California Insurance Code Section 533 Does Not Necessarily Bar Coverage For California Labor Code Retaliation Claims

A California state court of appeals, applying California law, has held that, as a matter of first impression, a provision in the California insurance code excluding insurance coverage for loss caused by an insured's willful acts did not bar coverage for an underlying lawsuit alleging retaliation in violation of the California labor code. City of Whittier v. Everest Nat'l Ins. Co., 315 Cal.Rptr.3d 856 (Dec. 26, 2023).

Police officers brought suit against the insured, a municipality. In the complaint, the police officers alleged that the insured subjected them to retaliatory discipline in violation of Labor Code Section 1102.5 after they objected to – and refused to comply with – a purported illegal citation and arrest quota system used to evaluate their performance. The insured ultimately settled the lawsuit and tendered the settlement for coverage under its EPL policies. The EPL policies provided coverage "for loss arising out of [the insured's] employment practice