Safeco Insurance was asked to defend their homeowner insureds, the Kellys, in a fatal gunshot incident. In March ’95, the Kelly’s son had invited friends to his home. During the visit, the Kelly’s son discovered his mother’s handgun. He took the ammunition clip out of the gun, laid it down and, thinking it unloaded, pulled the gun’s trigger. Unknown to the son, such handguns automatically chamber a single round of ammunition so they are ready for use. The gun went off and the bullet killed a friend, Chris Mitchell. The Mitchell family filed a wrongful death suit and the Kellys notified Safeco of the action.

The insurer, after reserving its rights, filed for a summary judgment. The insurer argued that, since the loss involved an ‘illegal act,’ it was not obligated to either defend or pay for the loss. The insurer acted upon the knowledge that the Kelly’s son was found guilty of involuntary manslaughter by a juvenile court, as well as upon their policy which excluded liability for bodily injuries "arising out of any illegal act committed by or at the direction of an insured." The Mitchell and Kelly families filed a counter-motion. The lower court held the opinion that the policy wording could only be reasonably interpreted to bar coverage for an illegal act that was also intentional; so it did not apply to the particular circumstances. The trial court ruled against the insurer and Safeco appealed.

The appellate court read things differently. Focusing on a commonly understood meaning of "illegal," it ruled that the policy’s illegal act wording applied to the loss that resulted in a criminal conviction, barring it from coverage. The lower court decision was reversed in favor of the insurer. This time, the two families appealed.

The state’s high court reviewed the case facts, focusing on the policy’s insuring agreement and exclusion language. The court had a problem with the appeals court’s willingness to interpret the policy reference of "illegal act" as a synonym for criminal act. The Supreme court disagreed, ruling that a dictionary definition should result in consideration of any violation of a law, civil or criminal, to be illegal. Since the latter interpretation would allow the exclusion to also apply to losses the policy intended to cover, such as those involving negligence, the wording was ambiguous. Deciding that allowing such an application would render the policy’s insuring obligation meaningless, the court reversed the appeals court ruling and affirmed the trial court decision in favor of the insureds.

(Editor’s Note: This case had an interesting dissent. One judge refused to join in the majority’s opinion, holding that the policy’s exclusion of illegal acts met a contractual standard of meeting each party’s reasonable expectations on coverage. However, the minority opinion also stated that, while the exclusion could’ve been applied to the Kelly’s child, coverage should still have existed for the parents’ vicarious liability.)

Safeco Insurance Company of America, Plaintiff-Appellant v. Robert S. et al, Defendants-Respondents. CalSCt. No. 8078199. Filed August 20, 2001. 2001 Cal. LEXIS 5479. Reversed. CCH Fire and Casualty Cases Paragraph 6810