Baker v. Liberty Mut. Ins. Co., 97-15781

• Decision Date: 12 May 1998
• Docket Number: No. 97-15781,97-15781
• Parties: 98 Cal. Daily Op. Serv. 3592, 98 Daily Journal D.A.R. 4948 Paul BAKER; Heidi Baker, Plaintiffs-Appellants, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

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143 F.3d 1260 98 Cal. Daily Op. Serv. 3592, 98 Daily Journal
D.A.R. 4948 Paul BAKER; Heidi Baker, Plaintiffs-Appellants,
v.
LIBERTY MUTUAL INSURANCE COMPANY, Defendant-Appellee. No. 97-15781. United States Court of Appeals,
Ninth Circuit. Argued and Submitted March 12, 1998.
Decided May 12, 1998.

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Dennis John Woodruff, Ellen Lake, Oakland, CA, for plaintiffs-appellants.

Lisa M. Kralik, Ronald J. Skocypec, Kern and Wooley LLP, Los Angeles, CA, for defendant-appellee.

Appeal from the United States District Court for the Eastern District of California; Lawrence K. Karlton, Chief Judge, Presiding. D.C. No. CV-96-01659-LKK.

Before: SNEED, WOOD, ^* and O'SCANNLAIN, Circuit Judges.

OPINION

SNEED, Circuit Judge:

Paul and Heidi Baker, whose son died when the car in which he was a passenger hit a tree, appeal the district court's summary judgment in favor of Liberty Mutual Insurance, which had issued an insurance policy on the car. The car was driven and the accident caused by 15-year-old Yasha Lowe, a friend of the daughter of John Medeiros, who rented the car from Shasta Ford-Mercury. The Bakers argue that, under California law, Yasha Lowe was a "permissive user" of the car, and as a result is covered under the Liberty Mutual policy. They also argue that irrespective of whether Yasha Lowe was covered under the policy, Liberty Mutual breached

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its good faith duty to defend the girl in a wrongful death action filed by the Bakers.

We hold that Shasta Ford-Mercury did not grant implied permission for Yasha Lowe to use the car, and that therefore she can not be considered a "permissive user." Moreover, Liberty Mutual did not violate any duty to defend. Accordingly, we affirm the district court's grant of summary judgment.

I.

FACTUAL AND PROCEDURAL BACKGROUND

On August 30, 1995, Shasta Ford-Mercury ("Shasta"), a car dealer and repair shop in Dunsmuir, California, loaned a 1994 Mercury Topaz to John Medeiros, for use while his personal car was undergoing repairs. The car was insured by a liability policy issued by appellee Liberty Mutual Insurance Company ("Liberty Mutual").

Medeiros signed a single sheet, two-sided rental agreement provided by Shasta. On "page 2," the side he signed, the contract stated that "only the below named persons are authorized as additional drivers. If none, print 'none' across this section and have signed by customer." In that space, a Shasta employee wrote John Medeiros's name, although Medeiros did not actually sign his name under the additional drivers heading.

On the other side of the contract, labeled "page 1," there is a lengthy list of restrictions and conditions. The first paragraph stipulates that

[i]n no event shall the vehicle be used, operated or driven by any person other than the Customer or a qualified licensed driver at least 21 years of age who has Customer's advance permission and is one of the following: a person whose name(s) appear on page 2 hereof, the Customer's spouse, the Customer's employer or co-worker if they are engaged in business activity with the customer.

The following paragraph also states, under the heading "Prohibited use," that "[t]he vehicle shall not be used, operated or driven by anyone ... who is other than an authorized driver."

Medeiros asserts that the Shasta employee who gave him the Topaz told him only that he had to sign "some kind of paper ... for their liability so they were covered as far as their insurance goes." Medeiros says that the employee told him he did not need to read the contract, and was in a hurry to get him "out the door." He claims he did not read the contract, and was not given a copy. Liberty Mutual does not dispute that the Shasta employee failed to specifically point out the no-additional-driver restrictions, and did not write "none" in the appropriate location or obtain Medeiros's initials or signature under the additional driver heading.

On September 9, 1995, while Medeiros was out of town, his daughter Adrienne Medeiros allowed her friend, 15-year-old Yasha Lowe, to drive the Topaz. Yasha drove the car off the road and into a tree, killing the back seat passenger, 14-year-old Evan Baker, the son of the appellant in the present case ("the Bakers"). Both Adrienne Medeiros, who was also in the vehicle, and Yasha Lowe were under the legal driving age and thus neither had a driver's license.

In January 1996, the Bakers filed a wrongful death action against Yasha Lowe. Lowe, claiming she was a permissive user of the Topaz and thus covered under the Liberty Mutual policy, tendered defense of the action to the insurance company. Liberty Mutual rejected the notion that Lowe was a permissive user and refused to defend. Subsequently, a default judgment in excess of $500,000 was entered against Lowe. She then assigned to the Bakers her claims against Liberty Mutual, and the Bakers brought an action against the insurer in Sacramento Superior Court, alleging breach of the duty to defend, breach of implied covenant of good faith and fair dealing, and breach of duty to pay a judgment.

Liberty Mutual removed the case to federal court as a diversity suit and moved for summary judgment, which the district court granted. The court held that Medeiros was bound by the terms of the contract even if he had not read it. The court rejected the significance of the failure to write in "none" under the additional driver heading, noting that even if the contract could be read to permit additional drivers, the prohibition on page 1 clearly bars an interpretation of the

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document which would suggest that the additional driver could be someone under 21 years of age without a driver's license. As a result, Shasta did not give Medeiros implied permission to permit either his daughter or Yasha Lowe to drive the Topaz, and therefore neither could possibly be a permissive user covered by Liberty Mutual. This timely appeal ensued.

II.

STANDARD OF REVIEW

A grant of summary judgment is reviewed de novo. Forsyth v. Humana, Inc., 114 F.3d 1467, 1474 (9th Cir.1997). We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law. Id. This court may affirm the summary judgment dismissal on any basis supported by the record. Sicor Ltd. v. Cetus Corp., 51 F.3d 848, 860 (9th Cir.1995), cert. denied, 516 U.S. 861, 116 S.Ct. 170, 133 L.Ed.2d 111 (1995).

We have jurisdiction to review this diversity action under 28 U.S.C. § 1291.

III.

DISCUSSION

A. The Standard for Determining Permissive Use

The district court correctly applied California law to the facts of this case. Yasha Lowe can only be considered a permissive user (and therefore covered under the Liberty Mutual policy) of the automobile loaned to John Medeiros by Shasta if she was expressly or impliedly granted permission to drive the car by both (1) the owner, Shasta, and (2) the initial permittee, Medeiros. Sandoval v. Mercury Ins. Group, 229 Cal.App.3d 1, 8-9, 278 Cal.Rptr. 533 (1991). Yasha Lowe's use of the vehicle must also have been "within the scope" of the permission given by both Shasta and Medeiros. Cal. Insurance Code § 11580.1(b)(4); Sandoval, 229 Cal.App.3d at 9, 278 Cal.Rptr. 533.

1. Permission by Shasta

It is undisputed that Shasta did not grant explicit permission to Lowe, a 15-year-old friend of Medeiros's daughter. Therefore, in determining whether...