Knight v. Alefosio

• Decision Date: 25 July 1984
• Citation: 205 Cal.Rptr. 42,158 Cal.App.3d 716
• Court: California Court of Appeals Court of Appeals
• Parties: Val Maureen KNIGHT, Plaintiff and Respondent, v. Alexander ALEFOSIO, et al., Defendants, Farmers Insurance Exchange as Subrogee of Val Maureen Knight, Movant and Appellant. Civ. B 001094.

Page 42

205 Cal.Rptr. 42

158 Cal.App.3d 716

Val Maureen KNIGHT, Plaintiff and Respondent, v. Alexander ALEFOSIO, et al., Defendants, Farmers Insurance Exchange as Subrogee of Val Maureen Knight, Movant and Appellant.

Civ. B 001094.

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

July 25, 1984.

Raymond T. Kaiser and J. Rodney DeBiaso, Long Beach, for movant and appellant.

Silver, McWilliams & Booth, Donna J. Silver, and Thomas G. Stolpman, Wilmington, for plaintiff and respondent.

No appearance for defendants.

CARSTAIRS, ^* Associate Justice.

BACKGROUND

Plaintiff, Val Maureen Knight, purchased a contract of insurance from appellant herein in the State of Washington.

Plaintiff was involved in an automobile accident which occurred on August 17, 1979, in the State of California. Plaintiff filed a personal injury action against the driver of the other vehicle involved, Alexander Alefosio, and others. The demand included a claim for loss of income.

Pursuant to the terms of the insurance policy issued by appellant herein, appellant paid income continuation benefits to its insured Val Maureen Knight in the amount of $3,900. No other losses or damages were payable under the policy under the circumstances.

Following discussion and disagreement between counsel for plaintiff and appellant as to whether or not the policy of insurance provided for a contractual right of subrogation as to income continuation benefits, appellant sought leave to intervene.

The lower court determined that there was no such contractual right and leave to intervene was denied. This appeal arises out of such ruling. The order is appealable. (In re Veterans' Industries, Inc. (1970) 8 Cal.App.3d 902, 916, 88 Cal.Rptr. 303.)

APPELLANT'S CONTENTIONS

Appellant contends in this appeal that the trial court abused its discretion in holding that:

1. Appellant does not have a subrogation interest under 387, subdivision (a) of the Code of Civil Procedure.

2. The doctrine of equitable subrogation does not apply.

3. Appellant does not have the right of intervention under Code of Civil Procedure section 387, subdivision (b).

Generally, where the trial court need not determine a matter in a particular way, its decision is said to be within the court's discretion.

"[T]he showing on appeal is wholly insufficient if it presents a state of facts, a consideration of which, for the purpose of judicial action, merely affords an opportunity for a difference of opinion. An appellate tribunal is neither authorized nor warranted in substituting its judgment for the judgment of the trial judge. To be entitled to relief on appeal from the result of an alleged abuse of discretion it must clearly appear that the injury resulting from such a wrong is sufficiently grave to amount to a manifest miscarriage of justice; ..." (Brown v. Newby (1940) 39 Cal.App.2d 615, 618, 103 P.2d 1018.)

Section 387, subdivision (a), in pertinent part, sets forth the statutory rules for the authorization of intervention.

"Upon timely application, any person, who has an interest in the matter in litigation, or in the success of either of the parties, or an interest against both, may intervene in the action or proceeding...." ¹

The "interest," it has been said, must be of such direct or immediate character, that the intervener will either gain or lose by the direct legal operation and effect of the judgment. (People v. City of Long Beach (1960) 183 Cal.App.2d 271, 6 Cal.Rptr. 658, also Timberidge Enterprises, Inc. v. City of Santa Rosa (1978) 86 Cal.App.3d 873, 150 Cal.Rptr. 606, and Hausmann v. Farmers Ins. Exchange (1963) 213 Cal.App.2d 611, 29 Cal.Rptr. 75.)

Appellant claims that it has a contractual right of subrogation based upon a policy of insurance it issued to plaintiff.

Pursuant to the terms of the policy appellant paid benefits under a section of the policy entitled "Personal Injury Protection." These benefits were paid under subsection 2 of the Coverage D which is headed "Income Continuation Benefits." Appellant's policy does not contain an express reservation of its right to subrogate with respect to "Income Continuation Benefits." Had appellant intended to reserve such right with respect to payment of these benefits it would have expressly reserved such right as it did with respect to liability and uninsured motorist coverage set forth in other sections of the insurance contract.

