Mt. Hawley Insurance v. Lopez (215 Cal. App. 4th 1385, 2013)

Court of Appeal of the State of California 2013-05-01

Citations

Full opinion text

Opinion

SEGAL, J.

INTRODUCTION

Insurance Code section 533.5, subdivision (b), precludes insurers from providing a defense for certain kinds of claims. The statute provides: “No policy of insurance shall provide, or be construed to provide, any duty to defend . . . any claim in any criminal action or proceeding or in any action or proceeding brought pursuant to” California’s unfair competition law under Business and Professions Code sections 17200 and 17500 “in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel, notwithstanding whether the exclusion or exception regarding the duty to defend this type of claim is expressly stated in the policy.” In Bodell v. Walbrook Ins. Co. (9th Cir. 1997) 119 F.3d 1411 (BodellI), the Ninth Circuit held that section 533.5, subdivision (b), applies to criminal actions brought by the four listed state and local agencies but does not apply to criminal actions brought by federal prosecutors. The dissenting judge in Bodell and the trial court in this case concluded that section 533.5, subdivision (b), applies to any criminal action, including federal criminal actions. We agree with the Ninth Circuit and hold that section 533.5, subdivision (b), does not preclude an insurer from agreeing to provide a defense for criminal actions against its insured brought by federal prosecutors. Therefore, the insurer in this case, which had agreed to provide its insureds with a defense in “a criminal proceeding . . . commenced by the return of an indictment” “even if the allegations are groundless, false or fraudulent,” cannot avoid its contractual duty to defend an insured against federal criminal charges by relying on section 533.5, subdivision (b).

FACTUAL AND PROCEDURAL BACKGROUND

1. The Indictment

On January 6, 2010, the United States Attorney for the Central District of California filed a grand jury indictment charging Dr. Richard R. Lopez, Jr., with criminal conspiracy, false statements and concealment, and falsification of records. The indictment alleged that Lopez, who was the medical director of the St. Vincent Medical Center’s comprehensive liver disease center, conspired with another doctor and other hospital employees in the liver transplant program to transplant a liver into the wrong patient.

According to the indictment, Lopez diverted a liver designated for one patient to a different patient who was further down the list of patients waiting for a liver transplant, in violation of regulations promulgated by the United States Department of Health and Human Services under the National Organ Transplant Act (Pub.L. No. 98-507 (Oct. 19, 1984) 98 Stat. 2339), and then covered up his diversion. The indictment alleges that Lopez initially notified the United Network for Organ Sharing (UNOS) that the second patient had received the liver, but later falsely told UNOS that the first patient had received the liver. The indictment further alleges that as a result the first patient never received a liver, “was removed from the liver transplant wait list,” was “thereafter deprived of the opportunity to have this life-saving operation,” and subsequently died. The indictment alleges that Lopez engaged in a coverup by directing his coconspirators to restore the second patient’s name to the transplant waiting list (even though the second patient had received the liver designated for the first patient), create a false pathology report for the first patient based on data in the second patient’s pathology report, and alter medical reports to support a claim “that the transplant program had made an honest mistake confiising the names.” The eight-count indictment included alleged violations of title 18 United States Code sections 371 (conspiracy), 1001 (making false statements), and 1519 (destruction, alteration, or falsification of evidence in federal investigations).

2. The Policy

Daughters of Charity Health Systems (DCHS), which owns St. Vincent’s, purchased a “Not For Profit Organization and Executive Liability Policy” pursuant to which Mt. Hawley agreed to “pay on behalf of the Insureds, Loss which the Insureds are legally obligated to pay as a result of Claims . . . against the Insured for Wrongful Acts . . . .” The policy defines “Loss” as “monetary damages, judgments, settlements, including but not limited to punitive, exemplary, multiple or non-contractual liquidated damages where insurable under applicable law, . . . and Defense Expenses which the Insureds are legally obligated to pay as a result of a covered Claim.” The policy further provides that Mt. Hawley “shall have the right and duty to defend any Claim covered by this Policy, even if any of the allegations are groundless, false or fraudulent . . . .” An endorsement defines “claim” to include “a criminal proceeding against any Insured commenced by the return of an indictment” or “a formal civil, criminal, administrative or regulatory investigation against any Insured . . . .” The policy’s definition of “insured” can include employees of St. Vincent’s like Lopez.

3. The Action

On March 3, 2010, Lopez tendered the defense to the charges to Mt. Hawley. On April 1, 2010, Mt. Hawley, through its attorneys, sent a letter to Lopez declining to defend or indemnify Lopez, and on the same date filed this action. Mt. Hawley’s first amended complaint alleged that a doctor at St. Vincent’s, with Lopez’s “knowledge and approval,” transplanted a liver designated for one patient “who was second in line on the regional waitlist” for a liver into another patient “who was fifty-second on the waiting list,” without prior approval. Mt. Hawley alleged that Lopez “engaged in an elaborate cover-up of the ‘switch,’ which included falsification of documents and encouragement of others to participate in the cover-up.” Mt. Hawley alleged that it had no duty to defend Lopez because of section 533.5, a “remuneration exclusion” or “personal profit exclusion,” and a “medical incident exclusion.” Mt. Hawley sought a declaration that it did not owe Lopez a duty to defend or indemnify in connection with the indictment. Lopez filed a cross-complaint against Mt. Hawley for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief.

4. The Demurrer and the Motion for Summary Judgment

Lopez filed a motion for judgment on the pleadings on Mt. Hawley’s original complaint and a demurrer to Mt. Hawley’s first amended complaint. Lopez argued in both motions that section 533.5 did not preclude an insurer from providing a defense to federal criminal charges brought by the United States Attorney’s Office, that the remuneration/personal profit exclusion did not apply because there was no judgment or final adjudication against Lopez, and that the medical incident exclusion did not apply because it was not part of the policy. The trial court rejected Lopez’s argument that section 533.5 did not apply, granted the motion for judgment on the pleadings on the original complaint with leave to amend to allow Mt. Hawley to attach a copy of the policy to the complaint, and then overruled Lopez’s demurrer to the first amended complaint.

Mt. Hawley subsequently filed a motion for summary judgment or in the alternative for summary adjudication. Mt. Hawley argued that it had no duty to defend Lopez against the grand jury indictment “because any defense obligation is excluded by California Insurance Code section 533.5 (b).” Mt. Hawley also argued that it was entitled to summary judgment on its declaratory relief causes of action and on Lopez’s cross-complaint because under section 533.5 Mt. Hawley had no duty to defend or indemnify Lopez. Although both Mt. Hawley and Lopez argued that section 533.5, subdivision (b), was unambiguous and supported their respective proposed interpretations, both sides submitted portions of the legislative history of the statute in support of their positions.

