Jones v. Globe Indemnity Co.

• Citation: 305 F. Supp. 242
• Court: U.S. District Court — Eastern District of California
• Decision Date: 09 October 1969
• Parties: Howard L. JONES, Plaintiff, v. GLOBE INDEMNITY CO. et al., Defendants.

305 F. Supp. 242

Howard L. JONES, Plaintiff, v. GLOBE INDEMNITY CO. et al., Defendants.

Civ. S-685.

United States District Court E. D. California.

October 9, 1969.

Jack Halpin, Redding, Cal., for plaintiff.

Charles C. Dawson, Jr., Rich, Fuidge, Dawson, Marsh & Morris, Marysville, Cal., for Globe.

William A. Wilson, Hardy, Erich & Brown, Sacramento, Cal., for State Farm.

MEMORANDUM AND ORDER

MacBRIDE, Chief Judge.

This is a diversity action brought by plaintiff as third party beneficiary under policies of insurance issued by the defendants, Globe Indemnity Company (Globe) and State Farm Mutual Insurance Company (State Farm), to W. S. Price, Jr. The action was originally brought in state court but removed here by Globe under 28 U.S.C.A. § 1441. At the pre-trial conference the parties agreed to submit the matter under a stipulated set of facts.

On October 13, 1966, the plaintiff and a Milton Purdom were involved in a two vehicle accident on State Highway A-5 (also known as U. S. 99 North) about one mile north of Project City in Shasta County, California. At the time of the accident Purdom was driving his own pickup truck on his way to work where he was employed by Price. Plaintiff, who was driving his own automobile, filed an action in state court, and by stipulation, a judgment was entered against Purdom and Price for $100,000 plus 7% interest from February 1, 1968. The parties herein stipulate that at the time of the accident Purdom was acting in the course and scope of his employment to Price.

Plaintiff has collected $10,000 on his judgment from Purdom's insurer. The purpose of this action is to recover the remainder from Price's insurers, each of which issued a policy with a limit of $100,000 for injuries to one person. State Farm's policy is an automobile policy primarily covering Price's leased pickup truck. Globe's policy is a manufacturer's and contractor's liability policy covering the premises and operations of Price's logging business.

This lawsuit can best be described as a free-for-all with each defendant not only denying its own liability but at the same time vigorously asserting the liability of the other. The issue to be decided is whether either or both of these policies provided coverage to Price for his liability resulting from this accident.¹

The Globe Policy

At the time of the accident Purdom was carrying a radiator or radiator part in the back of his pickup. This belonged to one of Price's tractors at the logging site. On Price's instructions Purdom had previously taken it to be fixed (in Purdom's truck), and on the morning of the accident he was returning the repaired piece to the work site, again on instructions from Price. It was this errand which led to the liability of Price under the doctrine of respondent superior.

The pertinent portions of the Globe policy read as follows:

I. Coverage A — Bodily Injury Liability

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the hazards hereinafter defined.

* * * * * *

DEFINITION OF HAZARDS

Division 1 — Premises — Operations

The ownership, maintenance or use of premises, and all operations.

* * * * * *

EXCLUSIONS

This policy does not apply:

(a) under division 1 of the Definition of Hazards, and under coverage C, to the ownership, maintenance, operation, use, loading or unloading of (1) watercraft if the accident occurs away from premises owned by, rented to or controlled by the named insured, except insofar as this part of this exclusion is stated in the declaration to be inapplicable, (2) automobiles if the accident occurs away from such premises or the ways immediately adjoining, or (3) aircraft * * *

Globe does not argue that the policy provides no coverage for automobile accidents. The language of the exclusion clearly implies that it does provide coverage for automobiles² if the accident occurs on the premises or the ways immediately adjoining. Under the definition of hazards the accident would also have to be a result of operations or the ownership, maintenance or use of the premises. The insured's liability arose from the fact that his employee, who caused the accident, was acting in the course and scope of his employment. The employee was on an errand involving maintenance of machinery used in operations. It therefore follows that the liability was the result of an accident "arising out of operations." (See Coverage A and Definition of Hazards.)

