Farmers Ins. Exchange v. Frederick

• Decision Date: 14 September 1966
• Citation: 244 Cal.App.2d 776,53 Cal.Rptr. 457
• Parties: FARMERS INSURANCE EXCHANGE, Plaintiff and Respondent, v. Karl FREDERICK, Jr., et al., Defendants and Appellants. Karl FREDERICK, Jr., Cross-Complainant and Appellant, v. FACTORY MUTUAL LIABILITY INSURANCE COMPANY OF AMERICA et al., Cross-Defendants, and Respondents. Civ. 29655.
• Court: California Court of Appeals Court of Appeals

Page 457

53 Cal.Rptr. 457

244 Cal.App.2d 776

FARMERS INSURANCE EXCHANGE, Plaintiff and Respondent, v. Karl FREDERICK, Jr., et al., Defendants and Appellants.

Karl FREDERICK, Jr., Cross-Complainant and Appellant, v. FACTORY MUTUAL LIABILITY INSURANCE COMPANY OF AMERICA et al., Cross-Defendants, and Respondents.

Civ. 29655.

District Court of Appeal, Second District,

Division 2, California.

Sept. 14, 1966.

Hearing Denied Nov. 30, 1966.

Wiener & Wiener, by Robert A. Klein, Sherman Oaks, for appellants.

Early, Maslach, Foran & Williams, by Harry Boyd, Los Angeles, for respondent Farmers Ins. Exchange.

Ives, Kirwan & Dibble, by Eugene S. Ives, Los Angeles, for respondent Factory Mut. Liability Ins. Co. of America.

ROTH, Presiding Justice.

This appeal from a declaratory judgment comes to us by way of an agreed statement pursuant to Rule 6(a) of the California Rules of Court. The essential facts are not in dispute.

Karl Frederick, Jr. (Frederick), appellant herein, owned a 1960 half-ton pickup truck, which was licensed as a commercial vehicle but which he used for personal purposes. He owned no other vehicle. He testified that the truck 'was used * * * solely to drive to and from work, for camping trips and to carry (his) skin diving equipment.' The truck was not used in his work.'

On August 26, 1961 Frederick, being an occupant, permitted Paul C. Edwards III (Edwards) to drive the truck. Frederick and Edwards were injured when Edwards drove the truck off the road into an embankment.

Frederick was the named insured under a public liability automobile insurance policy covering the truck. The policy had been issued to him by Farmers Insurance Exchange (Farmers). Edwards' father had a policy covering Edwards' liability substantially similar to the Farmers policy issued by Factory Mutual Liability Insurance Company of America, (Factory Mutual). This latter policy was limited in coverage to a 'private passenger automobile'. Both companies had denied liability to Frederick or Edwards.

Farmers brought this action for declaratory relief against Frederick and Edwards seeking a judicial determination of its responsibilities under its policy. Frederick cross-complained against both companies and Edwards, seeking a declaration of coverage as to him under both policies. Edwards cross-complained against both companies and Frederick for the same purpose. Judgment went against both on their respective cross-complaints. Edwards does not appeal.

On the Frederick cross-complaint the judgment was in favor of Farmers against Frederick on the Farmers policy on the theory that he was specifically excluded from coverage as a 'named insured'. The trial court also held that the Factory Mutual coverage for an uninsured motorist did not include Frederick because its policy covered only a 'private passenger automobile' and that the truck here involved did not come within that definition.

This appeal is by Frederick.

We treat first the Farmers policy. In part I thereof under coverages A and B, Farmers contracted liability insurance for '(A) Bodily Injury Liability, * * * which the insured becomes legally obliged to pay because of (A) bodily injury to Any person, * * * arising out of the ownership * * *' with respect to the described vehicle and in the same part 1 proceeds as follows under caption of 'Definition of 'Named Insured' and 'Insured' * * *.

'(1) If the Insured named in Item 1 of the (policy) is an individual, the term 'named insured' includes his spouse if a resident of the same household;

'(2) The unqualified word 'insured' includes * * * the named insured and his relatives, (b) with respect to the described automobile, any other person * * *, provided the actual use of the automobile is by the named insured or with his permission, * * *;

'(3) The term 'the Insured' is used severally and not collectively, but the inclusion herein of more than one insured shall not increase the limits of the Exchange's liability.'

Under the caption 'Exclusions' in paragraph II of said exclusions, the policy reads:

'This policy does not apply under part 1:

'11. To bodily injury to the Insured or any member of the family of the insured residing in the same household as the insured.' (Emphasis added.)