5. The Ruling

The trial court found that “section 533.5 unambiguously bars coverage for criminal actions and proceedings” and that “the plain language of section 533.5 bars Mt. Hawley’s duty to defend or indemnify Dr. Lopez against the Indictment.” The trial court acknowledged that “the legislative history seems to indicate that section 533.5 was enacted in response to difficulties that the Attorney General had encountered in settling actions under the unfair competition law due to the participation of insurance companies,” but “perceive[d] nothing in the legislative history from which it could clearly conclude that section 533.5 was intended to apply to state and local criminal actions only as opposed to all criminal actions, including federal proceedings.” The trial court concluded that “the correct interpretation of [section] 533.5 is that the enumeration of state, county and local prosecutors ought to be read as referring only to civil actions for unfair competition and false advertising. And that the prohibition against furnishing a defense in a criminal action applies regardless of the entity that commenced the criminal prosecution.” The trial court stated that the Ninth Circuit’s decision in Bodell was not binding and was unpersuasive, and concluded that the Bodell court’s “analysis of [section] 533.5, is in error.” The trial court therefore granted Mt. Hawley’s motion for summary judgment on Mt. Hawley’s first amended complaint and on Lopez’s cross-complaint.

The trial court entered judgment in favor of Mt. Hawley and against Lopez on June 23, 2011. Lopez filed a timely notice of appeal on June 29, 2011.

DISCUSSION

1. Standard of Review

We review a grant of summary judgment de novo. (Wiener v. Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142 [12 Cal.Rptr.3d 615, 88 P.3d 517]; see Culver Center Partners East #1, L.P. v. Baja Fresh Westlake Village, Inc. (2010) 185 Cal.App.4th 744, 749 [110 Cal.Rptr.3d 833].) “On appeal from the granting of a motion for summary judgment, we examine the record de novo, liberally construing the evidence in support of the party opposing summary judgment and resolving doubts concerning the evidence in favor of that party.” (Miller v. Department of Corrections (2005) 36 Cal.4th 446, 460 [30 Cal.Rptr.3d 797, 115 P.3d 77].) The de novo standard of review applies to issues of statutory and insurance policy interpretation. (See Bruns v. E-Commerce Exchange, Inc. (2011) 51 Cal.4th 717, 724 [122 Cal.Rptr.3d 331, 248 P.3d 1185] (Bruns) [“[statutory interpretation is a question of law that we review de novo”]; County of San Diego v. Ace Property & Casualty Ins. Co. (2005) 37 Cal.4th 406, 414 [33 Cal.Rptr.3d 583, 118 P.3d 607] [“ ‘ “[w]e apply a de novo standard of review to an order granting summary judgment when, on undisputed facts, the order is based on the interpretation or application of the terms of an insurance policy” ’ ”]; Sacks v. City of Oakland (2010) 190 Cal.App.4th 1070, 1082 [120 Cal.Rptr.3d 1] [where the pertinent facts are undisputed and the issue is one of statutory interpretation, “ ‘the question is one of law and we engage in a de novo review of the trial court’s determination’ ”].)

A “decision to sustain or overrule a demurrer is subject to de novo review on appeal . . . .” (Montclair Parkowners Assn. v. City of Montclair (1999) 76 Cal.App.4th 784, 790 [90 Cal.Rptr.2d 598].) “In reviewing an order overruling a demurrer, we accept as true all properly pleaded facts in the complaint and exercise independent judgment to determine whether the complaint states a cause of action as a matter of law.” (Caliber Bodyworks, Inc. v. Superior Court (2005) 134 Cal.App.4th 365, 373 [36 Cal.Rptr.3d 31]; see Boy Scouts of America National Foundation v. Superior Court (2012) 206 Cal.App.4th 428, 438 [141 Cal.Rptr.3d 819] [“ ‘[t]he reviewing court accepts as true all facts properly pleaded in the complaint in order to determine whether the demurrer should be overruled’ ”].)

2. The Trial Court Erred in Granting Mt. Hawley’s Motion for Summary Judgment

a. Section 533.5

Section 533.5, subdivision (b), as originally enacted in 1988, provided: “No policy of insurance shall provide, or be construed to provide, any duty to defend, as defined in subdivision (c), any claim in any civil or criminal action or proceeding in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, or any city prosecutor, notwithstanding whether the exclusion or exception regarding the duty to defend this type of claim is expressly stated in the policy.”

In 1990 the Legislature amended section 533.5, subdivision (b), to read substantially as it does now: “No policy of insurance shall provide, or be construed to provide, any duty to defend, as defined in subdivision (c), any claim in any criminal action or proceeding or in any action or proceeding brought pursuant to Chapter 5 (commencing with Section 17200) of Part 2 of, or Chapter 1 (commencing with Section 17500) of Part 3 of, Division 7 of the Business and Professions Code in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, or any city prosecutor, notwithstanding whether the exclusion or exception regarding the duty to defend this type of claim is expressly stated in the policy.” The parties agree that the language “. . . Chapter 5 (commencing with Section 17200) of Part 2 of, or Chapter 1 (commencing with Section 17500) of Part 3 of, Division 7 of the Business and Professions Code” refers to California's unfair competition and false advertising laws, commonly referred to as the UCL and the FAL. (See Hill v. Roll Internal Corp. (2011) 195 Cal.App.4th 1295, 1298 [128 Cal.Rptr.3d 109].)

In 1991 the Legislature amended section 533.5, subdivision (b), a second time to add county counsel to the list of prosecutors in the statute. Thus, the statute currently reads: “No policy of insurance shall provide, or be construed to provide, any duty to defend, as defined in subdivision (c), any claim in any criminal action or proceeding or in any action or proceeding brought pursuant to” the UCL or the FAL “in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel, notwithstanding whether the exclusion or exception regarding the duty to defend this type of claim is expressly stated in the policy.”

