American Auto. Ins. Co. v. Republic Indem. Co. of America
| Decision Date | 08 July 1959 |
| Citation | 341 P.2d 675,52 Cal.2d 507 |
| Court | California Supreme Court |
| Parties | AMERICAN AUTOMOBILE INSURANCE COMPANY (a Corporation), Respondent, v. REPUBLIC INDEMNITY COMPANY OF AMERICA (a Corporation) Appellant. L.A. 25367. |
Wyman & Finell and Marvin Finell, Beverly Hills, for appellant.
Bledsoe, Smith, Cathcart, Johnson & Phelps and Wilbur J. Russ, San Francisco, amici curiae on behalf of appellant.
Parker, Stanbury, Reese & McGee and Raymond G. Stanbury, Los Angeles, for respondent.
Weinstock, Anderson, Maloney & Chase, San Francisco, amici curiae on behalf of respondent.
This is an appeal from a declaratory judgment determining the obligations of two insurance companies whose policies, respectively, were issued to the driver and the owner of an automobile involved in an accident. On March 27, 1956, John M. Steinberg, who was insured by American Automobile Insurance Company, was driving a car which, as a customer, he had borrowed from Max Barish, Inc., an automobile dealer and garage company insured by Republic Indemnity Company of America. The persons injured in the accident recovered by stipulation a judgment of $5,000 against both the driver and the owner of the car.
The limits of each of the two policies are sufficient to cover the loss. The policy issued by Republic to the owner provides in its body for extension of coverage to any person using an automobile of the owner with permission, but affixed to the policy is Special Endorsement No. 4 which provides: 'It is agreed that, with respect to any automobile used with the permission of the named insured by a customer of the named insured, such insurance as is provided by the policy applies only to the named insured.' The policy issued by American to the driver insures him when using the automobile of another with permission. Both policies contain clauses to the effect that if the insured has other insurance covering the loss the company shall not be liable for a greater proportion of the loss than the limit recited in the policy bears to the applicable limit of all valid and collectible insurance against the loss, but that with respect to coverage for the driving of a car not owned by the insured the insurance under the policy shall be excess over any other valid and collectible insurance. 1
The trial court concluded that Special Endorsement No. 4 was contrary to public policy and invalid, that Republic's policy covered the driver as an additional insured and provided primary insurance whereas the policy issued by American provided excess insurance only, and that Republic was obligated to satisfy the whole judgment without being subrogated to any right of the owner against the driver. Republic has appealed from this judgment.
The conclusion that Special Endorsement No. 4 is invalid is supported by Wildman v. Government Employees' Ins. Co., 48 Cal.2d 31, 37-40, 307 P.2d 359. In that case the court held that an endorsement which restricted the coverage of an automobile liability insurance policy to accidents occurring when the car was being driven by the named insured or members of his immediate family was contrary to the public policy expressed in sections 402 and 415 of the Vehicle Code and therefore invalid. 2 It was expressly held that section 415 as it then read must be considered part of every automobile liability insurance policy. The section specifically required coverage of any person using the car with permission as well as coverage of the named insured, and it follows that Special Endorsement No. 4, which purports to exclude coverage of a customer of the owner, is invalid under the rule of the Wildman case. The fact that here, unlike the situation presented in that case, the injured persons were afforded protection by the coverage of the derivative liability of the owner and by the policy carried by the driver is immaterial because the operation of section 415 was not limited to the situation where the injured persons were not protected by other insurance.
Republic urges us to reconsider the Wildman case in view of an amendment of section 415 enacted in 1957 after the date of that decision. 3 The new legislation, according to Republic, was intended to clarify the meaning of the section by showing that the requirements there set forth were not a necessary part of every automobile liability policy. The 1957 enactment does not affect the present case or the correctness of our holding in the Wildman case. The amendment is not retroactive and therefore has no direct application to the accident involved here, which took place prior to 1957. It makes a material change in the phraseology of the section, and such a change is ordinarily viewed as showing an intention on the part of the Legislature to change the meaning of the provision rather than interpret it. Whitley v. Superior Court, 18 Cal.2d 75, 79, 113 P.2d 449; In re Estate of Todd, 17 Cal.2d 270, 274-275, 109 P.2d 913.
Since Special Endorsement No. 4 of Republic's policy must be disregarded, Steinberg, who was driving the automobile, was an additional insured under the terms of the policy issued by Republic to the owner. Thus the policies of both insurers covered the driver's liability, and each insurer would have been obligated to satisfy the whole judgment against Steinberg if the other insurance had not existed. The next question is whether the loss must be borne by one of the two insurers or apportioned between them.
The language of the 'other insurance' clauses contained in both policies is substantially the same. The clauses consist of two parts; the first provides generally for prorating where there is other insurance covering the loss, and the second provides, as a specific exception, that when the named insured is driving a car not owned by him the insurance will be excess over all other insurance. Because American's named insured, Steinberg, was driving another person's car, American's insurance falls within the exception specified in its policy if the insurance of Republic is treated as other insurance. On the other hand, Republic's insurance comes under the prorate provision in its policy if American's insurance is treated as other insurance. 4
Where 'other insurance' clauses of this type appear in the automobile liability policies of both the driver and the owner, the cases have generally given effect to the excess...
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