Lovy v. State Farm Insurance Co.

• Decision Date: 10 April 1981
• Citation: 117 Cal.App.3d 834,173 Cal.Rptr. 307
• Court: California Court of Appeals Court of Appeals
• Parties: George P. LOVY, Plaintiff, Cross-Defendant and Appellant, v. STATE FARM INS. CO., et al., Defendants, Cross-Complainants and Appellants, Employers Reinsurance Corp., Defendant, Cross-Defendant and Respondent. George P. LOVY, Plaintiff, Cross-Defendant and Appellant, v. STATE FARM INSURANCE COMPANY, Defendant, Cross-Complainant and Appellant, Carriers Insurance Company, Defendant, Cross-Defendant, and Appellant, Truck Insurance Exchange, Defendant, Cross-Complainant and Respondent. Civ. 41981, Civ. 43504.

Page 307

173 Cal.Rptr. 307

117 Cal.App.3d 834

George P. LOVY, Plaintiff, Cross-Defendant and Appellant, v. STATE FARM INS. CO., et al., Defendants, Cross-Complainants and Appellants, Employers Reinsurance Corp., Defendant, Cross-Defendant and Respondent.

George P. LOVY, Plaintiff, Cross-Defendant and Appellant, v. STATE FARM INSURANCE COMPANY, Defendant, Cross-Complainant and Appellant, Carriers Insurance Company, Defendant, Cross-Defendant, and Appellant, Truck Insurance Exchange, Defendant, Cross-Complainant and Respondent.

Civ. 41981, Civ. 43504.

Court of Appeal, First District, Division 2, California.

April 10, 1981.

Rehearing Denied May 8, 1981.

Hearing Denied July 3, 1981.

Cartwright, Sucherman, Slobodin & Fowler, Inc., and Lowell H. Sucherman, San Francisco, Leonard Sacks, Northridge, for George P. Lovy

Nagle, Vale, McDowall & Cotter, A Professional Corp., Vernon V. Vale, San Mateo, for State Farm Insurance Co.

Ropers, Majeski, Kohn, Bentley & Wagner, A Professional Corp., Michael J. Brady, Redwood City, for Farms Insurance Exchange, Truck Insurance Exchange, and Mid-Century Insurance Co.

Wines, Robinson, Wood & Anderson, Inc. by Thomas R. Fellows, San Jose, for Employers Reinsurance Exchange.

R. W. Levy, Fresno, for Carriers Insurance Co.

TAYLOR, Presiding Justice.

These consolidated appeals raise the question of the type and extent of coverages afforded under eight different insurance policies ¹ to Kondrack, the permissive driver of a vehicle rented from Hopkins by the plaintiff, George P. Lovy. ² For the reasons set forth below, we have concluded that the declaratory judgment in No. 43504 must be reversed, and the summary judgment in No. 41981 affirmed.

The basic underlying facts are not in dispute. So far as here pertinent, on May 25, 1973, Lovy rented a 1973 Honda from Hopkins for a pleasure trip to Yosemite National Park. At the time of the one-car accident on May 27, the Honda was driven by Kondrack with Lovy's permission. Lovy sustained catastrophic injuries, for which a jury in a subsequent separate personal injury action rendered a judgment in favor of Lovy against Kondrack in excess of $1,000,000. Additional facts will be added as required in our discussion of each policy.

No. 43504

As the major issues on this appeal pertain to the trial court's findings and conclusions that no coverage was afforded to Hopkins, the named insured, by three of the policies issued by Farmers Group, we turn first to these three policies: 1) Truck Ins. Exchange No. 9464-04-39, a comprehensive liability policy with limits of $500,000; 2) Farmers Insurance Exchange No. 9111-04-39, an automobile dealer's "unitized" policy with limits of $500,000; and 3) Truck Insurance Exchange No. 9372-04-79, an "umbrella" policy with limits of $2,000,000, which all parties agree afforded coverage only if the above mentioned automobile dealer's policy did so. As indicated above Preliminarily, we note that in doing so, the trial court did not mention the applicable statute, ³ the 1971 version of Insurance Code section 11580.1 (Stats.1971, ch. 1564, § 3, pp. 3135-3137). The court below also based its findings and conclusions on the inadmissible post-accident hearsay testimony of Farmers Group that in each policy, the insurer and its insured, Hopkins, intended to exclude coverage for a permissive user of a rental automobile. (Pepper Industries v. Home Ins. Co., 67 Cal.App.3d 1012, 1017, 134 Cal.Rptr. 904).

the trial court found that [117 Cal.App.3d 843] each of the above policies afforded no coverage here for a variety of different reasons discussed in detail below.

We turn first to the pertinent parts of Insurance Code section 11580.1, as it read at the time of the May 27, 1973, accident. The statute, a part of this state's financial responsibility law, ⁴ is to be liberally construed to provide monetary protection for "that ever changing and tragically large group of persons who ... suffer grave injury" (Metz v. Universal Underwriters Ins. Co., 10 Cal.3d 45, 51-53, 109 Cal.Rptr. 698, 513 P.2d 922; Interinsurance Exchange v. Ohio Cas. Ins. Co., 58 Cal.2d 142, 152-153, 23 Cal.Rptr. 592, 373 P.2d 640).