No California court has addressed the issue raised by this appeal of whether section 533.5, subdivision (b), precludes an insurer from providing a defense in all criminal actions, including federal criminal actions. In Bodell, supra, 119 P.3d 1411, the Ninth Circuit held that “the phrase ‘sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel’ modifies both ‘any criminal action or proceeding’ and ‘any action or proceeding brought pursuant to [the UCL and FAL],’ and that the statute therefore only precludes the tender of a defense in all criminal actions and certain civil actions brought by state, county or city officials.” (Id. at p. 1416.) The dissent in Bodell argued that the phrase “ ‘sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel’ ” modifies only civil actions or proceedings brought under the UCL and FAL, not criminal actions. (119 F.3d at p. 1421 (dis. opn. of Kozinski, J.).) The dissent noted that “the phrase ‘any criminal action or proceeding’ is separated by the disjunctive ‘or’ from actions brought pursuant to” the UCL and the FAL. (119 F.3d at p. 1421 (dis. opn. of Kozinski, J.).) Neither the majority nor the dissent in Bodell discussed or engaged in the three-step analysis for statutory interpretation under California law.

b. California law for interpreting statutes

“We begin with the fundamental rule that our primary task is to determine the lawmakers’ intent.” (Delaney v. Superior Court (1990) 50 Cal.3d 785, 798 [268 Cal.Rptr. 753, 789 P.2d 934].) “In construing statutes, we aim ‘to ascertain the intent of the enacting legislative body so that we may adopt the construction that best effectuates the purpose of the law.’ ” (Klein v. United States of America (2010) 50 Cal.4th 68, 77 [112 Cal.Rptr.3d 722, 235 P.3d 42] (Klein), quoting Hassan v. Mercy American River Hospital (2003) 31 Cal.4th 709, 715 [3 Cal.Rptr.3d 623, 74 P.3d 726].) California courts “have established a process of statutory interpretation to determine legislative intent that may involve up to three steps.” (Alejo v. Torlakson (2013) 212 Cal.App.4th 768, 786-787 [151 Cal.Rptr.3d 420] (Alejo)) The “key to statutory interpretation is applying the rules of statutory construction in their proper sequence ... as follows: ‘we first look to the plain meaning of the statutory language, then to its legislative history and finally to the reasonableness of a proposed construction.’ ” (MacIsaac v. Waste Management Collection & Recycling, Inc. (2005) 134 Cal.App.4th 1076, 1082 [36 Cal.Rptr.3d 650] (MacIsaac), quoting Riverview Fire Protection Dist. v. Workers’ Comp. Appeals Bd. (1994) 23 Cal.App.4th 1120, 1126 [28 Cal.Rptr.2d 601].)

“The first step in the interpretive process looks to the words of the statute themselves.” (Alejo, supra, 212 Cal.App.4th at p. 787; see Klein, supra, 50 Cal.4th at p. 77 [“[w]e look first to the words of the statute, ‘because the statutory language is generally the most reliable indicator of legislative intent’ ”].) “If the interpretive question is not resolved in the first step, we proceed to the second step of the inquiry. [Citation.] In this step, courts may ‘turn to secondary rules of interpretation, such as maxims of construction, “which serve as aids in the sense that they express familiar insights about conventional language usage.” ’ [Citation.] We may also look to the legislative history. [Citation.] ‘Both the legislative history of the statute and the wider historical circumstances of its enactment may be considered in ascertaining the legislative intent.’ [Citation.] [f] ‘If ambiguity remains after resort to secondary rules of construction and to the statute’s legislative history, then we must cautiously take the third and final step in the interpretive process. [Citation.] In this phase of the process, we apply “reason, practicality, and common sense to the language at hand.” [Citation.] Where an uncertainty exists, we must consider the consequences that will flow from a particular interpretation. [Citation.] Thus, “[i]n determining what the Legislature intended we are bound to consider not only the words used, but also other matters, ‘such as context, the object in view, the evils to be remedied, the history of the times and of legislation upon the same subject, public policy and contemporaneous construction.’ [Citation.]” [Citation.] These “other matters” can serve as important guides, because our search for the statute’s meaning is not merely an abstract exercise in semantics. To the contrary, courts seek to ascertain the intent of the Legislature for a reason—“to effectuate the purpose of the law.” ’ ” (Alejo, at pp. 787-788; see MacIsaac, supra, 134 Cal.App.4th at p. 1084.)

We do not necessarily engage in all three steps of the analysis. “It is only when the meaning of the words is not clear that courts are required to take a second step and refer to the legislative history.” (Soil v. Superior Court (1997) 55 Cal.App.4th 872, 875 [64 Cal.Rptr.2d 319]; accord, Sisemore v. Master Financial, Inc. (2007) 151 Cal.App.4th 1386, 1411 [60 Cal.Rptr.3d 719]; see MacIsaac, supra, 134 Cal.App.4th at p. 1084 [“[i]f ambiguity remains after resort to secondary rules of construction and to the statute’s legislative history, then we must cautiously take the third and final step in the interpretive process”].)

c. Step one: section 533.5 is not clear and unambiguous

Mt. Hawley argues that the “plain language of the statute ... is susceptible to only one, single, reasonable interpretation regarding the defense of criminal actions: that California law bars an insurance contract from providing for the defense of ‘any criminal action or proceeding.’ ” According to Mt. Hawley, “the statutory language used and enacted by the Legislature has plain meaning” and “[t]here is no need to refer to extrinsic aids to interpretation, specialized rules of grammar, or legislative history.”

In order for us to agree with Mt. Hawley, its proposed interpretation of section 533.5 must be not merely more reasonable than any other interpretation; Mt. Hawley’s proposed interpretation must be the only reasonable interpretation of section 533.5. (See Coalition of Concerned Communities, Inc. v. City of Los Angeles (2004) 34 Cal.4th 733, 737 [21 Cal.Rptr.3d 676, 101 P.3d 563] [“[i]f the statutory language permits more than one reasonable interpretation, courts may consider other aids, such as the statute’s purpose, legislative history, and public policy”]; accord, Bruns, supra, 51 Cal.4th at p. 724; see Jones v. Lodge at Torrey Pines Partnership (2008) 42 Cal.4th 1158, 1162-1163 [72 Cal.Rptr.3d 624, 177 P.3d 232] (Jones) [“statutory language is not plain” where its “language does lend itself to plaintiff’s interpretation, but . . . that is not the only reasonable interpretation of the statutory language”]; Chosak v. Alameda County Medical Center (2007) 153 Cal.App.4th 549, 561-562 [63 Cal.Rptr.3d 184] [where both plaintiffs and defendant’s proposed interpretations of statute were reasonable and “the statutory language can bear either meaning,” the court proceeded “to a more detailed consideration of’ the purpose and legislative history of the statute “to determine which of the proposed definitions best fits the intent of the Legislature in enacting the statute,” even though one side’s interpretation was “the most obvious” interpretation]; Ailanto Properties, Inc. v. City of Half Moon Bay (2006) 142 Cal.App.4th 572, 585-586 [48 Cal.Rptr.3d 340] (Ailanto Properties) [because plaintiff’s proposed interpretation of the statute was not “wholly unreasonable,” statute was ambiguous and court would “turn to the second step of our inquiry and look to the statute’s legislative history to clarify its meaning”].) Mt. Hawley’s interpretation, however, is not the only reasonable one.

