Beaumont-Gribin-Von Dyl Management Co. v. California Union Ins. Co., BEAUMONT-GRIBIN-VON

• Decision Date: 09 November 1976
• Docket Number: BEAUMONT-GRIBIN-VON
• Citation: 134 Cal.Rptr. 25,63 Cal.App.3d 617
• Court: California Court of Appeals Court of Appeals
• Parties: DYL MANAGEMENT COMPANY, a California Corporation, Plaintiff and Respondent, v. CALIFORNIA UNION INSURANCE COMPANY, Defendant and Appellant. Civ. 48275.

Page 25

134 Cal.Rptr. 25

63 Cal.App.3d 617

BEAUMONT-GRIBIN-VON DYL MANAGEMENT COMPANY, a California Corporation, Plaintiff and Respondent, v. CALIFORNIA UNION INSURANCE COMPANY, Defendant and Appellant.

Civ. 48275.

Court of Appeal, Second District, Division 1, California.

Nov. 9, 1976.

Hearing Denied Jan. 5, 1977.

Jones & Wilson and Robert E. Jones, Los Angeles, for defendant and appellant.

Ruderman, Levin, Ballin, Plotkin & Graf, North Hollywood, for plaintiff and respondent.

LILLIE, Associate Justice.

Defendant, California Union Insurance Company (Cal Union), appeals from a judgment entered in favor of plaintiff Beaumont-Gribin-Von Dyl Management Company, a California corporation (Management), on a policy of professional malpractice insurance. The policy provides maximum coverage of $500,000, with an amount of $2,500 deductible 'from the total amount resulting from each claim.' The resolution of the primary issue before us depends upon whether the word 'claim,' ¹ within the meaning of the insurance policy, is ambiguous.

Management was a property management organization acting as property manager for a number of property owners in the Santa Barbara area. Its responsibilities included collecting rentals from the occupants of the various properties, depositing them into a trust account, paying the clients' bills, and disbursing the balance of the rental proceeds to the clients.

On November 9, 1971, Management consummated a sale of its property management business to Syncom Management Company. As part of this sale, it transferred to Syncom a bank trust account in which some thirty-four of its clients had interests. Management had not requested or received the consent of its clients to the assignment of the property management contracts.

Almost immediately after the sale was completed, the trust account was closed by one or more representatives of Syncom who apparently absconded with the trust funds, approximately $29,000. The clients, whose funds had comprised the account, sought reimbursement from Management which in turn demanded, under its insurance policy, that Cal Union satisfy the clients' claims. Management's position was and is that it is the aggregate claims that should be reduced by the deductible amount of $2,500; Cal Union asserted that the deductible of $2,500 is applicable to the claim of each individual client. Under this latter theory, Cal Union proffered $1,034.44 in full satisfaction, only three claims being in excess of the $2,500 deductible. This offer was declined. Management reimbursed its clients and instituted this action to recover from Cal Union.

Management's second amended complaint essentially survived demurrer. ² After the filing of Cal Union's answer, the parties filed cross-motions for summary judgment; Management also moved the court to specify certain issues as without substantial controversy and established in its favor. ³ Both motions for summary judgment were denied. However, the court granted the motion of Management to specify, having concluded inter alia, ⁴ that the insurance policy was ambiguous as to whether the word 'claim' meant the Individual claim of Each person harmed by the insured's act, error, or omission or, the insured's claim against the insurer for the total liability incurred by reason of a single act, error, or omission on its part. Applying the principle of interpretation Contra proferentem, the issue was determined in favor of Management, the insured. The matter proceeded to trial on the remaining issues, principally that of damages, culminating in the within judgment.

No extrinsic evidence was offered in aid of interpretation of the pertinent provision of the policy. Thus, in the absence of extrinsic evidence the interpretation of the writing is a matter of law and must be independently determined on appeal. (Fry v. Pekarovich, 46 Cal.App.3d 165, 168, 120 Cal.Rptr. 55.)

There is no real dispute relative to the applicable rules of construction. It is the general rule that, in the event of uncertainty of meaning, a written contract is to be construed against the party who prepared it. (Yamanishi v. Bleily and Collishaw, Inc., 29 Cal.App.3d 457, 463, 105 Cal.Rptr. 580.) This rule comports with fairness and common sense in that it prevents the party with the primary opportunity to avoid misunderstanding, from capitalizing thereon. It is true not only that insurance contracts fall within the scope of this rule, but also that the rule applies to them with special force. (See Gray v. Zurich Insurance Co., 65 Cal.2d 263, 269, 54 Cal.Rptr. 104, 419 P.2d 168.) Any ambiguity or uncertainty in an insurance policy must be resolved in favor of the insured. (Insurance Co. of North America v. Electronic Purification Co., 67 Cal.2d 679, 686, 63 Cal.Rptr. 382, 433 P.2d 174.) If the insurer uses language which is uncertain any reasonable doubt will be resolved against it; whether the doubt relates to extent or fact of coverage, peril insured against, amount of liability or persons protected, the language will be understood in its most inclusive sense for the benefit of the insured. (States Farm Mut. Auto. Ins. Co. v. Elkins, 52 Cal.App.3d 534, 538, 125 Cal.Rptr. 139.) If Semantically permissible, the insurance contract will be given such construction as will fairly achieve its manifest object of securing indemnity to the insured for losses to which the insurance relates. (Holz Rubber Co., Inc. v. American Star Ins. Co., 14 Cal.3d 45, 60, 120 Cal.Rptr. 415, 533 P.2d 1055; Crane v. State Farm Fire & Cas. Co., 5 Cal.3d 112, 115, 95 Cal.Rptr. 513, 485 P.2d 1129.) Moreover, 'in doubtful cases, the law favors the insured over the insurer.' (State Farm Mut. Auto. Ins. Co. v. Elkins, 52 Cal.App.3d at p. 538, 125 Cal.Rptr. at p. 141.)

It has long been particularly true that provisos, exceptions, and exclusions in an insurance policy will be strictly construed against the insurer. (See Pacific, etc., Co. v. Williamsburgh, 158 Cal. 367, 369--370, 111 P. 4.) While technically a deductibility clause may not be an exception to insurance coverage or an exclusion therefrom, inasmuch as it too functions as a limitation on the liability of the insurer, it must be treated the same as other such limitations. (See Hays v. Pacific Indem. Group, 8 Cal.App.3d 158, 165, 86 Cal.Rptr. 815.)

Of course, none of the foregoing means that the parties are not free to make their own bargain. A court will not distort the plain meaning of the contract to impose unassumed liability on an insurer. (Farmers Ins. Exch. v. Harmon, 42 Cal.App.3d 805, 809, 117 Cal.Rptr. 117.) And the law provides numerous rules for the interpretation of contracts (Civ.Code, § 1635 et seq.) designed to resolve questions of meaning before recourse to the rule of strict construction against the drafter. (Civ.Code, § 1654.)

The instant dispute really is not over the meaning of the word 'claim' in any abstract sense. As with words generally, the meaning of 'claim' will be determined by its use in context. 'Claim' or its plural form appears some twenty times in the insurance policy. Cal Union argues that, contrary to the opinion of the trial court, the usage of the term makes it clear that a 'claim' must be by a third party against the insured; that the usage consistently contrasts the claim of a third party against the insured with any rights of the insured against the insurer. In the view of Cal Union, the court made an...