McGreehan v. California State Auto. Assn.

• Decision Date: 31 October 1991
• Docket Number: No. A051533,A051533
• Citation: 235 Cal.App.3d 997,1 Cal.Rptr.2d 235
• Court: California Court of Appeals Court of Appeals
• Parties: Francis P. McGREEHAN, Plaintiff and Respondent, v. CALIFORNIA STATE AUTOMOBILE ASSOCIATION, Defendant and Appellant.

Page 235

1 Cal.Rptr.2d 235

235 Cal.App.3d 997

Francis P. McGREEHAN, Plaintiff and Respondent, v. CALIFORNIA STATE AUTOMOBILE ASSOCIATION, Defendant and Appellant.

No. A051533.

Court of Appeal, First District, Division 3, California.

Oct. 31, 1991.

Rehearing Denied Dec. 2, 1991.

Review Denied Feb. 19, 1992.

Larry E. Lulofs, Michael Charles Comyns, Morton, Lulofs & Allen, Oakland, for defendant and appellant.

Oy-Lene Chong, Oakland, for plaintiff and respondent.

MERRILL, Associate Justice.

Respondent Francis McGreehan (McGreehan) filed the instant action for declaratory relief against appellant California State Automobile Association (CSAA) to resolve a coverage question under the uninsured motorist provisions of his automobile insurance policy. CSAA appeals from a summary judgment entered in McGreehan's favor. We reverse.

I

The essential facts are undisputed. McGreehan, in the course of his employment, was struck by a vehicle driven and owned by an uninsured motorist. At the time of the accident, McGreehan was insured by CSAA under an automobile liability insurance policy which included uninsured motorist coverage in the amounts of $30,000 per person and $60,000 per occurrence. McGreehan received workers' compensation benefits in the amount of $28,817.62. Claiming that his total estimated damages are in excess of $75,000, he filed a claim with CSAA in the amount of the policy limit, $30,000. However, CSAA rejected the claim stating that under the terms of the policy it had a right to offset its liability with the workers' compensation benefits received by McGreehan. On this basis, CSAA calculated that it was liable to pay only $1,182.38.

McGreehan filed the instant action for declaratory relief seeking a judicial determination as to this issue. Thereafter, he filed a motion for summary judgment. Following a hearing, the court granted the motion finding, as a matter of law, that under the terms of the policy, workers' compensation benefits are to be deducted from the total amount of damages to which respondent is entitled to recover from the uninsured motorist as a result of the accident and not merely from the policy limits. A subsequent motion for reconsideration filed by CSAA was denied and this appeal followed.

II

At issue is part IV of the CSAA policy entitled "UNINSURED MOTORISTS." Specifically of concern are two sections contained therein and how they relate to one another. The first of these sections, entitled "Coverage D--Uninsured Motorists Coverage" (coverage section), states in pertinent part: "We will pay damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle. The bodily injury must be caused by accident and arise out of the ownership, maintenance or use of the uninsured motor vehicle."

The second section, entitled "Limits of Liability" (limits of liability section), provides, inter alia: "The limits of liability shown in the Declarations [i.e., $30,000 per person and $60,000 per occurrence] apply, subject to the following: (1) the limit for 'each person' is the maximum for bodily injury sustained by any person in any one accident; (2) subject to the limit for 'each person,' the limit for 'each accident' is the maximum for bodily injury sustained by two or more persons in any one accident. [p] We will pay no more than these maximums regardless of the number of vehicles described in the Declarations, insured persons, claims, claimants or policies or vehicles involved in the accident."

The third paragraph of the limits of liability section, which we will hereafter refer to as "the offset clause," then states: "Any amounts payable will be reduced by: ... (3) any payment made or amount payable because of the bodily injury under any workers' compensation law...." (Emphasis added.)

McGreehan admits that the terms of the policy call for an offset in the amount of the workers' compensation benefits received. However, he argues for an interpretation of the policy whereby the offset is applied to the total amount of damages to which he is entitled to recover from the owner or operator of the uninsured motor vehicle. Under his interpretation, the offset clause contained in the third paragraph of the limits of liability section, would be applied to the unlimited "damages" referred to in the coverage section.

CSAA, on the other hand, argues for an interpretation of the policy whereby the subject offset is applied against the policy limits. Under its interpretation, the unlimited damages referred to in the coverage section would be modified by the policy limits set forth in the first paragraph of the limits of liability section. The offset clause would then be applied against these policy limits.

III

Preliminarily, we note our standard of review. 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, but it is our duty to make the final determination in accordance with the applicable principles of law.

The contractual provisions at issue in this case were drawn in compliance with California's uninsured motorist statute, Insurance Code section 11580.2. First enacted in 1959, the statute mandates that every automobile insurance contract contain a provision providing coverage for the insured against injury by an uninsured or underinsured motorist. The insured contributes directly to this fund through automobile insurance premiums. The amount of coverage is specified by statute (§ 11580.2, subd. (m)) and can be reduced or eliminated only by written agreement in a form approved by the statute (§ 11580.2, subd. (a)(1)-(2)).

Section 11580.2 authorizes insurers to include certain offsets within their policies. Relevant here is subdivision (h) which states: "Any loss payable under the terms of the uninsured motorist endorsement or coverage to or for any person may be reduced: [p] (1) By the amount paid and the present value of all amounts payable to him or her, his or her executor, administrator, heirs, or legal representative under any workers' compensation law, exclusive of nonoccupational disability benefits." (Emphasis added.)

The same issue raised by the parties herein was addressed squarely in Jarrett v. Allstate Ins. Co. (1962) 209 Cal.App.2d 804, 26 Cal.Rptr. 231. Jarrett involved an automobile liability insurance policy with uninsured motorist coverage provisions similar to those at issue in the instant case, contained in "Section II" of that policy. As in the case at bar, these provisions began with a general statement of coverage wherein Allstate promised to 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 use of such automobile.' " This language was then followed by a subsection limiting Allstate's liability for "each person" to " 'the limit of Allstate's liability for all damages arising out of bodily injury sustained by one person in any one accident....' " The limits of liability section of Allstate's policy also similarly provided an offset for workers' compensation: " '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.' " (Id., at p. 807, 26 Cal.Rptr. 231, emphasis added.)

As here, the plaintiff in Jarrett was injured by an uninsured motorist while working. His total damages exceeded his policy limit for uninsured motorist coverage. He contended that, under the terms of his policy, the workers' compensation benefits he received should be deducted from the total amount of damages. Allstate, on the other hand, took the same position as CSAA in the instant case, arguing that the benefits should be deducted from the amount of damages suffered up to the policy limit.

Before analyzing the issue, the Jarrett court enunciated the following ground rules for interpreting insurance contracts: 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. The primary object is to ascertain and carry out the intention of the parties. In construing insurance contracts, the standard to be used is the understanding of the ordinary person. If any ambiguity or uncertainty exists, an insurance policy is construed strictly against the insurer and most liberally in favor of the insured. 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. When the terms of the policy are plain and explicit, the courts will not opt for a forced construction so as to fasten a liability on the insurance company which it has not assumed. (Jarrett v. Allstate Ins. Co., supra, 209 Cal.App.2d at pp. 809-810, 26 Cal.Rptr. 231.)

Applying these principles to the case before it, the Jarrett court found the limits of liability section of the policy "complementary and not contradictory" to the coverage section. Noting that the limits of liability section incorporated by reference the policy's uninsured motorist coverage limit of $10,000 per person, the court said that whereas the principal coverage clause contained no limitation as to the amount Allstate would pay, its liability...