There are at least three reasonable interpretations of the statute. One reasonable interpretation, advocated by Mt. Hawley, is that section 533.5, subdivision (b), addresses “two separate and distinct types of actions: any criminal action or proceeding (unqualified), or any action or proceeding brought pursuant to certain specific statutes in which the recovery of a fine, penalty or restitution is sought by certain state and local attorneys (as distinct from such actions brought by private parties).” Under this interpretation, “in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel” modifies “any action or proceeding brought pursuant to” the UCL or FAL, but not “any criminal action or proceeding.” This interpretation precludes insurers from providing a defense in any criminal action, including a criminal action bought by federal prosecutors.

Another reasonable interpretation, advocated by Lopez and adopted by the majority in Bodell, is that section 533.5, subdivision (b), applies to “any criminal action or proceeding” “in which the recovery of a fine, penalty, or restitution is sought by” the four California state and local public agencies listed in the statute, or to “any action or proceeding brought pursuant to [the UCL or the FAL] in which the recovery of a fine, penalty, or restitution is sought by” the four state and local public agencies. Under this interpretation, “in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel” modifies both “any criminal action or proceeding” and “any action or proceeding brought pursuant to [the UCL and FAL].” This interpretation precludes insurers from providing a defense in criminal or civil actions brought by the state and local agencies listed in the statute, but not in criminal or civil actions brought by federal prosecuting agencies.

Yet another reasonable interpretation, urged by neither Mt. Hawley at all nor by Lopez directly, is that section 533.5, subdivision (b), applies to “any claim” in either a criminal action or proceeding or a UCL or FAL action or proceeding “in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel.” Under this interpretation, “in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel” modifies “any claim,” whether the claim is part of a criminal, UCL, or FAL action or proceeding.

Thus, section 533.5, subdivision (b), is susceptible of at least these three reasonable interpretations. Even the dissenting judge in Bodell did not argue that the language of the statute is clear and unambiguous. (See Bodell, supra, 119 F.3d at pp. 1421-1422 (dis. opn. of Kozinski, J.).) Therefore, we cannot conclude that the language of the statute is clear and unambiguous, and we must proceed to the second step of the interpretive analysis and consider the purpose of the statute, the legislative history, and the secondary rules of interpretation.

It may be that at first glance Mt. Hawley’s proposed interpretation is more grammatically natural. Under the first step of the statutory interpretation analysis, however, that is not the test. The issue is whether Mt. Hawley’s proposed interpretation is the only reasonable interpretation. And because it is not, we proceed to step two. (See County of San Diego v. Alcoholic Beverage Control Appeals Bd. (2010) 184 Cal.App.4th 396, 401 [109 Cal.Rptr.3d 59] [“[w]hen the language is reasonably susceptible of more than one meaning, it is proper to examine a variety of extrinsic aids in an effort to discern the intended meaning,” including, “for example, the statutory scheme, the apparent purposes underlying the statute and the presence (or absence) of instructive legislative history”].)

d. Step two: the statute’s legislative history, the circumstances of its enactment, and maxims of construction

As have the few courts that have considered section 533.5, we now “ ‘proceed to the second step of the inquiry,’ ” looking to “ ‘the statute’s legislative history,’ ” which “can be very instructive.” (People v. Nelson (2011) 200 Cal.App.4th 1083, 1101 [132 Cal.Rptr.3d 856]; see Ailanto Properties, supra, 142 Cal.App.4th at p. 586 [“[i]n the second step of our interpretive inquiry, we examine the entire history of the Legislature’s enactment and amendment of the statute”].) If a statute “is susceptible of multiple interpretations ... we will divine the statute’s meaning by turning to a variety of extrinsic sources, including the legislative history [citation], the nature of the overall statutory scheme [citation], and consideration of the sorts of problems the Legislature was attempting to solve when it enacted the statute [citation].” (Clayworth v. Pfizer, Inc. (2010) 49 Cal.4th 758, 770 [111 Cal.Rptr.3d 666, 233 P.3d 1066].) In addition, an “examination of the original text of the statute and the evolution of the language” of a statute that has been amended is “useful in ascertaining its current meaning.” (Ailanto Properties, at p. 586.)

i. Legislative history

We look to the Legislative Counsel’s Digest and other summaries and reports indicating the Legislature’s intent. “Although the Legislative Counsel’s summary digests are not binding [citation], they are entitled to great weight.” (Van Horn v. Watson (2008) 45 Cal.4th 322, 332, fn. 11 [86 Cal.Rptr.3d 350, 197 P.3d 164]; accord, Jones, supra, 42 Cal.4th at p. 1170; see People v. Superior Court (Lavi) (1993) 4 Cal.4th 1164, 1178 [17 Cal.Rptr.2d 815, 847 P.2d 1031] [Legis. Counsel’s Dig. is indicative of legislative intent.]; Martin v. PacifiCare of California (2011) 198 Cal.App.4th 1390, 1402 [130 Cal.Rptr.3d 714].) The Legislative Counsel’s Digest “constitutes the official summary of the legal effect of the bill and is relied upon by the Legislature throughout the legislative process,” and thus “is recognized as a primary indication of legislative intent.” (Souvannarath v. Hadden (2002) 95 Cal.App.4th 1115, 1126, fn. 9 [116 Cal.Rptr.2d 7].) In addition, “[c]ommittee reports are often useful in determining the Legislature’s intent.” (California Teachers Assn. v. Governing Bd. of Rialto Unified School Dist. (1997) 14 Cal.4th 627, 646 [59 Cal.Rptr.2d 671, 927 P.2d 1175]; see Tesco Controls, Inc. v. Monterey Mechanical Co. (2004) 124 Cal.App.4th 780, 793 [21 Cal.Rptr.3d 751].) “In construing a statute, legislative committee reports, bill reports, and other legislative records are appropriate sources from which legislative intent may be ascertained.” (In re John S. (2001) 88 Cal.App.4th 1140, 1144, fn. 2 [106 Cal.Rptr.2d 476]; see Valley Vista Services, Inc. v. City of Monterey Park (2004) 118 Cal.App.4th 881, 889 [13 Cal.Rptr.3d 433] [“[w]hen construing a statute, we may consider its legislative history, including committee and bill reports, and other legislative records”].) “Relevant material includes: legislative committee reports [citation]; Legislative Analyst’s reports [citation]; and testimony or argument to either a house of the Legislature or one of its committees,” but “[m]aterial showing the motive or understanding of an individual legislator, including the bill’s author, his or her staff, or other interested persons, is generally not considered.” (Metropolitan Water Dist. v. Imperial Irrigation Dist. (2000) 80 Cal.App.4th 1403, 1425-1426 [96 Cal.Rptr.2d 314].)

