Grand Rent A Car Corp. v. 20th Century Ins. Co.

• Decision Date: 14 June 1994
• Docket Number: Nos. B073108,B073396 and B073487,s. B073108
• Citation: 31 Cal.Rptr.2d 88,25 Cal.App.4th 1242
• Court: California Court of Appeals Court of Appeals
• Parties: GRAND RENT A CAR CORPORATION, Plaintiff and Appellant, v. 20TH CENTURY INSURANCE COMPANY, Defendant and Respondent. GRAND RENT A CAR CORPORATION, Plaintiff and Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Appellant. GRAND RENT A CAR CORPORATION, Plaintiff and Appellant, v. INTERINSURANCE EXCHANGE OF the AUTOMOBILE CLUB, Defendant and Respondent.

Page 88

31 Cal.Rptr.2d 88

25 Cal.App.4th 1242

GRAND RENT A CAR CORPORATION, Plaintiff and Appellant, v. 20TH CENTURY INSURANCE COMPANY, Defendant and Respondent.

GRAND RENT A CAR CORPORATION, Plaintiff and Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant and Appellant.

GRAND RENT A CAR CORPORATION, Plaintiff and Appellant, v. INTERINSURANCE EXCHANGE OF the AUTOMOBILE CLUB, Defendant and Respondent.

Nos. B073108, B073396 and B073487.

Court of Appeal, Second District, Division 5, California.

June 14, 1994.

Review Denied Oct. 13, 1994.

Latham & Watkins, G. Andrew Lundberg, Myra J. Pasek, Ure & Peterson, and Steven J. Roberts, for plaintiff and appellant in Nos. B073487 and B073108, and plaintiff and respondent in No. B073396.

Ford, Walker, Haggerty & Behar, Donna Rogers Kirby, Maxine J. Lebowitz, Gilbert, Kelly, Crowley & Jennett, Clifford H. Woosley and Peter J. Godfrey, for defendant and respondent in No. B073487.

Spray, Gould & Bowers, Robert D. Brugge, Melinda J. McGee, Horvitz & Levy, Christina J. Imre and Julie L. Woods as amici curiae on behalf of defendant and respondent in No. B073487.

Demler, Armstrong & Rowland, Thomas J. Moses, Horvitz & Levy, Christina J. Imre and Julie L. Woods, for defendant and respondent in No. B073108.

Spray, Gould & Bowers, Robert D. Brugge and Melinda J. McGee as amici curiae on behalf of defendant and respondent in No. B073108.

Spray, Gould & Bowers, Robert D. Brugge, Richard C. Turner and Melinda J. McGee, for defendant and appellant in No. B073396.

Ford, Walker, Haggerty & Behar, Donna Rogers Kirby, Maxine J. Lebowitz, Horvitz & Levy, Christina J. Imre and Julie L. Woods as amici curiae on behalf of defendant and appellant in No. B073396.

GRIGNON, Associate Justice.

These cases involve priority of coverage disputes between Grand Rent A Car Corporation, a self-insured car rental agency, and automobile liability insurers of renters of Grand's automobiles. The question presented is whether the car rental agreements together with Grand's certificate of self-insurance constitute policies of automobile liability insurance providing primary coverage to renters of Grand automobiles pursuant to Insurance Code section 11580.9. We answer this question in the affirmative. ¹

FACTS

Grand is in the business of renting cars to the public on a short term basis. The cars are rented to the public pursuant to a written rental agreement. The rental agreement provides in pertinent part as follows. "Liability Insurance. Anyone driving the car as permitted by this Agreement will be protected against liability for causing bodily injury or death to others or damaging the property of someone other than the driver and/or the renter up to the limits stated in box 21 on the other side of this Agreement, but in no event less than the (minimum) financial responsibility limits required by applicable law. Such coverage will be provided by [Grand] according to the terms and subject to all of the conditions of a standard automobile liability policy, including all requirements as to notice and cooperation on [renter's] part, which are hereby made a part of this Agreement.... [Grand] can provide coverage under a certificate of self-insurance or an insurance policy, or both as [Grand chooses]. In any case, a copy of the policy and/or Certificate, will be available for [renter's] inspection at [Grand's] main office." ²

Grand elected to provide coverage under a certificate of self-insurance, which states as follows. "This is to certify that The First Gray Line Corporation/Grand Rent A Car Corporation 9841 Airport Blvd. # 200, Los Angeles, CA 90045 has been approved as a Self-Insurer under the Compulsory Financial Responsibility Law and assigned S.I. No. 99 by the Director of Motor Vehicles. This Certificate exempts [Grand] from the reporting provisions of the law as provided under Section 16002 of the California Vehicle Code. However, if [Grand] or [its] employees receive a request for a report from this office, return it and furnish the Self-Insurer number assigned."

