Continental Cas. Co. v. Phoenix Const. Co.

• Decision Date: 04 May 1956
• Citation: 57 A.L.R.2d 914,46 Cal.2d 423,296 P.2d 801
• Court: California Supreme Court
• Parties: , 57 A.L.R.2d 914 CONTINENTAL CASUALTY COMPANY, a corporation, Plaintiff and Appellant, v. PHOENIX CONSTRUCTION COMPANY, a corporation; Oilfields Trucking Company, a corporation; Transport Indemnity Company, a corporation; Harvey Leming and James E. Mason, Defendants and Respondents, Underwriters at Lloyd's, London, an unincorporated association, et al., Interveners and Respondents. L. A. 23225.

Page 801

296 P.2d 801

46 Cal.2d 423, 57 A.L.R.2d 914

CONTINENTAL CASUALTY COMPANY, a corporation, Plaintiff and Appellant, v. PHOENIX CONSTRUCTION COMPANY, a corporation; Oilfields Trucking Company, a corporation; Transport Indemnity Company, a corporation; Harvey Leming and James E. Mason, Defendants and Respondents Underwriters at Lloyd's, London, an unincorporated association, et al., Interveners and Respondents.

L. A. 23225.

Supreme Court of California, In Bank.

May 4, 1956.

Rehearing Denied May 29, 1956.

Jennings & Belcher, Sigurd E. Murphy and Louis E. Kearney, Los Angeles, for appellant.

Robert W. Stevenson, John F. O'Hara, Martin, Hahn & Camusi, William P. Camusi, Los Angeles, and Oscar F. Catalano Bakersfield, for respondents and intervenors.

Bledsoe, Smith, Cathcart, Johnson & Phelps, San Francisco, as amici curiae on behalf of respondents.

SCHAUER, Justice.

In this suit for declaratory relief determination is sought, as among the contesting insurance compaines, of the order of incidence and of the limits of their respective contractual obligations to defendants Phoenix Construction Company, Oilfields Trucking Company (hereinafter called, respectively, Phoenix and Oilfields), and James E. Mason, all as affected by certain judgments previously recovered by defendant Leming in an action for persona injuries. Leming was injured in a highway truck collision on July 10, 1951, caused by the negligent driving by Oilfields' employe, Mason, of a truck owned by Oilfields. In April, 1955, this court affirmed a judgment (in Kern County superior court action No. 56455) in Leming's favor against Oilfields and Phoenix in the principal sum of $213,460.02 (Leming v. Oilfields Trucking Co., 44 Cal.2d 343, 282 P.2d 23); a judgment entered against Mason in the same action, in the principal sum of $212,585.69, had previously become final.

Phoenix and Oilfields as joint venturers contracted with the State of California to do certain highway construction work known as the Haypress Canyon Job. The business of Phoenix was highway and similar construction; that of Oilfields was the truck hauling of oil surfacing materials and heavy construction equipment. The two companies had entered into the highway contract pursuant to a written agreement between themselves that they should engage in certain unspecified joint ventures. The present suit was commenced by Continental Casualty Company (hereinafter called Continental), which had issued an insurance policy to Phoenix, to have declared the liabilities arising under various outstanding policies. Named as defendants were (1) Phoenix, (2) Oilfields, (3) Transport Indemnity Company (hereinafter called Transport), the insurer of Oilfields, (4) Leming, (5) Mason, who defaulted, and (6) various other persons as to whom the action was dismissed before trial. Compalints in intervention were filed on behalf of 'Underwriters at Lloyd's, London, an unincorporated association' (hereinafter called Lloyd's London), and on behalf of 'Certain Underwriters at Lloyd's London' (hereinafter called Pacific Lloyd's). Lloyd's London had issued a certificate of excess insurance over the basic policy issued by Transport ¹ to Oilfields, and Pacific Lloyd's had issued certificates of excess insurance over the basic policy issued by Continental to Phoenix.

After extensive oral argument the trial court concluded (1) that Oilfields, Phoenix and Mason are covered under the Continental and Pacific Lloyd's policies; (2) Oilfields, but not Phoenix or Mason, is covered under the Transport and Lloyd's London policies; (3) that the liability should be prorated among the insurers according to a formula set out in the judgment.

Continental, the appellant herein, contends that its basic policy provided no coverage for the liability here involved, either to Phoenix, to Oilfields or to Mason, both by reason of certain endorsements and exclusions attached to that policy and upon the theory that the liability which had attached to Phoenix was based solely on imputed negligence as a joint venturer, and not as an employer of Mason. ² The trial court in the present suit found, among other things, that Mason was a general employe of Oilfields and a special employe of Phoenix, and that at the time and place of the accident he was 'acting in the scope and course of his employment as such employee and agent'; Continental questions the sufficiency of the evidence to support the finding insofar as it refers to Phoenix. Transport (with Lloyd's London), although admitting coverage of Oilfields for any liability chargeable to it which arises from the accident, denies that any coverage was extended by Transport to Phoenix or to Mason. Transport, Oilfields, Phoenix and Leming all contend that the Continental policy (and Pacific Lloyd's excess certificates) extended coverage to Phoenix, Oilfields and Mason.