(A) The 1988 enactment of section 533.5

The legislative history of section 533.5 reveals two unmistakable and undisputed facts about the 1988 statute. First, the Legislature intended the statute to apply equally to civil and criminal actions brought by the three (at the time) listed state and local public entities that seek to recover a fine, penalty or restitution, and not to actions brought by federal agencies. As originally enacted in 1988, section 533.5, subdivision (b), applied to “any claim in any civil or criminal action or proceeding in which the recovery of a fine, penalty, or restitution is sought by” the Attorney General, a district attorney, or a city prosecutor. The Legislative Counsel’s Digest states that Assembly Bill No. 3920 (1987-1988 Reg. Sess.) (Assembly Bill 3920), the bill that would become section 533.5, “would prohibit insurance coverage or indemnity for the payment of any fine, penalty, or restitution in any civil or criminal action or proceeding brought by specified law enforcement entities . . . .” (Legis. Counsel’s Dig., Assem. Bill 3920 (1987-1988 Reg. Sess.) 4 Stats. 1988, Summary Dig., p. 149.)

Committee analyses and reports confirm the Legislative Counsel’s understanding. (See Ailanto Properties, supra, 142 Cal.App.4th at pp. 589-590.) An analysis for the Assembly Committee on Finance and Insurance stated that Assembly Bill 3920 would prohibit “any policy of insurance providing, or being construed to provide, coverage or indemnity for the payment of fine, penalty, or restitution in any civil or criminal action brought by the Attorney General, district attorney, or city attorney regardless of what the policy says.” (Assem. Com. on Finance and Insurance, Analysis of Assem. Bill 3920 (1987-1988 Reg. Sess.) Apr. 19, 1988, p. 1.) The bill also would prohibit “any insurance policy from providing, or being construed to provide, any duty to defend any claim” “in any civil or criminal action brought by” the three specified public entities. (Ibid.) Thus, as the Supreme Court noted in 1990, the original version of section 533.5 “on its face . . . [did] not apply to relief sought by the federal government. .. .” (AIU Ins. Co. v. Superior Court, supra, 51 Cal.3d at p. 837, fn. 15, original italics; see Bank of the West, supra, 2 Cal.4th at p. 1271.)

Second, the Legislature enacted section 533.5 to address a problem the Attorney General had encountered (only) in UCL and FAL actions and to address a specific problem that public entities were experiencing when they brought unfair competition or false advertising actions, whether civil or criminal, against individuals and businesses. According to the Attorney General, the bill’s sponsor and principal supporter, section 533.5 was intended to facilitate “the consumer protection activities of our office and local district attorneys and city attorneys.” (See Catlin v. Superior Court (2011) 51 Cal.4th 300, 305-306 [120 Cal.Rptr.3d 135, 245 P.3d 860] [considering a letter to Senate and Assembly Committees on Public Safety expressing the Attorney General’s concerns about proposed legislation as part of the legislative history].)

The Attorney General argued to the Assembly Committee on Finance and Insurance that the proposed new law would address “a problem which arises under current law when the Attorney General or a district attorney seeks to enforce [the UCL and FAL],” because “[i]n many instances” the defendants were claiming “that the conduct involved is covered by their business insurance policy.” (Office of Atty. Gen., Statement on Assem. Bill 3920 before Assem. Com. on Finance and Insurance (1989-1990 Reg. Sess.) Apr. 19, 1988 (Attorney General Statement).) The Attorney General complained that defendants “tendered the defense of the action[s] to insurers whose policies provide general liability coverage which may include coverage for advertising and unfair competition claims.” (Office of Atty. Gen., Bill Proposal, Summary of Assem. Bill 3920 (1989-1990 Reg. Sess.) (undated) p. 1.) The public entity then found itself litigating with an insurance company, “rather than the individual whose conduct violated provisions of the Business & Professions Code,” a practice that made “no public policy sense.” (Atty. Gen. Statement.) These cases became “impossible to settle because the defendants refuse[d] to make restitution of unlawfully obtained property or to pay any civil penalty out of their own funds,” and law enforcement agencies would not accept any settlement “paid by the insurer because such a settlement does not impose any penalty for unlawful conduct directly on the defendant and permits the defendant to retain the ill-gotten gains .... H] As a result, the cases consume a large measure of prosecutorial resources during extensive litigation financed without cost to the defendant by the insurer which should have no obligation to pay the judgment ultimately awarded.” (Office of Atty. Gen., Bill Proposal, Summary of Assem. Bill 3920, supra, at p. 1.) For this reason, the Attorney General proposed and urged the Legislature to enact section 533.5 “ ‘to hold individuals personally accountable for behavior [that] constitutes an unfair business practice or false and misleading advertising,” in order to avoid “the litigation becoming] a contest between the public entity and the insurance company in which the involvement of the person whose conduct is at issue is almost negligible.’ ” (Assem. Com. on Finance and Insurance, Analysis of Assem. Bill 3920, supra, at p. 2.)

The Attorney General also argued to the Assembly Committee on Finance and Insurance and the Senate Insurance Committee that “[m]ost businesses purchase insurance to protect against losses arising from the operation of the business. Although existing law expressly prohibits insurance for losses incurred as a result of an insured’s willful misconduct, the Attorney General’s office frequently encounters problems enforcing [the UCL and FAL] because business defendants claim that the conduct involved is covered by their business insurance policies. If there is any ambiguity as to the potential liability of the insurance company, and there often is because there is no statute expressly dealing with this issue, the insurance company is obligated to defend the business. [][]... [f] Instead of individual accountability, the litigation becomes a contest between the public entity and the insurance company in which the involvement of the person whose conduct is at issue is almost negligible.” (Office of Atty. Gen., letters to Assemblyman Patrick Johnston, Chair of the Assem. Com. on Finance and Insurance, and Senator Alan Robbins, Chair of the Sen. Insurance Com., regarding Assem. Bill 3920, Apr. 12, 1988, at pp. 1-2.) The Attorney General explained that “[c]ases brought under [the UCL and FAL] do not involve the private victim’s right to compensation for losses. Rather, the public entities are seeking civil and/or criminal penalties, fines, and perhaps restitution as well. No legitimate public purpose is served by allowing such fines and penalties to be paid by insurance companies; nor is there any valid purpose served by forcing insurance companies to provide defenses in such cases solely because the insurance policy coverage is ambiguous.” (Id. at p. 2.)

(B) The 1990 amendment

In 1990 the Legislature amended section 533.5, subdivision (b), by enacting what was referred to as a “clean-up bill” from the Attorney General, Assembly Bill No. 3334 (1989-1990 Reg. Sess.) (Assembly Bill 3334). The legislative history reveals two unmistakable and undisputed facts about the 1990 amendment.