Grand rented specific cars, of which it was the registered owner, to individual renters. ³ While operating the rented cars, renters were involved in traffic collisions with third parties, who suffered personal injuries as a result of the traffic collisions. These third parties made claims against Grand. ⁴

A portion of the car rental fee was allocated by Grand to the liability insurance described in the agreement. Grand employed claim investigators, set aside reserves for third party claims and retained attorneys to settle and defend against third party claims.

At the time of the traffic collisions, renters were insured under their own individual automobile liability insurance policies by insurers. Insurers' automobile liability insurance policies provided insurance coverage for vehicles listed on the declaration page of the policies. In addition, the policies provided coverage for "additional insured vehicles," which were defined as automobiles not owned by or available for regular use to renters. The cars rented by renters of Grand were "additional insured vehicles" within the meaning of insurers' policies. Insurers' policies contained "other insurance clauses" with respect to "additional insured vehicles." These clauses provided that if other insurance were available with respect to an additional insured vehicle, the other insurance would provide primary liability coverage and insurers' policies would only provide excess coverage.

The other insurance clauses provided as follows. "If there is other automobile liability insurance for a loss covered under this part, we will pay no greater portion of the loss than the applicable limits of this policy bear to the combined limit of all policies that apply to the loss, except: (a) If you have other valid and collectible automobile liability insurance for an insured automobile newly acquired by you, this part does not apply. [p] (b) Any insurance afforded under this part for an insured automobile not owned by you, for an additional insured automobile or for loss occurring in Mexico shall be excess over any other valid and collectible automobile liability insurance." ⁵

DISCUSSION

Issues

In this case, we are asked to determine a priority of coverage issue between a self-insured car rental agency and the automobile liability insurer of a renter, when the car rental agency rents a car to renter pursuant to the terms of a car rental agreement and renter is involved in a traffic collision while operating the rented vehicle. In arriving at this determination, we must resolve two questions: (1) Whether the car rental agreement together with the certificate of self-insurance constitutes a policy of automobile liability insurance; and (2) If the car rental agreement together with the certificate of self-insurance constitutes a policy of automobile liability insurance, whether "the policy" provides primary coverage for injuries arising out of the operation of the rented vehicle. For the reasons discussed below, we answer both of these questions in the affirmative.

Statutory Framework

Division 2, part 3, article 2 of the Insurance Code, sections 11580 through 11589.5, entitled "Actions on Policies Containing Liability Provisions," is a comprehensive statutory scheme setting forth the required provisions of automobile liability insurance policies. "The Legislature declares that the public policy of this state in regard to provisions authorized or required to be included in policies affording automobile liability insurance or motor vehicle liability insurance issued or delivered in this state shall be as stated in this article, that this article expresses the total public policy of this state respecting the content of such policies...." (Ins.Code, § 11580.05.)

Insurance Code section 11580.9 concerns priority of coverage when two or more automobile liability insurance policies apply to the same automobile involved in an occurrence giving rise to liability to third parties. Subdivision (d) of that section provides "[W]here two or more policies affording valid and collectible liability insurance apply to the same motor vehicle or vehicles in an occurrence out of which a liability loss shall arise, it shall be conclusively presumed that the insurance afforded by that policy in which the motor vehicle is described or rated as an owned automobile shall be primary and the insurance afforded by any other policy or policies shall be excess."

Insurance Code section 11580.9 is intended to be comprehensive on the issue of priority of coverage. "The Legislature declares it to be the public policy of this state to avoid so far as possible conflicts and litigation, with resulting court congestion, between and among injured parties, insureds, and insurers concerning which, among various policies of liability insurance and the various coverages therein, are responsible as primary, excess, or sole coverage, and to what extent, under the circumstances of any given event involving death or injury to persons or property caused by the operation or use of a motor vehicle. [p] The Legislature further declares it to be the public policy of this state that Section 11580.9 of the Insurance Code expresses the total public policy of this state respecting the order in which two or more of such liability insurance policies covering the same loss shall apply...." (Ins.Code, § 11580.8.)

A certificate of self-insurance issued pursuant to Vehicle Code section 16053 is a policy of automobile liability insurance. (Ins.Code, § 11580.9, subd. (g).) Similarly, a cash deposit made pursuant to Vehicle Code section 16054.2, a bond in effect pursuant to Vehicle Code section 16054, and a report of governmental ownership filed pursuant to Vehicle Code section 16051 are policies of automobile liability insurance. (Ibid.) Subdivision (g) of section 11580.9 of the Insurance Code treating certificates of...