 P. 815] [defendant liable for conversion despite negligence in mistakenly believing wine barrels empty and belonged to someone other than plaintiff]; Byer v. Canadian Bank of Commerce (1937) 8 Cal.2d 297 [65 P.2d 67] [negligent misdelivery of goods by bailee to wrong person constitutes conversion]; Swim v. Wilson (1891) 90 Cal. 126 [27 P. 33] [innocent agent who sells property it turns out principal took from another is liable for conversion despite lack of knowledge or intent].)

My differences with my colleagues are over their treatment of the trial court’s findings. This case was submitted on stipulated facts. The stipulated facts present a rather complete picture of what happened here. American Empire’s insured, employed by the Collins’ lessee, removed most of the Collins’ furniture and some other possessions to a storage locker without the Collins’ knowledge or consent. It did so without any intent to retain, damage or destroy that furniture or those possessions, but solely to facilitate the renovations it had been hired to perform. For whatever reason, that furniture and those possessions were damaged, destroyed, lost or stolen before American Empire’s insured could return them to the Collins’ possession. The Collins do not know, and as far as this case is concerned, no one, including American Empire, knows who damaged, destroyed, lost or stole the furniture and other possessions which American Empire’s insured had taken and placed in storage.

Those facts constitute an unintentional conversion, and accidental conversion if you will, from the perspective of American Empire’s insured. Not just *823the harm but most of the acts which caused the harm were unintended and accidental in nature, just as is true in the case of the speeding automobile driver who sees his intentional act combine with other unintended causative factors to produce an “accident” which harms others.1

American Empire attempts to obfuscate the facts to which it stipulated by attempting to limit the facts the court can properly consider to the allegations of the Collins’ complaint. If the trial court indeed were to be limited to the allegations of the Collins’ complaint, American Empire should not have stipulated to the true facts of this conversion. One could be sure American Empire would have been happy to accept any deviation between the allegations of the complaint and the stipulated facts which favored its position. (Indeed, American Empire several times repeats and relies on the stipulated fact the Collins don’t know what happened to their possessions after they were put in storage, a stipulated fact found nowhere in the Collins’ complaint.)

American Empire cannot stipulate the facts of this conversion then deny those stipulated facts are true or can be used by the trial court to determine whether the conversion in this case was an accident for purposes of insurance coverage.

Even accepting the allegations of the complaint as somehow determinative of the nature of this “conversion” cause of action, those allegations are not nearly as unambiguous as to its insured’s intent as American Empire would have us believe. Those allegations, as repeated in the majority opinion, do not accuse American Empire insured’s of “intentional” conduct, but merely of “taking,” etc. (In this conduct the allegation of “taking” is no more an intentional, nonaccidental act than is “speeding” an intentional, nonaccidental act in a personal injury negligence case.)

The allegations the majority opinion quotes evidencing American Empire insured’s mental state are the “punitive damages” allegations of “malicious, oppressive, etc.” conduct. While insurance companies are not liable for punitive damages, this does not relieve the insurer of its responsibility to indemnify its insured for the compensatory damages it must pay in that same action. In other words, the punitive damage allegations about an insured’s *824mental state do not convert what would otherwise be an “accident” covered under the policy into “intentional conduct” not so covered. (City Products Corp. v. Globe Indemnity Co. (1979) 88 Cal.App.3d 31 [151 Cal.Rptr. 494]; 6 Witkin, supra, § 1330, pp. 787-788.) Accordingly, even assuming the allegations of the Collins’ complaint controlled the coverage issue, the “punitive damages” allegations in this case cannot supply the mental state which turns this particular “conversion” into an intentional tort. It would remain an “accident,” and thereby be covered under American Empire’s insurance policy with Southwest Design.

In my opinion, the trial court was correct in concluding this conversion was an “accident” within the meaning of the “occurrence” clause of this insurance policy. This is not even a close case if one accepts the stipulated facts and what they tell us about the nature of this conversion. But even accepting American Empire’s cramped version which limits the “facts” to the allegations of the Collins’ complaint, this particular conversion remains an “accident” qualifying for coverage under this policy. Accordingly, I would affirm.

American Empire cites a number of out-of-state cases for the proposition “conversion” causes of action are not “accidents” and thus are not covered by the typical insurance policy. Most, if not all, of those cases involve factual circumstances which bear no resemblance to the instant case, but situations where the conversion was obviously intentional. Even if they had precedential value these cases would be distinguishable. As out-of-state cases, they are only persuasive at best. And, in this instance, they fail to provide a persuasive reason for California to adopt an erroneous, unnecessarily broad rule.