First, the legislative history makes clear that the Legislature did not intend the 1990 amendment to the statute to expand the reach of section 533.5, subdivision (b). The Legislative Counsel’s Digest stated that the bill to amend section 533.5 was designed to “restrict the civil actions to which those limitations apply” (Legis. Counsel’s Dig., Assem. Bill 3334 (1989-1990 Reg. Sess.) 5 Stats. 1990, Summary Dig., p. 613.) The Assembly Committee on Finance and Insurance analysis stated that Assem. Bill 3334, “like its 1988 predecessor, is sponsored by the Attorney General, to reinforce the notion that person[s] violating our unfair competition and unfair advertising law may not use their insurance coverage to evade the personal consequences of wrongdoing. This proposition is not in controversy.” (Assembly Com. on Finance and Insurance, Analysis of Assem. Bill 3334 (1989-1990 Reg. Sess.) Apr. 17, 1990, p. 1.) The committee analysis stated that the amendment “seeks to conform current law to its originally declared purpose while avoiding any adverse effect, one way or another, upon other issues of insurance contract coverage.” (Id. at p. 2.) There is nothing in the legislative history indicating that the Legislature intended to expand the scope of the statute. (See Donovan v. Poway Unified School Dist. (2008) 167 Cal.App.4th 567, 597 [84 Cal.Rptr.3d 285] [“the absence of legislative history [can] be of significance in deciphering legislative intent”], citing Jones, supra, 42 Cal.4th at p. 1169; Starving Students, Inc. v. Department of Industrial Relations (2005) 125 Cal.App.4th 1357, 1363 [23 Cal.Rptr.3d 583] [court can consider “the presence (or absence) of instructive legislative history”].)

Second, the Legislature intended the 1990 amendment to address a specific problem that state and local public entities had encountered arising from insurance companies’ use of section 533.5, subdivision (b), to avoid paying for environmental cleanup costs. The new problem arose because of “the use of the overbroad civil action reference,” which created “other insurance coverage issues . . . which were not remotely considered by the Legislature in connection with the 1988 legislation . . . .” (Assem. Com. on Finance and Insurance, Analysis of Assem. Bill 3334, supra, at p. 2.) This coverage issue arose because insurers were arguing in court that section 533.5 precluded and excused them from providing coverage under a “Comprehensive General Liability Policy for the cost of toxic waste cleanup when a business is sued by the state or federal government . . . .” (Assem. Com. on Finance and Insurance, Analysis of Assem. Bill 3334, at p. 2.) As the Assembly Committee on Finance and Insurance Republican Analysis, explained, the original statute “prohibited insurers from paying for fines arising from unfair business practices. Since then it has been interpreted to prevent insurers to cover [si'c] certain toxics costs. That was never the author’s or the sponsor’s intent. This bill clarifies that.” (Assem. Com. on Finance and Insurance, Republican Analysis of Assem. Bill No. 3334 (1989-1990 Reg. Sess.) Apr. 10, 1990.)

The Attorney General, who proposed the 1990 amendment as he had the original 1988 legislation, argued to the Assembly Committee on Finance and Insurance that “Insurance Code section 533.5 was proposed due to the concerns about insurance companies being involved, on behalf of insured businesses, in the defense and settlement of cases brought under the unfair competition and false advertising statutes.” (Office of Atty. Gen., letter to Assemblyman Patrick Johnston, Chair of the Assem. Com. on Finance and Insurance, regarding Assem. Bill 3334, Apr. 10, 1990, p. 1.) The problem in 1988, the Attorney General noted, was that “businesses were unwilling to pay penalties or restitution to defrauded customers out of their own funds, as long as they had . . . pending claims against insurance companies,” which meant that “unfair competition and false advertising cases were dragging out and consuming a large measure of prosecutorial resources.” (Ibid.) The Attorney General explained that, to resolve these problems, the Legislature enacted section 533.5, which “prohibits insurance coverage for fines, penalties, and restitution in any civil or criminal action brought by the Attorney General, district attorneys, and city attorneys.” (Office of the Atty. Gen., letter to Assemblyman Patrick Johnston, supra, at p. 1.)

In the area of environmental cleanup costs, however, insurers were taking the position “that state agencies are precluded from arguing that damages within the meaning of the typical liability policy include environmental clean up costs because such costs are in the nature of equitable restitution.” (Office of Atty. Gen., letter to Assemblyman Patrick Johnston, Chair of the Assem. Com. on Finance and Insurance, regarding Assem. Bill 3334, supra, at p. 2.) Thus, insurance companies were interpreting “restitution more broadly in order to restrict their liability” for environmental cleanup costs. (Ibid.) This was not the intent of the original statute, and the Attorney General argued that “AB 3334 would clarify the original intent” of section 533.5 and “preserve the potential of maximizing recovery of public funds expended pursuant to statutory programs, such as the superfund regarding release of hazardous substances into the environment . . . .” (Office of Atty. Gen., letter to Assemblyman Patrick Johnston, supra, at p. 2.)

The Assembly Committee on Finance and Insurance also considered a lengthy memorandum from the environmental section of the Attorney General’s Office, entitled “Bill Proposal: Hazardous Waste Insurance.” (See People v. Cruz (1996) 13 Cal.4th 764, 773, fn. 5 [55 Cal.Rptr.2d 117, 919 P.2d 731] [“it is reasonable to infer that those who actually voted on the proposed measure read and considered the materials presented in explanation of it, and that the materials therefore provide some indication of how the measure was understood at the time by those who voted to enact it”].) This memorandum stated that “section 533.5 . . . prohibits insurance coverage for fines, penalties and restitution in any civil or criminal action brought [by] the Attorney General, district attorneys and city attorneys. The Environmental Section proposes an amendment to clarify that section 533.5 is directed at criminal actions and civil law enforcement actions brought under [the UCL and FAL] and does not apply to actions filed under state and federal hazardous substance and hazardous waste control laws.” (Office of Atty. Gen., Bill Proposal; Hazardous Waste Insurance, Assem. Bill No. 3334 (1989-1990 Reg. Sess.) (undated) p. 1.) The Attorney General noted that “[t]he problem at hand is that Insurance Code section 533.5 was not intended to address the currently active issue of toxic pollution insurance coverage, yet the statute has played, and undoubtedly will continue to play[,] a role in resolving the coverage question.” (Id. at p. 2.)

