Jarrett v. Allstate Ins. Co.

• Decision Date: 20 November 1962
• Citation: 26 Cal.Rptr. 231,209 Cal.App.2d 804
• Parties: Clifford JARRETT, Plaintiff and Appellant, v. ALLSTATE INSURANCE COMPANY, a corporation, Defendant and Respondent. Civ. 20323.
• Court: California Court of Appeals Court of Appeals

Page 231

26 Cal.Rptr. 231

209 Cal.App.2d 804

Clifford JARRETT, Plaintiff and Appellant, v. ALLSTATE INSURANCE COMPANY, a corporation, Defendant and Respondent.

Civ. 20323.

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

Nov. 20, 1962.

Bernard Allard, Oakland, Thomas Schneider, Oakland, of counsel, for appellant.

Hagar, Crosby & Rosson, Justin M. Roach, Jr., Oakland, for respondent.

MOLINARI, Justice.

This is an appeal from a declaratory judgment by the trial court interpreting an 'uninsured automobile' section of an automobile liability insurance policy issued by respondent, Allstate Insurance Company, to appellant, Clifford Jarrett. The sole question is whether the trial court properly interpreted the contested provision.

The Facts

This appeal is taken upon the same agreed statement of facts which was before the trial court. These facts are essentially as follows:

On April 3, 1959, Jarrett was insured by Allstate under an automobile liability insurance policy with limits of $10,000 for all damages sustained by one person under the 'uninsured automobiles' provision contained in 'Coverage S' of said policy. On said day Jarrett was employed as a truck driver by the Modesto Irrigation District and, in the course and scope of his employment was struck by an automobile owned and operated by one Robinson. Neither Robinson nor his car was covered by insurance. As a result of said accident Jarrett sustained personal injuries and damages. He became entitled to and did receive workmen's compensation benefits for the injuries sustained in the accident.

Section II of the policy in question entitled 'Protection Against Bodily Injury By Uninsured Automobiles,' contains within its provisions the following subtitles and clauses, which for purposes of reference we shall hereinafter refer to as Clause A, Clause B and Clause C, respectively:

'Coverage S--Bodily Injury Benefit Insurance 'Allstate will pay all sums which the insured shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury, sustained by the insured, caused by accident and arising out of the ownership, maintenance or used of such automobile.' (Clause A)

'Limits of Allstate's liability

'The limits of Allstate's liability stated on the Supplement Page under Coverage S as applicable to: 1. 'each person' is the limit of Allstate's liability for all damages arising out of bodily injury sustained by one person in any one accident; * * *.' (Clause B)

'Any loss payable to any person under the terms of this Section II shall be reduced by the amount paid and the present value of all amounts payable to him under any workmen's compensation law.' (Clause C)

Jarrett brought this action for declaratory relief to determine the meaning of these clauses. The trial court made its findings of fact and conclusions of law, and adjudged and decreed that Allstate is entitled to offset any sums determined to be payable under said policy by Allstate to Jarrett by the amount of all workmen's compensation benefits paid to Jarrett and the value of all amounts payable to Jarrett in the future for workmen's compensation benefits at the time said payment is made under said coverage by Allstate.

The Question Presented

Are workmen's compensation benefits payable to the insured deducted from the total amount of the damages sustained by him irrespective of the amount thereof, or only from the amount thereof which is within the policy limit of $10,000?

The latter alternative is the one adopted by the trial court as the basis for its judgment.

The issue before the trial court and before us involves the situation where the total amount of the damages exceeds $10,000 and both parties have so treated it. This results from the fact that because the total amount of the insured's claim against the insurer under the uninsured motorist coverage cannot exceed $10,000, the same result would obtain under either interpretation where the total amount of the damages sustained are $10,000 or less.

Contentions Of The Parties

Jarrett contends that the amount payable to him under the insurance policy should be determined by deducting his workmen's compensation benefits from the total amount of his damages, not from the $10,000 policy limit. Thus he asserts, by way of illustration, that if he suffers damage in the total sum of $15,000 and the workmen's compensation benefits amount to $10,000, he is entitled to the sum of $15,000, less $10,000, or the sum of $5,000. Allstate, on the other hand, maintains that Jarrett must deduct the $10,000 compensation benefits from the $10,000 policy limit, and accordingly, that he would not be entitled to anything. Under Jarrett's interpretation if the total damages amounted to $25,000 and the compensation benefits were in the sum of $10,000, he would be entitled to $10,000, because, while the difference between the amount of such damages and the amount of the benefits is $15,000, the most he can recover under the policy is its $10,000 limit. Applying Allstate's interpretation the same result would be reached by it as in the previous illustration.

