Last month, we reported that the Court of Appeal issued its unpublished decision in Jon Davler, Inc. v. Arch Insurance Company enforcing an ISO form employment-related practices (ERP) exclusion in a CGL policy. On September 15, 2014, the Court of Appeal ordered the Opinion certified for publication. The decision is now citable precedent, Jon Davler, Inc. v. Arch Insurance Company, 229 Cal.App.4th 1025 (2014).
The Court of Appeal held that the ERP exclusion excluded all of the employees’ claims alleged against their employer (the insured) arising from a workplace incident in which the female employees were forced by a supervisor to submit to a humiliating physical inspection by another employee. The Court distinguished and rejected a potentially conflicting federal court decision, Zurich Ins. Co. v. Smart & Final, Inc., 996 F. Supp. 979 (C.D.Cal. 1998). The Zurich decision held an earlier form of the ERP exclusion did not preclude coverage for an employee’s false imprisonment claim against his employer. The Jon Davler Court rejected the insured’s argument that the employees’ false imprisonment claim was not barred by the ERP exclusion because “false imprisonment” was not listed after the phrase “such as” in the exclusion. The Jon Davler Court thus affirmed the dismissal of the insured’s bad faith lawsuit after the trial court sustained Arch’s demurrer without leave to amend.
The Jon Davler decision is the first California Court of Appeal decision to address the issue of whether an employee’s false imprisonment is excluded by this version of the ISO ERP exclusion and dispels any doubt on the subject.