Globe argues that since the accident occurred about 35 miles from the insured's logging operation, the exclusionary clause makes the policy inapplicable to this accident. To apply the exclusionary clause one must first determine the extent of the insured "premises." Price had no permanent place where his logging operations were carried out. His business consisted of moving from job site to job site cutting, bucking and loading timber in various timber stands in Shasta and other adjacent Northern California counties. The logging site at the time of the accident was on private property adjacent to Dog Creek Road. To get from the logging site to the accident scene one proceeds along an unpaved portion of Dog Creek Road approximately eight miles; then approximately one mile on paved road to Vollmers and the inter-section of U. S. 99; then about 24 miles on U. S. 99 to where the accident took place, about one mile north of Project City.³ Because part of the logging operation involved the watering of the unpaved portion of Dog Creek Road, Globe concedes that the premises could conceivably extend along that stretch. Globe also apparently concedes that "ways immediately adjoining" could include the rest of Dog Creek Road to the U. S. 99 intersection. But that, Globe argues, still places the accident over 20 miles from the premises or the ways immediately adjoining, and thus outside the ambit of the policy.

A common-sense reading of the policy's language supports this position. Plaintiff and State Farm advance several reasons why the exclusion should not be applied. Both argue that it is fatally ambiguous, and State Farm argues that its application would offend California's public policy. The ambiguity arises from the fact that the space left in the policy to provide for a description of the insured premises had been left blank. This was apparently done because of the nomadic nature of Price's business as previously described.

There are of course the cardinal rules of insurance contract construction that exceptions and exclusions are construed strictly against the insurer and liberally in favor of the insured and that ambiguities in language must be resolved against the insurer. E. g., Arenson v. National Automobile & Casualty Insurance Co., 45 Cal.2d 81, 83, 286 P.2d 816 (1955). But this does not mean that if any ambiguity is found the insurer automatically loses or the exclusion does not apply. In General Casualty Co. of America v. Azteca Films, Inc., 278 F.2d 161 (9th Cir. 1960), a diversity case applying California substantive law, the Ninth Circuit Court of Appeals has outlined some general principles of construction helpful in this case:

The test to be applied by the court in determining whether there is an ambiguity is not what the insurer intended its words to mean, but what a reasonably prudent person applying for insurance would have understood them to mean. citations In other words, the criterion is ambiguity from the standpoint of a layman, not from that of a lawyer. Where it is possible to adopt a construction which is favorable to the insured without doing violence to the policy wording that construction will be preferred. This anticipates a reasonable interpretation of the language and can apply only so far as the fair application of the ordinary meaning of language permits. But this rule of strict construction against the insurer cannot apply unless there is some reasonable basis for doubt. (278 F.2d at 167-168)

All rules of construction are subordinate to the leading principle that the intention of the parties, to be collected from the entire instrument, must prevail, unless inconsistent with some rule of law. (278 F.2d at 167)

Applying these rules to the instant exclusionary clause, I conclude that it does exclude this accident from coverage under the policy.

It is clear to me that the parties intended the premises to be the existent site of logging operations, and that Price's itinerant operations prevented any precise definition of premises in the policy. State Farm argues that since the policy does not describe any precise premises, the premises must be deemed to be anywhere in Shasta County in the general geographic area within which Price conducted his successive operations. Any accident, it argues, arising from operations and occurring in the general vicinity should be covered. However, applying the tests set out above, I cannot reasonably conclude that there was an ambiguity such that "premises" covered the entire county. To use the words of the Ninth Circuit, "a reasonably prudent person applying for insurance" would have understood premises, in the absence of precise description, to mean the present site of logging operations.

The same test convinces me that "ways immediately adjoining" cannot include the stretch of highway where the accident occurred, which was more than 20 miles from the "premises." State Farm argues that Pacific Employers Insurance Co. v. Maryland Casualty Co., 65 Cal.2d 318, 54 Cal.Rptr. 385, 419 P.2d 641 (1966), stands for the proposition that the words "ways immediately adjoining" in an insurance policy are ambiguous as a matter of law. I do not read the case to stand for any such thing. California Vehicle Code, § 16451 provides inter alia that an owner's policy of automobile liability insurance may not restrict the...