It need hardly be added that thereafter in approximately 11 closely printed pages of the policy the word 'insured' is used many times. However, in portions of various contextual subject matter, the word 'insured' is departed from and the designation 'named insured' is used. Thus, in the paragraph on 'Assignment' policy reference is to the legal representative of the 'named insured'. Under paragraph on 'Cancellation', reference is 'This policy may be cancelled by the named insured * * *.'

The use and repeated use of the word 'insured' in the Farmers policy demonstrates that it is used as a word of art. It has an artificially definite contractual meaning which is of considerable convenience to the drafting and reading of the insurance contract.

We start with the assumption, that any interpretation of the Farmers policy is governed by the settled rule that where there are two possible constructions of an insurance policy, the one more favorable to the insured should be adopted. (Continental Casualty Company v. Phoenix Construction Company, 46 Cal.2d 423, at p. 437, 296 P.2d 801, 57 A.L.R.2d 914; Norton v. Farmers Automobile Inter-Insurance Exchange, 40 Cal.App.2d 556, 105 P.2d 136.)

In respect of its liability to Frederick, Farmers argues that Frederick, the named insured, is by definition an 'insured' within the meaning of the exclusion '* * * bodily injury to the insured or any member of the family of the insured * * *,' and as such he cannot, even though he is an injured claimant, sue himself and seek damages under the policy. If Frederick were driving, no one could quarrel with this construction. ¹

Frederick's position is that a proper construction of the exclusion clause read in the full context of the insurance contract, with settled rules of construction in mind, and considered in the light of the settled public policy of this state (see Atlantic National Insurance Company v. Armstrong, Cal., 52 Cal.Rptr. 569, 416 P.2d 801) impels the conclusion that '* * * the unqualified word insured * * *' in the policy does by definition refer to the Person who actually drives the vehicle, whether such driver be the named insured or some other who drives with the permission of the named insured. Thus, the exclusion quoted does not prevent the named insured from a recovery for bodily injuries suffered as a consequence of negligent operation when someone other than the named insured is properly driving his vehicle.

Frederick argues that Edwards, who was driving his truck, was the insured and that any injuries Frederick suffered as the result of negligent operation of his truck by Edwards, who drove it with his permission, must be compensated for under the policy.

It is clear, we think, without any ambiguity, that when Frederick purchased the policy, and Farmers issued and sold it to him, that both parties contracted not only that it would insure Frederick against public liability, but that it would in addition insure anyone who drove the vehicle with Frederick's permission. Frederick therefore is not suing himself. He is suing Edwards, a third person, for whom he also contracted and for whose liability Farmers agreed to become responsible.

Farmers' claim of exclusion has a complexion of plausibility because Frederick was an occupant of the truck at the time of the accident. It is not suggested that Frederick was in control of the truck directly or indirectly. However, if Frederick or his spouse or both were negligently hit by their insured truck, which was being driven by Edwards with their permission, while either or both were walking through a pedestrian zone in another part of town, any semblance of plausibility would vanish. (See Armstrong, supra.) ² If Farmers intended to exclude Frederick or his spouse by contract from claiming benefits to which any member of the public is automatically entitled, then it seems to us that its policy must do more than use a word of art such as 'insured', which, when read in the context of the whole policy, has an ambiguous application to the facts at bench and to many other situations which can be posed. The exclusion at bench, assuming that public policy is not involved, ³ might have reached appellant if its language were as specific as it is in the policy construed in the case of Armstrong, supra.

In our opinion, if Farmers, by the exclusion meant to include within its operative effect injuries to the named insured even though some other insured was driving, the language of the exclusion must be such as to leave no doubt that the definition of 'insured' is not merely for contractual convenience, but that the named insured can never recover under the policy, or recover only in certain situations, irrespective of who drives. The exclusion at bench is not that certain.

We note too that the policy, following section 16451 of the Vehicle Code, contracts to insure against '* * * bodily injury to Any person * * *.' (Emphasis added.) This language is analyzed at length in Bachman v. Independence Indemnity Company, 214 Cal. 529, 6 P.2d 943 and in Travelers Insurance Company v. Norwich Union Fire Insurance Society, 221 Cal.App.2d 150, 34 Cal.Rptr. 406. In Norwich, the court discussing said phrase in respect of whether a named insured is covered by the phrase 'bodily injury to any person', says at page 152, 34 Cal.Rptr. at page 407:

'The question has not been determined in California. One case (Bachman v. Independence Indem. Co., 214 Cal. 529, 6 P.2d 943) holds that similar policy language indemnifies the additional insured against wrongful death claim by heirs of the named insured. But it expressly leaves open the question whether a like result would follow if the named insured were himself...