Liability insurance is built on the concept of fortuity. The policyholder pays premiums to transfer the risk of accidental harm to its insurer, and the standard commercial general liability policy delivers that protection by promising to pay sums the insured becomes obligated to pay because of “bodily injury” caused by an “occurrence.” Most policies, in turn, define an “occurrence” as an “accident,” and many define an accident – or expressly qualify the grant of coverage – by excluding injury that is “expected or intended from the standpoint of the insured.” As the California Supreme Court has observed, the “concept of fortuity is basic to insurance law,” and insurance “typically is designed to protect against contingent or unknown risks of harm, not to protect against harm that is certain or expected.” Waller v. Truck Ins. Exch., Inc., 11 Cal. 4th 1, 17 (1995).

That fortuity principle has taken on outsized significance in the wave of long-tail sexual abuse litigation unleashed by revival statutes across the country, such as California’s Assembly Bill 218. Faced with claims arising from conduct that occurred decades ago – and with settlement and defense outlays that can run into the tens of millions of dollars – insurers increasingly invoke the “expected or intended” defense not only to deny coverage prospectively but also to claw back amounts they have already paid to defend and settle the underlying suits. The argument is superficially seductive: because the perpetrator’s conduct was deliberate, and because the institutional insured allegedly should have done more to stop it, insurers argue that the resulting injuries were “expected” and therefore fall outside the grant of coverage.

California law, however, imposes a demanding standard on insurers asserting this defense, and an insured confronted with it has a deep bench of doctrinal tools to defeat it. This article examines the standard contentions insurers advance in support of an “expected or intended” defense and the arguments insureds can use to overcome them: pinning the burden of proof on the insurer; holding the insurer to a strictly subjective standard; separating mere notice of prior misconduct from a subjective expectation of future injury; enforcing severability and anti-imputation principles; and resisting efforts to substitute willful-blindness or punitive-damages theories for actual proof of subjective certainty.

The insurer bears the burden – even when the expected or intended language appears in the “occurrence” definition

The threshold battleground is the burden of proof, and it is one the insured should win at the outset. In California, the insurer bears the burden of proving any limitation on coverage. Dart Indus., Inc. v. Commercial Union Ins. Co., 28 Cal. 4th 1059, 1071 (2002). Insurers frequently argue that the “expected or intended” limitation is different because it frequently appears in the definition of “occurrence” rather than a separately captioned “Exclusions” section – and that the insured, who bears the burden of establishing the existence of an “occurrence,” must therefore prove the absence of expectation. But this argument cannot be reconciled with Dart and the principle that insurers must prove limitations on coverage.

As the Dart court explained: “It is the function served by the policy language, not the location” of that language, that is determinative. Id. at 1071 (emphasis in original). Because “expected or intended” language operates to defeat coverage, the insurer carries the burden of proving it regardless of where it is housed in the policy. Courts applying California law have reached the same conclusion. See Clemco Indus. v. Commercial Union Ins. Co., 665 F. Supp. 816, 820–21 (N.D. Cal. 1987), aff’d, 848 F.2d 1242 (9th Cir. 1988) (insurer had the burden to prove the “neither expected nor intended” language applied even though it appeared in the “occurrence” definition because it functioned as an exclusion of coverage); Armstrong World Indus., Inc. v. Aetna Cas. & Sur. Co., 45 Cal. App. 4th 1, 63–64, 68 n. 27, 77 (1996) (insurer bore the burden to prove the insured “actually did expect” injury where the phrase appeared in the definition of an occurrence); Restatement of the Law of Liability Insurance, section 32 (“The clause ‘neither expected nor intended…’ is an exclusion despite the fact that it is included…in a section of the policy labeled ‘Definitions’ and not in the section…labeled ‘Exclusions’” and “[t]he insurer bears the burden of proving that a claim falls within the scope of an exclusion”).

The burden allocation is even more firmly fixed where the insurer is not merely resisting a coverage demand but is affirmatively suing to recover defense and settlement costs it has already paid. An insurer seeking reimbursement from its insured must carry an “extremely difficult” burden of proof to obtain recoupment. See Buss v. Superior Court, 16 Cal. 4th 35, 54, 58 (1997); LA Sound USA, Inc. v. St. Paul Fire & Marine Ins. Co., 156 Cal. App. 4th 1259, 1272-73 (2007); Cal. Evid. Code section 500. Practitioners on the insured side should press this point early and often. An insurer that has funded a defense and settlement under a reservation of rights, and then sues to claw those payments back, is the party with the burden of establishing every fact necessary to its limitation – including the insured’s subjective state of mind decades ago. Where the relevant witnesses are deceased and the contemporaneous documents are gone, that allocation of burdens can prove dispositive.

