Hellman v. Great American Ins. Co.

• Decision Date: 25 January 1977
• Court: California Court of Appeals Court of Appeals
• Parties: Denise HELLMAN, Plaintiff and Appellant, v. GREAT AMERICAN INSURANCE COMPANY, Defendant and Respondent. Civ. 38399.

Page 24

136 Cal.Rptr. 24

66 Cal.App.3d 298

Denise HELLMAN, Plaintiff and Appellant, v. GREAT AMERICAN INSURANCE COMPANY, Defendant and Respondent.

Civ. 38399.

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

Jan. 25, 1977.

Frederick L. Hirschfield, Lafranchi, Bettinelli & Mickelsen, Petaluma, for appellant

Keith Howard, Austin, Gibbons, Tinning & DeLap, Walnut Creek, for respondent.

WEINBERGER, ^* Associate Justice.

Appellant Denise Hellman filed a declaratory relief action in the superior court seeking to recover on the medical payments coverage contained in an automobile liability insurance policy issued by respondent Great American Insurance Company (Great American) to appellant's parents. She was covered as an additional insured by reason of residency in her parents' home. This appeal is from a summary judgment entered in favor of respondent.

The undisputed facts are that appellant was injured in an automobile accident while she was riding as a passenger in a vehicle insured by United Services Automobile Association (USAA). The USAA policy afforded automobile medical payments coverage in the amount of $5,000.00, subject to an 'other insurance' clause. ¹ As the result of the accident the appellant incurred medical expenses in the sum of $6,998.64 of which $5,798.64 was reimbursed by Founders Life Insurance Company (Founders) pursuant to the terms of a medical plan underwritten by said company. The trial court found that this was the full limit of Founders' liability under its policy. USAA, pursuant to the terms of its policy, paid the $1,200.00 unpaid loss sustained by appellant, and no claim is made that USAA has any further liability under its policy. It is conceded that USAA has not exhausted the $5,000.00 limit of its medical payments coverage, and respondent Great American has paid nothing under its policy.

The trial court, on competent evidence, found that the medical payments coverage in the USAA policy was written on an owned vehicle and the Great American medical payments coverage is on a non-owned vehicle, and that as between the two policies USAA is a primary policy and Great American is an excess policy.

The other insurance clause of the Great American policy provides as follows: 'Other Insurance: If there is other automobile medical payments insurance against a loss covered by Part II of this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible automobile medical payments insurance; provided, however, the insurance with respect to a temporary substitute automobile or Non-owned automobile shall be excess insurance over any other valid and collectible automobile medical payments insurance.' (Emphasis added.)

It is appellant's contention that the word 'collectible' in the quoted clause is ambiguous and susceptible of two interpretations. Accordingly, appellant argues that she is entitled to Great American's coverage limit of $5,000. The contention is essentially as follows.

1. For the purpose of construing Great American's liability under its policy, the court should disregard the reimbursement by Founders to appellant inasmuch as Great American's policy fails to mention medical insurance carriers but only mentions Automobile medical payments insurance.

2. It follows that appellant's unreimbursed medical expenses are still $6,998.64. This amount exceeds the amount collectible under USAA's policy and therefore Great American's obligation arises since, by the terms of its other insurance clause, it is obligated to pay all excess over other valid and collectible automobile medical payments insurance.

3. The word 'collectible', at least under one interpretation suggested by appellant, means 'collectible in fact.'

4. Translating this to the policy of Great American, the relevant provision would read: '(T)he insurance with respect to a . . . non-owned automobile shall be excess insurance over any other valid and (collectible in fact) automobile medical payments insurance.'

5. The 'collectible in fact' payment by USAA is $1,200. Construing Great American's policy literally, Great American must pay the $6,998.64 medical expenses of appellant which is in excess of $1,200 (the collectible in fact amount) up to Great American's coverage limit of $5,000.

Appellant cites no authority to support her argument that 'collectible' actually means 'collectible in fact' and our research has failed to uncover a case so holding. Her contention is that the obligation of the excess insurer arises when the insured's medical expenses exceed the reimbursement actually received from the primary insurer irrespective of the fact that the primary coverage has not been exhausted. She urges us to disregard the fact that she has been reimbursed in full for her medical expenses and that the coverage of the primary insurer has not been exhausted.

