Monday, December 16, 2002
C.A. Rules for Insurer in Dispute Over Coverage of AIDS-Related Claim
By KENNETH OFGANG, Staff Writer/Appellate Courts
The state insurance commissioner did not abuse his discretion in ruling that an employer accused of disclosing that one of its employees had AIDS was not entitled to a defense under its policy with an insolvent insurer, the First District Court of Appeal has ruled.
In a Nov. 20 opinion by Justice Patricia Sepulveda, certified Thursday for publication, Div. Four affirmed a ruling by San Francisco Superior Court Judge Alex Saldomando in favor of Insurance Commissioner Harry W. Low.
The coverage dispute emanated from a suit by an employee of U.S. Continental Marketing, Inc. against that company and the employee’s supervisor. The employee claimed that the supervisor, who had AIDS, forced the employee to have sex with him in order to keep his job.
The suit piqued the interest of KMEX, a Spanish-language radio station in Los Angeles. David Williams, the president of U.S. Continental Marketing, appeared with the employee on a KMEX program and answered questions about employment practices with the company.
Williams’ comments on the program led the supervisor to file a cross-complaint against the company, claiming that Williams violated his privacy by disclosing that the supervisor, who was not identified by name in the opinion and who has not worked for the company since 1997, had AIDS and by implicitly disclosing he was gay.
The cross-complaint set forth the following dialogue from the broadcast:
“Employee: While [Supervisor] was my supervisor at U.S. Continental Marketing, [he] repeatedly forced me to have sex with him, even though he had AIDS. He also forced me to spend time at his home and pull down my pants and walk around naked in front of him. He said if I didn’t do these things, he would fire me.
“Interviewer: You had sex with [Supervisor] even though he had AIDS, out of fear of losing a job paying $4.25 an hour?
“Employee: Yes. The job meant a lot to me.
“Interviewer: [To Williams]: Did [Supervisor] ever discuss with you about his having AIDS?
“Williams: Occasionally we would talk about it.”
U.S. Continental Marketing tendered the defense of the cross-complaint to its insurer, Golden Eagle Insurance Company, which has been in liquidation for some time. When the insurance commissioner held there was no duty to defend, the company applied to the Superior Court for a determination of the insurer’s obligations, pursuant to Insurance Code Sec. 1010.
Saldomando ruled that there was no possibility of coverage, and thus no duty to defend. Coverage, the judge said, was excluded by the employment-related-practices clause of the policy.
Sepulveda agreed, emphasizing that in liquidation cases, the determination of the insurance commissioner is entitled to deference and can only be overturned for abuse of discretion.
To establish a duty to defend, the justice elaborated, the insured must show a close nexus between the cause of action and the employment relationship.
Sepulveda distinguished Golden Eagle Ins. Corp. v. Rocky Cola Café, Inc. (2001) 94 Cal.App.4th 120, in which the Court of Appeal held the insurer had to defend a company against a former employee’s claim that the company was liable for the actions of a former supervisor. The ex-supervisor, upset that the plaintiff had broken off their relationship, followed her to a gym where he “humiliated her with coarse and abusive remarks about her body,” according to her complaint.
The court held that because the remarks were not made in the context of the plaintiff’s employment, the ERP exclusion did not appear to apply and there was at least a potential for coverage.
The cross-complaint against U.S. Continental Marketing is different, Sepulveda said.
“The statement by Williams...certainly qualified as employment-related,” the justice said. “It was given in response to a question concerning Supervisor’s medical condition (and impliedly, his sexual orientation) while an employee of the organization Williams headed. Appearing on a news program devoted to an investigation of appellant’s employment practices, Williams was asked and answered a question concerning his knowledge of a particular employee’s medical status. Moreover, there is no indication, either in the KMEX interview or otherwise in this record, that Williams and the third party had any kind of relationship beyond that of employer and employee.”
The case is Low v. Golden Eagle Insurance Company, A097404.
Copyright 2002, Metropolitan News Company