The essence of Jarrett's argument is that Allstate has obligated itself to pay the difference between the sum specified in Clause A, which is not limited as to amount, and the amount specified in Clause C, subject to the limitation that the total amount payable to the insured shall not exceed the policy limit of $10,000. Allstate, on the other hand, urges the interpretation made by the trial judge to the effect that the sums specified in Clause A are limited to the amount referred to in Clause B, i. e., the policy limit of $10,000, from which policy limit the amount specified in Clause C is to be deducted and the balance, if any, paid to the insured as uninsured motorist coverage liability.

Interpretation of Insurance Contracts

Certain fundamental rules have been evolved with reference to the interpretation of insurance contracts. Thus it is a well-established principle that each clause of an insurance contract must be considered with reference to every other clause on which it has any bearing and all of the provisions are to be construed together for the purpose of ascertaining the intent of the parties. (Civ.Code, § 1641; New York Life Ins. Co. v. Hollender, 38 Cal.2d 73, 81, 273 P.2d 510; Jensen v. Traders & General Ins. Co., 52 Cal.2d 786, 790, 345 P.2d 1; Sullivan v. Royal Exchange Assurance, 181 Cal.App.2d 644, 646, 5 Cal.Rptr. 878.) The primary object is to ascertain and carry out the intention of the parties. (Civ.Code, § 1636; New York Life Ins. Co. v. Hollender, supra.) In construing insurance contracts, the standard to be used is the understanding of the ordinary person. (Arenson v. Nat. Automobile & Cas. Ins. Co., 45 Cal.2d 81, 83, 286 P.2d 816; Prickett v. Royal Ins. Co. Ltd., 56 Cal.2d 234, 237, 14 Cal.Rptr. 675, 363 P.2d 907; Artukovich v. St. Paul-Mercury Indem. Co., 150 Cal.App.2d 312, 324, 310 P.2d 461.) If any ambiguity or uncertainty exists an insurance policy is construed strictly against the insurer and most liberally in favor of the insured. (New York Life Ins. Co. v. Hollender, supra, 38 Cal.2d 73, 273 P.2d 510; Continental Cas. Co. v. Phoenix Constr. Co., 46 Cal.2d 423, 296 P.2d 801, 57 A.L.R.2d 914; Arenson v. Nat. Automobile & Cas. Ins. Co., supra.) Where a policy provision is susceptible of two constructions, the one more favorable to the policyholder should be adopted. (Bonfils v. Pacific Auto. Ins. Co., 165 Cal.App.2d 152, 159, 331 P.2d 766; Russ-Field Corp. v. Underwriters at Lloyd's, 164 Cal.App.2d 83, 92, 330 P.2d 432.) The rule of strict construction against the insurer and liberal construction in favor of the insured is particularly applicable where the policy provides for exceptions to or exclusions from the general import of the principal coverage clauses. The burden rests on the insurer to phrase such exceptions and exclusions in clear and unmistakable language. (Prickett v. Royal Ins. Co., Ltd., supra, 56 Cal.2d 234, 14 Cal.Rptr. 675, 363 P.2d 907; City of Santa Monica v. Royal Indem. Co., 157 Cal.App.2d 50, 54, 320 P.2d 136.) This rule requiring all uncertainties, ambiguities, inconsistencies and doubtful provisions to be resolved against the insurer and in favor of the insured is subject to the important limitation, however, that it is applicable only when the policy actually presents such uncertainty, ambiguity, inconsistency or doubt. In the absence thereof, the courts have no alternative but to give effect to the contract of insurance as executed by the parties. Accordingly, when the terms of the policy are plain and explicit the courts will not indulge in a forced construction so as to fasten a liability on the insurance company which it has not assumed. (New York Life Ins. Co. v. Hollender, supra, 38 Cal.2d 73, 81, 273 P.2d 510; Jensen v. Traders & General Ins. Co., supra, 52 Cal.2d 786, 790-791, 345 P.2d 1; Ogburn v. Travelers Ins. Co., 207 Cal. 50, 54, 276 P. 1004.)

Interpretation Of The Instant Insurance Policy

The construction of the instant contract is one of law because it is based upon the terms of the insurance contract without the aid of extrinsic evidence. Accordingly, we are not bound by the trial court's interpretation of it, but it is our duty to make the final determination in accordance with the applicable principles of law. (Estate of Platt, 21 Cal.2d 343, 352, 131 P.2d 825; Ziganto v. Taylor, 198 Cal.App.2d 603, 606, 18 Cal.Rptr. 229.) Our interpretation does, however, coincide with that made by the trial court.

Although the 'Supplement Page' of the instant insurance contract is not included in the copy of the policy attached to the 'Agreed Statement on Appeal' (Ex. 1), paragraph 2 of said statement sets forth as an agreed fact that the policy limits are '$10,000.00 for all damages sustained by one person under the 'uninsured motorist' clause contained in Coverage...