Thus, the use of the broad term “any civil action” in the 1988 statute was the problem because it covered more than just UCL and FAL civil actions. As the Attorney General noted, section 533.5 as originally drafted was “too broad, in that it affects many more regulatory activities than consumer protection” (Office of the Atty. Gen.,.Bill Proposal Summary, supra, at p. 4.) The statute was supposed to solve a narrow problem in UCL and FAL actions brought by state and local agencies, but it created problems in other kinds of cases. As a result, the Legislature amended the statute so that the prohibition on providing a duty to defend applied to UCL and FAL actions, rather than all civil actions, which insurers were arguing included environmental cleanup actions. As the analysis of Assembly Bill 3334 from the Assembly Committee on Finance and Insurance explained, the amendment “deletes the general references to civil actions in the 1988 Insurance Code amendments and, instead, substitutes more specific references to proceedings brought pursuant to those portions of the Business and Professions Code governing unfair competition and unfair advertising.” (Assem. Com. on Finance and Insurance, Analysis of Assem. Bill 3334, supra, at p. 2.)

Of course, as is often the case with legislative histories, the legislative history of Assembly Bill 3334 is not always entirely consistent. For example, an analysis prepared for the Senate Committee on Insurance, Claims and Corporations stated that the bill “clarifies that the prohibition against insurance to provide coverage or indemnity for the payment of any fine, penalty or restitution shall apply only to proceedings pertaining to unfair business practices or false or misleading advertisements rather than all civil actions, in addition to criminal actions.” (Sen. Insurance, Claims and Corporations Com., Analysis of Assem. Bill 3334 (1989-1990 Reg. Sess.) Aug. 8, 1990, p. 1.) This fragment of the legislative history can be read to support Mt. Hawley’s position that the 1990 amendment revised section 533.5 to bar insurers from providing a defense in (1) UCL and FAL actions seeking to recover a fine, penalty, or restitution, and (2) criminal actions. As explained above, however, the vast majority of the amendment’s legislative history and the circumstances of its enactment do not support this interpretation. Indeed, the Senate Committee analysis went on to state that the amendment “is needed to avoid any adverse [ejffects that may result as a misinterpretation of the unintended broad reference to ‘any civil action.’ ” (Sen. Insurance, Claims and Corporations Com., Analysis of Assem. Bill 3334, supra, at p. 2.) The committee analysis also did not discuss the issue of what agency (state or federal) was bringing the action.

Mt. Hawley relies heavily on section 2 of Assembly Bill 3334, which states that the Legislature’s intent in 1988 in enacting section 533.5 was that it “shall be applicable to insurance coverage and to the duty to defend only in criminal actions and in actions or proceedings brought by the Attorney General, any district attorney, or any city prosecutor, pursuant to [the UCL and the FAL].” (Assem. Bill 3334; Stats. 1990, ch. 1512, § 2, p. 2.) This statement suggests that the statute applies to (1) criminal actions and (2) civil actions under the UCL and FAL, as Mt. Hawley contends. This declaration in 1990 of what the Legislature had intended in 1988 is relevant to our inquiry but it is not binding. (See Apple Inc. v. Superior Court (2013) 56 Cal.4th 128, 145 [151 Cal.Rptr.3d 841, 292 P.3d 883] [“ ‘[t]he declaration of a later Legislature is of little weight in determining the relevant intent of the Legislature that enacted the law’ ”]; McClung v. Employment Development Dept. (2004) 34 Cal.4th 467, 473 [20 Cal.Rptr.3d 428, 99P.3d 1015] [“ ‘a legislative declaration of an existing statute’s meaning’ is but a factor for a court to consider and ‘is neither binding nor conclusive in construing the statute’ ”].) “Ultimately, the interpretation of a statute is an exercise of the judicial power the Constitution assigns to the courts.” (Western Security Bank v. Superior Court (1997) 15 Cal.4th 232, 244 [62 Cal.Rptr.2d 243, 933 P.2d 507] (Western Security Bank); see In re Retirement Cases (2003) 110 Cal.App.4th 426, 480 [1 Cal.Rptr.3d 790] [Legislature “has no legislative authority simply to say what it did mean,” but “[c]ourts do take cognizance of such declarations when they are consistent with the original intent”].) In any event, it is undisputed that section 533.5, subdivision (b), as originally enacted in 1988, unambiguously applied only to actions brought by state and local agencies, and not to actions brought by federal agencies.

Moreover, there are other indications in the 1990 legislative record confirming that the Legislature had intended in 1988 that the original statute apply to civil or criminal actions brought by the three named state and local public entities that seek to recover a fine, penalty or restitution. (See Ailanto Properties, supra, 142 Cal.App.4th at p. 589, fn. 13 [“[w]e may properly rely on the legislative history of subsequent enactments to clarify the Legislature’s intent regarding an earlier enacted statute,” and, while the concept of “ ‘subsequent legislative history’ may seem oxymoronic, it is well established that ‘the Legislature’s expressed views on the prior import of its statutes are entitled to due consideration, and we cannot disregard them’ ”], quoting Western Security Bank, supra, 15 Cal.4th at p. 244; City of Long Beach v. California Citizens for Neighborhood Empowerment (2003) 111 Cal.App.4th 302, 307, fn. 6 [3 Cal.Rptr.3d 473] [“ ‘[although a legislative expression of the intent of an earlier act is not binding upon the courts in their construction of the prior act, that expression may properly be considered together with other factors in arriving at the true legislative intent existing when the prior act was passed’ ”], quoting Eu v. Chacon (1976) 16 Cal.3d 465, 470 [128 Cal.Rptr. 1, 546 P.2d 289].) For example, the Legislative Counsel’s Digest for Assembly Bill 3334 stated that under “[e]xisting law ... no policy of insurance shall provide any [duty to defend] any civil or criminal action or proceeding brought by the Attorney General, any district attorney, or any city prosecutor” for “the payment-of any fine, penalty, or restitution.” (Legis. Counsel’s Dig., Assem. Bill 3334, supra, 5 Stats. 1990, Summary Dig., at p. 613.) An analysis prepared for the Assembly Committee on Finance and Insurance stated that “California law, enacted by the adoption of Assembly Bill 3920 (Johnston) in 1988[,] provides that no policy of insurance shall provide coverage or indemnity for the payment of any fine, penalty, or restitution in any civil or criminal action brought by the Attorney General, any district attorney, or any city prosecutor . . . .” (Assembly Com. on Finance and Insurance, Analysis of Assem. Bill 3334, supra, at p. 1.) The committee analysis also confirmed that the purpose of Assembly Bill 3920 in 1988 “was to ‘hold individuals personally accountable for behavior which constitutes an unfair business practice or false and misleading advertising.’ ” (Assem. Com. on Finance and Insurance, supra, at p. 1.)

