The Ninth Circuit has held that California Insurance Code § 533 bars indemnity coverage for retaliation claims brought against the County of Sacramento Sheriff’s Department under California’s Fair Employment and Housing Act (“FEHA”). See County of Sacramento v. Everest National Insurance Co., No. 22-15250, 2023 U.S. App. LEXIS 3387 (9th Cir. Feb. 13, 2023).

California Insurance Code § 533 provides that “[a]n insurer is not liable for a loss caused by the wilful act of the insured; but he is not exonerated by the negligence of the insured, or of the insured’s agents or others.” The court noted that Section 533 is “an implied exclusionary clause which by statute is to be read into all insurance policies.” Id. at *1-2 (quoting Certain Underwriters at Lloyd’s London v. ConAgra Grocery Prods. Co., 77 Cal. App. 5th 729, 739 (2022) (emphasis in original)). The court held that the retaliation claims against the County were willful acts barred from indemnity coverage by Section 533.

The court rejected the County’s argument that its liability for retaliation under FEHA was vicarious and therefore not caused by its own willful act for the purpose of Section 533. The court noted that California cases have held that FEHA imposes direct employer liability as a matter of law, see id. at *2 (citing cases), and it also pointed out various aspects of the claim against the County consistent with direct liability. See id. at *3. The court also rejected the County’s request for an exception to Section 533 for certain public employers, stating that such request “is properly directed to the state legislature.” Id. at *4.