For reasons which are hereinafter developed we have reached the following conclusions:

1. Insofar as the issues now before us are concerned, Mason, as the negligent driver, bears the primary liability to Leming.

2. The Transport policy, together with its related excess insurance, provides $1,000,000 coverage to Mason as well as to Oilfields, an amount more than sufficient to pay the Leming award.

3. The Continental policy, together with its related excess certificates, covers neither Mason nor Oilfields.

4. Hence, there is no need to decide either (a) whether the evidence supports the trial court's determination that Mason was acting as an employe of Phoenix at the time of the accident, or (b) whether either the Continental or the Transport policy (and excess insurance) covers Phoenix.

5. Result: Transport and Lloyd's London must pay the entire award to Leming.

Where a judgment has been rendered against an employer for damages occasioned by the unauthorized negligent act of his employe, the employer may recoup his loss in an action against the negligent employe (Popejoy v. Hannon (1951), 37 Cal.2d 159, 173(19), 231 P.2d 484; Bradley v. Rosenthal (1908), 154 Cal. 420, 423, 97 P. 875; Johnston v. City of San Fernando (1939), 35 Cal. App.2d 244, 246, 95 P.2d 147; Myers v. Tranquility Irr. Dist. (1938), 26 Cal.App.2d 385, 389, 79 P.2d 419; Ledgerwood v. Ledgerwood (1931), 114 Cal.App. 538, 542-543, 300 P. 144; Rest., Restitution, 418-419, § 96; 35 Am.Jur. 530-531, § 101; 56 C.J.S., Master and Servant, § 79, p. 502; see also Aynes v. Winans (1948), 33 Cal.2d 206, 208-209, 200 P.2d 533); that is, as between employer and employe in such a situation, the obligation of the employe is primary and that of the employer secondary. Respondents cite Consolidated Shippers v. Pacific Employers Ins. Co. (1941), 45 Cal.App.2d 288, 293, 114 P.2d 34; Air Transport Mfg. Co. v. Employers' Liability, etc., Corp., (1949), 91 Cal.App.2d 129, 132, 204 P.2d 647; Employers Liability Assur. Corp. of London, England v. Pacific, etc., Inc. Co. (1951), 102 Cal.App.2d 188, 192, 227 P.2d 53; and Traders & General Ins. Co. v. Pacific Emp. Ins. Co. (1955), 130 Cal.App.2d 158, 165-166, 278 P.2d 493, as supporting a contrary view; such cases are broadly distinguishable on their facts but it would unduly extend this opinion and serve no useful purpose to individually discuss and differentiate them as any implications therein contrary to the long established rule above stated must be deemed disapproved.

Under equitable principles of subrogation the insurer of the employer who has been compelled to pay the judgment against the employer may recover against the negligent employer of the employe's insurer (Canadian Indemnity Co. v. United States Fidelity & Guaranty Co. (9 Cir., 1954), 213 F.2d 658, 659; see also Maryland Cas. Co. v. Employers Mut. Liability Ins. Co. (2 Cir., 1953), 208 F.2d 731; United Pacific Ins. Co. v. Ohio Casualty Ins. Co. (9 Cir., 1949), 172 F.2d 836, 840 (note 5), 846-848.) Here, it is established that the negligent act upon which the Leming judgment is based was the unauthorized act of Mason who, it will be remembered, is not only a judgment debtor to Leming but is also a defaulted defendant in this proceeding. It follows that if Mason was covered with sufficient insurance to pay the total Leming judgment, then the insurance coverage of Oilfields and Phoenix becomes immaterial insofar as concerns the issues now involved. Consideration will therefore first be given to whether and to what extent Mason is covered by the two lines of policies, Continental and Transport.

Copies of the insurance policies and excess certificates which were in effect at the time of the Leming accident were introduced into evidence by stipulations, not subject to conflicting inferences, and no parol evidence was offered in aid of construction. Therefore, construction of the policies is a matter of law. (Western Coal & Mining Co. v. Jones (1946), 27 Cal.2d 819, 826-827, 167 P.2d 719, 164 A.L.R. 685; see also Arenson v. National Automobile & Cas. Ins. Co. (1955), 45 Cal.2d 81, 286 P.2d 816.)

The Continental policy, which is entitled 'Comprehensive General Automobile ³ Liability Policy,' commences with 'Item 1. Name of insured Phoenix Construction Co., Inc.', and in paragraph I of the printed 'insuring agreements' identifies the primary protection as Coverages A, B, and C. ⁴ Coverage A, thus included in the printed policy form, extends coverage to Phoenix for bodily injury liability. An endorsement, numbered R6309202 and hereinafter referred to as No. 202, reads as follows: 'It is agreed Oil Fields Trucking Company is added as an additional insured in connection with construction operations conducted as a joint venture with the Phoenix Construction Company, Inc.

'It is further agreed that this policy excludes coverage for all operations of Oil Fields Trucking Company other than construction struction operations conducted as a joint venture with Phoenix Construction Company, Inc.'

A second endorsement, numbered R6309208 and hereinafter referred to...