In Part II, the section on Underinsured Motorists, the word "damages" is used several times. In Part V, labelled "Conditions," it is provided that the company is entitled to reimbursement of payment of "damages" when the insured party has been paid by the company and also recovers from another. ²

Reference to the policy shows that under the heading "Definitions" the word "Damages" is defined as the cost of compensating those who suffer bodily injury or property damage from an accident.

The moneys paid to plaintiff however, were paid under the section entitled "Income Continuation Benefits." No right of recovery is reserved in respect to these benefits. (Subsection 2 of Coverage D.) Appellant has not paid "damages." ³

That appellant provided differently for "damages" and "benefits" is evident. It is equally clear that appellant provided for a right of recovery of certain types of payment, and did not provide such right of Assuming arguendo that an ambiguity exists in the interpretation of the language of the insurance contract it is basic California law that where policy provisions are reasonably susceptible of different interpretations, ambiguities or doubt as to the meaning of the policy provisions must be resolved against the insurer. (Universal Underwriters Ins. Co. v. Gewirtz (1971) 5 Cal.3d 246, 250, 95 Cal.Rptr. 617, 486 P.2d 145; Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 269, 54 Cal.Rptr. 104, 419 P.2d 168.) In addition nowhere in the policy is there any statement that "benefits" and "damages" are used interchangeably as meaning the same thing. Where the insurance contract is silent as to subrogation rights it means that such a right was not bargained for and hence not acquired by the insurance company. In so holding, we are only giving effect to the carrier's probable intent as expressed in the policy it drafted. It follows therefrom that appellant is not a person who has an interest in the matter in litigation or in the success of either of the parties or an interest against both.

recovery in respect to "Income Continuation Benefits."

There was no abuse of discretion in denying intervention under Code of Civil Procedure section 387, subdivision (a).

EQUITABLE SUBROGATION

Subrogation is of two sorts: "legal" and "conventional." Legal subrogation has its source in equity and arises by operation of law. (Fifield Manor v. Finston (1960) 54 Cal.2d 632, 7 Cal.Rptr. 377, 354 P.2d 1073; 83 C.J.S., § 3, pp. 585, 586.)

It has been stated that legal subrogation arises by operation of law where a person having a liability or a right or a fiduciary relationship in the premises, pays a debt due by another under such circumstances that he is in equity entitled to the security or obligation held by the creditors whom he has paid. (83 C.J.S., § 3, p. 585.)

It does not arise from any contractual relationship between the parties, but takes place as a matter of equity with or without an agreement to that effect.

Appellant contends it is entitled to legal (equitable) subrogation in the premises, as well as conventional (or contractual) subrogation.

We have explained herein above that appellant does not have a contractual subrogation right.

We are also satisfied that the principle of equitable subrogation should not be applied here.

As has been said in Bater v. Cleaver (1935) 114 N.J.L. 346, 176 A. 889: "The doctrine of subrogation cannot be invoked to override the contract of the parties. It is not applicable where, as here, its enforcement would be inconsistent with the terms of the contract, or where the contract, either expressly or by implication, forbids its application." (176 A. p. 892.)

Likewise in 83 Corpus Juris Secundum, section 3, pages 585 and 586, the writer in reviewing decisions throughout the United States concludes: "The doctrine of subrogation cannot be invoked to override and displace the real contract of the parties, or where to do so would be inconsistent with the terms thereof, or where the contract either expressly or by implication forbids its application; and, if the liability of a party is fixed by contract, the doctrine cannot be used either to enlarge or defeat it."

We reject the contention of appellant that it enjoys a right of equitable subrogation notwithstanding its failure to reserve the right under the policy. This would be permitting the company to rewrite the policy to the detriment of its insured who had paid a premium for a designated benefit without the company's right of subrogation.

The reasonable expectation of the insured must be found to be that the company had no right of recovery (subrogation) in respect to Income Continuation Benefits.

"But where the policy reserves the right of subrogation with respect to claims paid under certain policy coverages, it does not have the rights as to other coverages which do not reserve the right." (Couch on Insurance (2d ed. 1983) § 61:19, p. 96.)

Our review of the authorities has not disclosed any case where the right of intervention was found to exist in favor of a party to an indemnity or insurance contract where a right of subrogation had been reserved as to one class of payment, and not reserved as to another.

The usual application of equitable subrogation has been as a device to achieve a just result by clothing a party with a right of recovery where he would otherwise be defeated by lack of privity. (Transit Casualty Co. v. Spink Corp. (1979) 94 Cal.App.3d 124, 132, 156 Cal.Rptr. 360.) Equitable subrogation is a legal device which permits a party who has been...