DISCUSSION

It is well established law that 'In cases of uncertainty . . . the language of a contract should be interpreted most strongly Against the party who caused the uncertainty to exist.' (Civ.Code, § 1654; emphasis added.) 'If the insurer uses language which is uncertain any Reasonable doubt will be resolved against it; if the doubt relates to extent or fact of coverage . . ., the language will be understood in its most inclusive sense, for the benefit of the insured.' (Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 437--438, 296 P.2d 801, 809; emphasis added; see also State Farm Mut. Auto. Ins. Co. v. Johnston (1973) 9 Cal.3d 270, 274, 107 Cal.Rptr. 149, 507 P.2d 1357; Crane v. State Farm Fire & Cas. Co. (1971) 5 Cal.3d 112, 115--116, 95 Cal.Rptr. 513, 485 P.2d 1129.)

Relying on the above rules of contract interpretation, appellant argues that the word 'collectible' in Great American's insurance policy is ambiguous and susceptible to two interpretations. She asks: 'Does the word 'collectible' in the body of the other insurance clause mean: (1) That (Great American's) obligation becomes effective when the primary insurance policy limits of (USAA) have become uncollectible in fact? or (2) That (Great American's) obligation becomes effective only when Payment from (USAA) reaches the $5,000.00 limit, even if the Payment is not collectible in fact? ' (Emphasis added.)

The clause 'valid and collectible insurance' has widespread use in the insurance industry of the United States and has a well established meaning. Generally, the clause refers to insurance which is legally valid and is underwritten by a solvent carrier. Thus, reference to other 'valid and collectible insurance' in a pro rata clause of a personal liability policy is directed to a policy which is legal and valid, as distinguished from one which is invalid, as for fraud, or uncollectible, as for insolvency. (Friedfeld v. Royal Indemnity Company (Fla.App.1964) 167 So.2d 586, 587--588.) And in an automobile policy medical payments provision reading "shall be excess over any other collectible automobile medical payments insurance available to the injured person," the word 'collectible' means exhaustion of primary coverage. (Schweisthal v. Standard Mutual Insurance Co. (1964) 48 Ill.App.2d 226, 198 N.E.2d 860, 862.) While no California cases have been found which define the meaning of 'valid and collectible insurance' the words are used in the California Insurance Code. For example, Insurance Code section 11580.9, subdivision (d) provides: 'Except as provided in subdivisions (a), (b), and (c), where two or more policies affording Valid and collectible liability Insurance apply to the same motor vehicle 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 such 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.' (Emphasis added.) This section, which applies to a liability loss, is also applicable to medical reimbursement provisions contained in automobile liability policies. (See Ins.Code, § 11580.9.)

In the instant case the undisputed facts are that, as between USAA and Great American, USAA as insurer of the owned automobile is the primary insurer. The liability of Great American, as the excess insurer, does not arise until the limit of the primary insurer's coverage has been exhausted. (Owens Pacific Marine, Inc. v. Insurance Co. of North America (1970) 12 Cal.App.3d 661, 668, 90 Cal.Rptr. 826; Miller v. Western Pioneer Ins. Co. (1965) 237 Cal.App.2d 138, 46 Cal.Rptr. 579; Hartford Accident & Indemnity Co. v. Transport Indemnity Co. (1966) 242 Cal.App.2d 90, 51 Cal.Rptr. 168; Travelers Indem. Co. v. Colonial Ins. Co. (1966) 242 Cal.App.2d 227, 51 Cal.Rptr. 724; Universal Underwriters Ins. Co. v. Aetna Ins. Co. (1967) 249 Cal.App.2d 144, 57 Cal.Rptr. 240.)

In general, the liability of an excess insurer is stated in 8 Appleman, Insurance Law and Practice (1942) section 4914, page 400 as follows: '(T)he liability of the excess insurer does not arise until the limits of the collectible insurance under the primary policy have been exceeded. It should be noted that under this rule, the courts give no application to the other insurance clause in the primary policy, which provides that if the additional insured has other valid and collectible insurance, he shall not be covered by the primary policy. That is because the insurance under the excess coverage policy is not regarded as other collectible insurance, as it is not available to the insured until the primary policy has been exhausted.'

It follows that in the instant case the appellant had total insurance coverage in the amount of $15,798.64 ($5,798.64 was covered and paid by Founders; $5,000.00 was covered and $1,200.00 was paid by USAA, and $5,000.00...