Fratis v. Fireman's Fund American Ins. Companies

• Decision Date: 18 March 1976
• Citation: 56 Cal.App.3d 339,128 Cal.Rptr. 391
• Court: California Court of Appeals Court of Appeals
• Parties: Gwen FRATIS, Administratrix of the Estate of Joseph Fratis, Deceased, Plaintiff and Respondent, v. FIREMAN'S FUND AMERICAN INSURANCE COMPANIES et al., Defendants and Appellants. Civ. 14848.

Page 391

128 Cal.Rptr. 391

56 Cal.App.3d 339

Gwen FRATIS, Administratrix of the Estate of Joseph Fratis, Deceased, Plaintiff and Respondent, v. FIREMAN'S FUND AMERICAN INSURANCE COMPANIES et al., Defendants and Appellants.

Civ. 14848.

Court of Appeal, Third District, California.

March 18, 1976.

Trezza, Ithurburn, Keeley, Steidlmayer & Bower by Terence Keeley, Yuba City, Keeley, Guthrie & Ruddick, Marysville, for plaintiff and respondent and cross-appellant.

Cyril Viadro, San Francisco, for defendants and appellants and cross-respondents.

FRIEDMAN, Associate Justice.

In August 1965 plaintiff's husband was killed in an automobile collision with a car driven by William McConkey. Her wrongful death action resulted in a damage judgment against McConkey. Plaintiff then filed the present action on the judgment, seeking recovery from Fireman's Fund American Insurance Companies (Fireman's Fund), which had issued an automobile liability policy to McClatchy Newspapers. ¹ Her theory was that McConkey had been an additional insured under the McClatchy policy. A jury trial resulted in a verdict against Fireman's Fund, which appeals from the judgment.

In plaintiff's wrongful death action McClatchy Newspapers was an unserved defendant. At the time of the accident McConkey was working under a commission contract as a subscription solicitor for the McClatchy firm. The written contract provided McConkey an automobile mileage allowance away from his 'home base.' While the wrongful death suit was pending, McConkey received a discharge in bankruptcy and disappeared from the scene. His attorney withdrew from the action. Plaintiff's attorneys then informed Fireman's Fund and McClatchy Newspapers by letter that plaintiff intended to take a default judgment against McConkey. Fireman's Fund decided against undertaking defense of the lawsuit. Plaintiff then dismissed McClatchy Newspapers as a defendant, took McConkey's default, presented evidence before the trial court and was awarded a $300,000 damage judgment against McConkey.

In July 1969, closely on the heels of the judgment entry, McConkey reappeared and moved under Code of Civil Procedure section 675b for cancellation of the judgment, alleging his discharge in bankruptcy. ² The trial court directed cancellation of the judgment, and this court affirmed the order by an opinion filed October 5, 1970. (Fratis v. McConkey, 3 Civ. 12544, unpublished opinion.) Mrs. Fratis, the judgment creditor, then instituted the present action against Fireman's Fund.

The only issue raised by appellant is whether McConkey became an additional insured under the McClatchy automobile policy as the driver of a 'hired automobile.' The facts are not in dispute; neither are the terms of the policy. The appeal involves an issue of law, a question of interpreting an insuring clause as applied to undisputed facts. (Pacific Indem. Co. v. Truck Ins. Exch., 270 Cal.App.2d 700, 702, 76 Cal.Rptr. 281.) ³

The Fireman's Fund policy covered the named insured and 'any person while using an owned automobile or a hired automobile . . . provided the actual use of the automobile is by the named assured or with his permission . . ..'

The policy defined a hired automobile as one 'used under contract in behalf of . . . the named insured provided such automobile is not owned by or registered in the name of . . . an employee or agent of the named insured who was granted an operating allowance of any sort for the use of such automobile.'

The policy also contained an exclusion clause designed to restrict coverage of a hired automobile. We shall quote it at a later point of this opinion.

Fireman's Fund contends that a vehicle used under contract became a hired automobile (as defined by the policy) only if the contract gave the policyholder possession or control of the vehicle and only if its use was the objective of the contract. Fireman's Fund points out that the McClatchy contract had an objective other than use of the vehicle; that the vehicle was used only incidentally in the performance of the contract objective. We reject the contention. McConkey had a contract with McClatchy which permitted him a mileage allowance. He was driving his automobile 'under' or by virtue of this contract. At the time of the accident he was en route to a destination for the purpose of soliciting subscription sales for a McClatchy newspaper. Thus he was using the vehicle 'in behalf of,' that is, for the purposes and objectives of McClatchy Newspapers, the named insured. McConkey was neither an employee nor agent of the named insured. ⁴ All the conditions demanded by the policy definition of 'hired automobile' were present.

To classify McConkey's vehicle as a hired automobile within the policy definition requires no resort to the familiar rule which resolves policy ambiguities in favor of coverage. (See Continental Cas. Co. v. Zurich Ins. Co., 57 Cal.2d 27, 32--33, 17 Cal.Rptr. 12, 366 P.2d 455.) The facts of the case fit foursquare and irrefragably within the definition. The insurance carrier's argument would insert implied restrictions in the insuring agreement, contrary to settled principles of insurance policy interpretation.

At this point of its argument Fireman's Fund relies upon Continental Cas. Co. v. Hartford Acc. & Indem. Co., 213 Cal.App.2d 78, 28 Cal.Rptr. 606, and Government Employees Ins. Co. v. St. Paul Fire etc. Ins. Co., 243 Cal.App.2d 186, 52 Cal.Rptr. 317. Neither decision is in point. The former revolved around the identity of the party who hired the vehicle, not its status as a hired automobile. The latter decision involved no contractual use whatever.

We reject defendant's argument that McClatchy Newspapers could not give McConkey permission to drive his own car. 'The (policy) language in question plainly refers to actual consent, not some theoretical concept.' (Osborne v. Security Ins. Co., 155 Cal.App.2d 201, 208, 318 P.2d 94, 99.) McConkey had McClatchy's consent to use his vehicle to solicit subscriptions for McClatchy. He was thus driving with the latter's permission.

Finally, Fireman's Fund invokes the exclusion clause mentioned earlier. The clause declares: 'The insurance with respect to any person or organization other than the named insured does not apply . . . with respect to any hired automobile, to the owner or a lessee thereof other than the named insured or to any agent or employee of such owner or lessee . . ..'

The McConkey automobile, as we have concluded, was a hired automobile, and it was driven by its owner, a person other than the named insured. In unambiguous terms, the exclusion clause was designed to deny coverage to McConkey at the time of the accident. The coverage question turns upon the legality of the exclusion clause. At the heart of the inquiry is the wellknown Wildman doctrine, which denies validity to policy exclusions if they defeat statutory demands for coverage. (See Metz v. Universal Underwriters Ins. Co., 10 Cal.3d 45, 50, 109 Cal.Rptr. 698, 513 P.2d 922.)

In August 1965, when the McConkey-Fratis accident occurred, section 11580.1 of the Insurance Code declared: 'No policy of (automobile) liability insurance . . . shall be issued . . . unless it contains the following provisions: . . . (b) Provision designating by explicit description or by appropriate reference all motor vehicles with respect to which coverage is intended to be granted. . . . (d) Provision insuring the insured named therein and to the same extent that coverage is afforded such named insured in respect to said described motor vehicles, any...