These declarations and statements of prior legislative intent are relevant to our inquiry, but no individual expression is determinative. Section 2 of Assem. Bill 3334 does not, as Mt. Hawley argues, definitively prove that the Legislature intended (in 1988 or 1990) that “the list of attorneys who are prosecuting an action modifies only those civil actions brought pursuant to the UCL and the [FAL],” and not criminal actions. The entirety of the legislative history and purpose of the statute show that the Legislature enacted section 533.5 in 1988 to address actions brought by state and local agencies, and then amended section 533.5 in 1990 to limit—not expand—the application of the statute.

(C) The 1991 amendment

In 1991 the Legislature again amended section 533.5, subdivision (b), as part of Senate Bill No. 709 (1990-1991 Reg. Sess.) (Senate Bill 709). Senate Bill 709, sponsored by the County of San Bernardino, made a relatively minor change in the UCL by adding county counsel to the list of public entities that can bring UCL actions. The Legislative Counsel’s Digest states that the bill would allow “a county counsel authorized by agreement with the district attorney in actions involving violation of a county ordinance to prosecute an action for injunction to enjoin unfair competition.” (Legis. Counsel’s Dig., Sen. Bill 709 (1991-1992 Reg. Sess.) 4 Stat. 1991, Summary Dig., p. 560.) The Legislative Counsel’s Digest also states that the bill would authorize the county to collect any fine recovered in such an action brought by a county counsel. (Ibid.) Although Senate Bill 709 was primarily about amending the UCL, the last section of the bill added county counsel to the group of public entities listed in section 533.5, subdivision (b). (Sen. Bill 709, §4.)

Most of the legislative history of Senate Bill 709 concerns the issue of adding county counsel to the list of public entities that can bring UCL actions. An analysis of the bill prepared for the Senate Committee on Judiciary explains that the bill “would provide that in addition to the Attorney General, the district attorney and the city attorney, any county counsel can bring an action for any violation of, or an injunction pursuant to, specified provisions [of the Unfair Trade Practices Act].” (Sen. Com. on Judiciary, Analysis of Sen. Bill 709 (1990-1991 Reg. Sess.) May 14, 1991, p. 2.) This analysis contains one of the few references in the legislative history of Senate Bill 709 to section 533.5 and confirms that section 533.5, subdivision (b), applies to UCL actions brought by state and local agencies: “Existing law also provides that no policy of insurance shall provide, or be construed to provide^] coverage or indemnity of the payment of any fine, penalty, or restitution in any action brought under unfair competition laws brought by the Attorney General, any district attorney and city attorney.” (Sen. Com. on Judiciary, supra, May 14, 1991, at p. 2.) There is no indication in the legislative history that the Legislature intended in 1991 to preclude insurers from providing a defense in federal criminal actions, or for that matter in any actions other than UCL and FAL actions brought by state and local public entities.

(D) The takeaway

The legislative history of the original 1988 statute and the 1990 and 1991 amendments makes it clear that the purpose of the statute, the circumstances of its enactment, and the Legislature’s goal in enacting the statute, were to preclude insurers from providing a defense in civil and criminal UCL and FAL actions brought by the Attorney General, district attorneys, city attorneys, and (later) county counsel. It is undisputed that the original version of section 533.5, subdivision (b), applied only to criminal and civil actions brought by the Attorney General, a district attorney, or a city attorney seeking the recovery of a fine, penalty, or restitution, and not to actions brought by federal agencies. Although the original version of section 533.5, subdivision (b), did not specifically mention UCL and FAL claims, the Legislature enacted the original statute to address UCL and FAL actions. It was in response to a perceived defect in the wording of the original statute, which allowed insurers to use the statute as a defense in environmental cleanup cases, that the Legislature in 1990 amended the statute to make it clear that the prohibition on providing a defense applied only in UCL and FAL cases brought by the three (and in 1991 four) named state and local agencies. At no time did the Legislature ever intend section 533.5, subdivision (b), to apply to actions other than UCL and FAL actions brought by state and local agencies. At no time did the Legislature ever intend section 533.5, subdivision (b), to apply to criminal actions brought by public entities other than the three and then four enumerated state and local agencies, such as criminal actions brought by the federal prosecuting authorities.

Mt. Hawley’s primary argument on the issue of legislative intent is that “there is no indication that the Legislature intended to distinguish federal from state criminal prosecutions and to permit an insurer-funded defense or indemnity for federal [crimes] while barring it for those brought by the State.” As Lopez concedes, Mt. Hawley is correct: there is nothing in the legislative history suggesting that the Legislature intended or was even thinking about a distinction between state and federal criminal actions and proceedings. (See People v. Taylor (2007) 157 Cal.App.4th 433, 439 [68 Cal.Rptr.3d 682] [noting that the “absence from the legislative history” of a distinction “supports our conclusion that no distinction was intended by the Legislature”].) But that is because the Legislature was thinking about UCL and FAL actions and proceedings, which only state and local agencies bring. As Lopez correctly argues, “[b]ecause federal prosecutors do not enforce the UCL, the Legislature had no reason to include them within the statute’s ambit,” and there was no need to distinguish or even consider actions brought by federal prosecutors. The Attorney General’s expressed concern that UCL and FAL cases were consuming “a large measure of prosecutorial resources” was a concern about state resources, not federal resources. (Office of Atty. Gen., Bill Proposal Summary of Assem. Bill 3920, supra, at p. 1.) Indeed, the absence of any discussion regarding, concern about, or mention of federal prosecutions supports Lopez’s position that the Legislature intended the original statute and the two amendments to apply only to criminal or civil UCL actions brought by the listed state and local agencies. As the Supreme Court stated in Van Horn v. Watson, supra, 45 Cal.4th 322, “one would expect that, had the Legislature intended to alter the scope of’ a statute, “some mention of its intent would have made it into the legislative history. The absence of any such discussion suggests the Legislature did not so intend.” (Id. at p. 332, fn. 12.)

ii. Maxims of construction

As noted above, section 533.5, subdivision (b), precludes an insurer from defending “any claim in any criminal action or proceeding or in any action or proceeding brought pursuant to [the UCL or the FAL] in which the recovery of a fine, penalty, or restitution is sought by the Attorney General, any district attorney, any city prosecutor, or any county counsel.” Mt. Hawley argues that the “plain grammatical structure” of section 533.5, subdivision (b), “compels the conclusion that the list of lawyers contained within the second ‘in any’ prepositional phrase qualifies only those types of actions described within that phrase,” because of the “or” between “criminal action or proceeding” and “any action or proceeding brought pursuant to” the UCL or FAL.

Such grammatical and interpretive aids are important tools, but they are only tools. “The rules of grammar and canons of construction are but tools, ‘guides to help courts determine likely legislative