The standard is strictly subjective, not objective

The second, and often decisive, principle is that California measures expectation from the actual, subjective standpoint of the insured – not from the vantage point of a hypothetical reasonable person. The “appropriate test for ‘expected’ damage is whether the insured knew or believed its conduct was substantially certain or highly likely to result in that kind of damage.” Shell Oil Co. v. Winterthur Swiss Ins. Co., 12 Cal. App. 4th 715, 748 (1993); accord Armstrong, 45 Cal. App. 4th at 69. This is consistent with the language of many liability policies, which explicitly state that “expected or intended” is to be measured “from the standpoint of the insured.”

The corollary is critical. Only the insured’s subjective expectation matters, therefore, what the insured “should have known” based on the supposed expectations of a “reasonably prudent person” is irrelevant. As the California Court of Appeal held in Armstrong, “[w]hat is expected or intended is different from that which was reasonably foreseeable or which should have been known.” 45 Cal. App. 4th at 72. Similarly, Shell Oil held that jury instructions defining “expect” by reference to what the insured “should have known,” rather than what it “actually knew or believed,” “contained error” because they “invited denial of coverage for conduct within the realm of negligence.” 12 Cal. App. 4th at 747–48; see also Chu v. Canadian Indem. Co., 224 Cal. App. 3d 86, 97–99 (1990) (“notice of facts which would incite investigation by a reasonably prudent person” was insufficient to render injuries “expected”; coverage “is not barred merely because [the insured] ‘should have discovered’ the defect but negligently failed to do so”).

Insurers routinely pay lip service to the subjective standard while building their entire case on an objective one – arguing that the warning signs an insured received, viewed through the lens of a reasonable insured, establish that injury was foreseeable and therefore “expected.” Insureds should hold the line firmly. The proper response is not merely to dispute what the insured knew, but to insist that even uncontested knowledge of a risk does not equal a subjective belief in the practical certainty of harm. An institution that “should have done more” has been negligent; it has not, on that basis alone, “expected” the injury. Imposing a “should have known” standard, as Armstrong warned, “would defeat the essential purpose of insurance agreements” by “creat[ing] an exclusion swallowing…insurance protection for unintended consequences.” 45 Cal. App. 4th at 72–73.

Notice of prior misconduct, standing alone, does not establish expectation

A common factual theory advanced by insurers in abuse coverage disputes is that the institutional insured received earlier reports about the perpetrator and therefore “expected” the later abuse. No published California decision has directly addressed whether an insured’s mere knowledge of prior abuse is sufficient to establish that the insured expected injuries resulting from later abuse. But as noted above, a rule that would bar coverage based on mere knowledge of a risk cannot be squared with the subjective standard employed by California courts, which requires evidence that the insured itself was substantially certain of further harm before coverage can be denied on expected or intended grounds. Courts in other jurisdictions applying a subjective standard have confirmed that earlier knowledge of abuse, without more, cannot transform subsequent injuries into expected ones.

For example, in Hartford Roman Catholic Diocesan Corp. v. Interstate Fire & Casualty Co., the Second Circuit held that an archdiocese “did not subjectively know that [a priest] would abuse more children,” despite being informed by the perpetrator himself that he had molested two boys, because after the earlier abuse, the priest underwent treatment and the archdiocese was informed by a doctor that the treatment would allow the priest to work safely with minors. 905 F.3d 84, 91–92, 94 (2d Cir. 2018). And in American Medical Response Northwest, Inc. v. ACE American Insurance Co., the court held that an insured sued for an employee’s sexual assault “did not subjectively intend or expect to cause harm,” even though it had received two earlier complaints, because the employee had worked for the insured for 15 years without incident, and the employer notified the police and accepted the perpetrator’s resignation “[a]s soon as” it received a credible complaint. 31 F. Supp. 3d 1087, 1096–97 (D. Or. 2014). On that record, a “reasonable inference” was that the insured “believed [the perpetrator] to be innocent,” and so “subjective intent cannot be found as a matter of law.” Id.; see also Lutheran Benevolent Ins. Co. v. National Catholic Risk Retention Group, 939 F. Supp. 1506, 1513 (N.D. Okla. 1995) (“Diocese’s prior knowledge of [abuse], without more, is not sufficient to transform the Diocese’s retention of [the perpetrator]” into an expectation of injury).