The statute in clear and unambiguous terms compels all issuers of automobile liability policies to provide coverage for permissive users by stating, so far as here pertinent, that no policy of automobile liability insurance covering liability arising out of the use of any motor vehicle shall be issued in this state on any motor vehicle principally used in this state unless it contains the provisions set forth in subdivision (b). " ⁵

Subdivision (d) provides as follows: "Notwithstanding the provisions of paragraph (4) of subdivision (b), or the provisions of Article 2 (commencing with Section 16450) of Chapter 3 of Division 7, or Article 2 (commencing with Section 17150) of Chapter 1 of Division 9, of the Vehicle Code, the insurer and any named insured may, by the terms of any policy of automobile liability insurance to which subdivision (a) applies, or by a separate writing relating thereto, agree as to either or both of the following limitations, such agreement to be binding upon every insured to whom such policy applies and upon every third party claimant:

"(1) That coverage under such policy shall not apply nor accrue to the benefit of any insured or any third party claimant "(2) That with regard to any such policy issued to a named insured engaged in the business of selling, repairing, servicing, delivering, testing, road-testing, parking, or storing automobiles, coverage shall not apply to any person other than the named insured or his agent or employee, except to the extent that the limits of liability of any other valid and collectible insurance available to such person are not equal to the limits of liability specified in subdivision (a) of Section 16059 of the Vehicle Code." (Emphasis added.) ⁶

while any insured motor vehicle is being used or operated by a natural person or persons designated by name. Such agreement shall remain in force as long as the policy remains in force, and shall apply to any continuation, renewal, or replacement of such policy by the named insured, or reinstatement of such policy within 30 days of any lapse thereof.

As the above quoted statutory provisions are part of a well entrenched sound rule of public policy, any attempt to exclude coverage for permissive users of insured automobiles is viewed with disfavor. All ambiguities and doubts must be resolved in favor of coverage. (Metz, supra, 10 Cal.3d 45, 109 Cal.Rptr. 698, 513 P.2d 922; Interinsurance Exchange, supra, 58 Cal.2d 142, 152, 23 Cal.Rptr. 592, 373 P.2d 640; Brown v. Merlo, 8 Cal.3d 855, fn. 13 at p. 872, 106 Cal.Rptr. 388, 506 P.2d 212; Universal Underwriters Ins. Co. v. Gewirtz, 5 Cal.3d 246, 95 Cal.Rptr. 617, 486 P.2d 145; National Indemnity Co. v. Manley, 53 Cal.App.3d 126, 133-134, 125 Cal.Rptr. 513; Jordan v. Consolidated Mut. Ins. Co., 59 Cal.App.3d 26, 40-42, 130 Cal.Rptr. 446; Pacific Indem. Co. v. Transport Indem. Co., 81 Cal.App.3d 649, 656-657, 146 Cal.Rptr. 648). Exclusions must be construed strictly against the insurer (Phelps v. Allstate Ins. Co., 106 Cal.App.3d 752, 758-759, 165 Cal.Rptr. 263).

Given the unchanged public policy and law of this state on the subject, the intention of the parties to the insurance contract is immaterial (Interinsurance Exchange v. Ohio Cas. Ins. Co., supra, 58 Cal.2d 142, 23 Cal.Rptr. 592, 373 P.2d 640; City of Mill Valley v. Transamerica Ins. Co., 98 Cal.App.3d 595, 159 Cal.Rptr. 635; Fratis v. Fireman's Fund American Ins. Companies, 56 Cal.App.3d 339, 343-344, 128 Cal.Rptr. 391; Home Indemnity Co. v. Mission Ins. Co., 251 Cal.App.2d 942, fn. 6 at p. 955, 60 Cal.Rptr. 544; Malmgren v. Southwestern A. Ins. Co., 201 Cal. 29, 33-34, 255 P. 512). Wint v. Fidelity & Casualty Co., 9 Cal.3d 257, 107 Cal.Rptr. 175, 507 P.2d 1383, ⁷ cited for the first time at oral argument is not apposite here, as there, no permissive user of a vehicle was involved. Surely, Farmers cannot maintain that the collusive intent of the insurer and the insured can prevent coverage mandated by statute. We agree that the questions before us are purely legal and reject the Farmers Group contention that the trial court's factual determination of the intent issue is relevant and binding on appeal if supported by substantial evidence. In this connection, we hold that the trial court's admission of evidence on the intent of the parties was erroneous as a matter of law. ⁸ (Pepper Industries, supra, 67 Cal.App.3d 1012, 134 Cal.Rptr. 904).

In the light of the above mentioned rules favoring coverage, we proceed to analyze and discuss each of the three Farmers Group policies in detail.

We turn first to Truck Insurance Exchange "Comprehensive Liability Policy" No. 9464-04-39. ⁹

The court below concluded that this policy did not cover Kondrack based on its "46. It was the intent of Hopkins and Truck Insurance Exchange that the Truck comprehensive policy would protect Hopkins in the event that a lessee or rentee defaulted on his obligation to procure insurance protecting Hopkins as well as the lessee or rentee." (Emphasis added.)

findings, as follows: "45. The Truck comprehensive policy was designed to protect Hopkins in the event that a lessee or rentee (pursuant to an agreement with Hopkins) failed to procure insurance which would protect not only the lessee or rentee, but Hopkins as well.

These findings were based on the testimony of Hopkins and a Farmers Group employee (Aballi) that the policy was designed to provide coverage only where there was a gap in insurance coverage, i. e., the rental customer failed to obtain insurance on the leased vehicle.

"47. In the instant case, there was no default by Lovy or Kondrack in connection with the procurement of insurance; to the contrary, Kondrack had two insurance policies available to him for the circumstances of the May 27, 1973, accident, namely, the...