These decisions teach that the dispositive question is not whether the insured received earlier reports, but whether those reports caused the insured to subjectively believe further injury was substantially certain to occur. That distinction is where the insured should build its record. Two categories of evidence are particularly powerful. First, the insured’s contemporaneous reaction to a credible complaint – shock, disbelief, or horror – is strong evidence that it did not previously expect the harm. Second, and even more compelling, prompt remedial action upon receiving a credible report negates expectation: terminating the perpetrator, stripping credentials, restricting access to potential victims, seeking treatment, or notifying authorities all demonstrate that the insured did not believe injury was certain and acted to prevent it once it formed that belief. Courts have repeatedly relied on such measures – a police investigation, behavioral treatment, removal from a position of trust – to deny the defense. See American Medical Response, 31 F. Supp. 3d at 1096; Hartford Roman Catholic, 905 F.3d at 94. But see Diocese of Winona v. Interstate Fire & Cas. Co., 89 F.3d 1386, 1393–94 (8th Cir. 1996) (holding that diocese expected priest’s abuse because the perpetrator had admitted to eight other cases of abuse, the diocese had required the perpetrator to undergo treatment, and the diocese “was fully aware this treatment was ineffective” before the abuse of the claimant).

Insureds should also be prepared for insurers to cite outlier authority from jurisdictions applying an objective test. A federal district court in Arizona, for example, rejected the argument that “knowledge of one prior molestation is insufficient” to establish an insured’s expectation of injury and denied coverage under “an objective test” that was “satisfied even if the [insured's] officials did not themselves believe the future harm was substantially probable.” Interstate Fire & Cas. Co. v. Diocese of Phoenix, 2012 U.S. Dist. LEXIS 192226, at *12, *16 (D. Ariz. 2012). That is not the law in California, and the distinction should be drawn sharply. A decision turning on an objective standard has no persuasive force where the governing standard is subjective.

Severability clauses require an insured-by-insured analysis

Where coverage is sought by more than one insured – a common posture in institutional abuse litigation – and where a local church and its regional body or the perpetrator and his employer are separately named, the policy’s severability clause is a potent tool. Such clauses typically provide that the insurance “applies separately to each Insured against whom claim is made or suit is brought.” The California Supreme Court has held that this language requires expectation to be assessed separately for each insured so that one insured’s knowledge or intent does not bar coverage for another. Minkler v. Safeco Ins. Co. of Am., 49 Cal. 4th 315, 333 (2010) (severability language prevents an expected or intended limitation that bars coverage for one insured from barring coverage for all insureds).

The practical consequence is significant. An insurer cannot establish its defense against a regional or parent entity simply by pointing to what a local entity or its employees allegedly knew. The inquiry must be conducted insured by insured, and the insured should insist that the insurer marshal entity-specific proof of subjective expectation as to each insured it seeks to charge. Where the entity with the alleged knowledge is legally and operationally distinct from the entity against which the insurer presses its defense, severability may foreclose an expected or intended defense against the “innocent” insured. See LAUSD v. Ace Prop. & Cas. Ins. Co., No. BC593234, 2025 Cal. Super. LEXIS 84977, at *50 (Cal. Super. Ct. Los Angeles Cnty Oct. 13, 2025) (“Given the language of the Severability Provision and the holding in Minkler, the fact that [school] employees with knowledge of [abuser’s] acts might also be ‘insureds’ … does not defeat coverage for the School District under the ‘expected or intended’ limitation.”) (emphasis in original).

Agent knowledge is not automatically imputed to a corporate insured

Closely related is the principle that the knowledge or expectation of an agent or low-level employee is not automatically imputed to a corporate insured for purposes of the “expected or intended” defense. California courts have declined to impute such knowledge absent evidence that a policymaker with final authority to bind the entity either possessed the requisite knowledge or ratified the conduct. See Ins. Co. of Pa. v. City of Long Beach, 342 Fed. Appx. 274, 276–77 (9th Cir. 2009) (expected or intended limitation did not bar coverage for intentional unconstitutional acts where the individuals who acted were “not officials with final policy-making authority,” and “no final policy-making official had ratified” the conduct); Dart Indus., Inc. v. Liberty Mut. Ins. Co., 484 F.2d 1295, 1299 (9th Cir. 1973) (refusing to impute a company president’s libelous letter to the corporation for purposes of insurance coverage given the “absence of proof that the policy-making management of the corporation[] approved, ratified or had any knowledge” of it).

Insurers will sometimes attempt to sidestep the legal-imputation rules by arguing that the knowledge of an agent or employee should be imputed to the corporate insured based on internal reporting obligations. The insurer will contend that whatever the agent knew, the agent would have communicated that information to the corporate insured, and so the insured must have the same information as the agent. Insureds should expose the gap in that reasoning. An obligation to report establishes, at most, that the agent should have reported; it is not evidence that the agent did report. Where the only percipient witnesses testify that no earlier report was made, and the entity has no record of one, knowledge based on nothing more than an inference that reporting obligations were followed rests on speculation – which cannot carry the insurer’s affirmative burden.

Beware the willful-blindness counter – and keep it in its lane

Insurers attempting to manufacture a triable issue to defeat a summary judgment motion on an expected or intended defense will frequently reach for a deliberate-avoidance theory drawn from Shell Oil, which cautioned that “[c]laims of ignorance are unlikely to succeed when circumstantial evidence shows the insured expected damage or avoided confirming such a belief in hopes of denying awareness of the risk.” 12 Cal. App. 4th at 744–45. The argument is that the insured’s failure to investigate amounts to studied indifference, which should be treated as the equivalent of expectation.

Insureds should confine this theory to its actual scope. Shell Oil’s willful-blindness language addresses the insured who already harbors a belief that harm is substantially certain and deliberately avoids confirming it in order to manufacture deniability. It does not convert ordinary negligence – a failure to investigate or a failure to connect warning signs that a more diligent institution would have connected – into a subjective expectation of injury. Read otherwise, the doctrine would resurrect the very “should have known” standard that Shell Oil itself rejected in the same opinion. The insurer must come forward with evidence that the insured actually suspected the truth and consciously avoided confirming it. Absent that, an inference of willful blindness is no more than a relabeled negligence argument.

A punitive-damages showing is not an expectation of injury

Finally, insurers often point to punitive damages allegations or rulings in the underlying litigation as proof that the insured’s conduct was so culpable that the resulting injuries must have been expected. The premise is unsound. A prima facie showing to support a punitive-damages claim – which may rest on “conscious disregard of the safety of others” – does not establish the subjective expectation of injury required to defeat coverage. The California Supreme Court turned down a similar argument in Peterson v. Superior Court, 31 Cal. 3d 147, 158 (1982), rejecting the “claim that imposition of punitive damages negates an insured’s coverage” where those damages may be awarded for “conscious disregard of others”.¹ Indeed, conduct that is merely reckless remains an “accident” for coverage purposes. Interinsurance Exch. v. Flores, 45 Cal. App. 4th 661, 671 (1996) (reckless conduct “constitute[s] [an] ‘accident’ within the meaning of personal injury insurance policies because the injuries are not intended or expected”).

The takeaway for insureds is to draw a clean line between culpability and expectation. Conscious disregard, recklessness, and even gross negligence describe a state of mind that falls short of the subjective certainty the “expected or intended” defense demands. An insurer that can show only that the insured was reckless has, by definition, shown only that the injury was an accident – and accidents are what the policy covers.

Conclusion

The “expected or intended” defense will remain a fixture of institutional abuse coverage litigation, particularly as revival statutes continue to reopen decades-old claims and insurers seek to recoup substantial outlays. But the defense is far weaker than its rhetorical force suggests. California law places the burden squarely on the insurer; it demands proof of the insured’s actual, subjective belief that injury was highly likely or practically certain; and it refuses to treat notice of prior misconduct, agent-level knowledge, reckless conduct, or a failure to investigate as a substitute for that proof. Severability and anti-imputation principles further confine the defense entity by entity.

Insureds confronting this defense should pin the burden on the insurer at the outset; hold the insurer to a strictly subjective standard and police every slide toward “should have known”; separate the question of what the insured was told from the question of what it actually believed; and insist that punitive-damages and willful-blindness theories not be allowed to fill the gap left by the absence of proof of subjective certainty. Deployed together, these strategies can defeat the defense as a matter of law and ensure that the fortuity protection the insured paid for is not rewritten, in hindsight, into an exception that swallows the coverage.

1. Peterson concerned application of California Insurance Code section 533, which excludes coverage for “willful acts.” But the standard applied under section 533 is materially the same as the expected or intended standard. See Kogler v. State Farm Gen. Ins. Co., 788 Fed. Appx. 461, 462 (9th Cir. 2019) (“An exclusion for acts ‘expected or intended’ by the insured are ‘identical in meaning and effect with the statutory language’ in section 533.”).

Client Alert 2026-146