Mercury Ins. V. Enterprise Rent-A-Car

Decision Date28 March 2000
Docket NumberRENT-A-CAR
Citation95 Cal.Rptr.2d 222,80 Cal.App.4th 41
Parties(Cal.App. 2 Dist. 2000) MERCURY INSURANCE COMPANY, Plaintiff and Appellant, v. ENTERPRISECOMPANY OF LOS ANGELES et al., Defendants and Respondents. B120256 Filed
CourtCalifornia Court of Appeals Court of Appeals

APPEAL from judgments of the Superior Court of Los Angeles County. Michael B. Rutberg, Judge. (Retired judge of the superior court sitting under assignment by the Chairperson of the Judicial Council.) Affirmed.

(Super. Ct. No. TC 009407)

Silva, Clasen & Raffalow, Susan M. Hamilton and Michael J. Convey for Plaintiff and Appellant.

John M. Boyko for Defendant and Respondent Enterprise Rent-A-Car Company of Los Angeles.

Black, Compean & Hall, Frederick G. Hall and Vicente Valencia, Jr. for Defendant and Respondent California Insurance Guarantee Association.

JOHNSON, Acting P. J.

CERTIFIED FOR PUBLICATION

WOODS, J.

Plaintiff Mercury Insurance Company ("Mercury") appeals from judgments entered after the court granted summary judgments in favor of defendants Enterprise Rent-A-Car Company of Los Angeles ("Enterprise") and California Insurance Guarantee Association ("CIGA"). Plaintiff sought to recover payment from defendants of the uninsured motorist ("UM") bodily injury benefits it had paid to its insured. We affirm.

FACTUAL AND PROCEDURAL SYNOPSIS
I. Underlying Action

Mercury is an insurance carrier which offers and sells to members of the general public automobile liability insurance policies which meet the requirements of Insurance Code sections1 11580.1 and 11580.2. Mercury issued such a policy ("the Policy") to Koji Okamoto for the period February 4, 1993, to August 4, 1993. The Policy provided UM coverage limits of $30,000 per person and $60,000 per accident for the benefit of the insureds of the Policy. Koji's son, Mamoru Gary Okamoto ("Okamoto"), qualified as an insured under the Policy.

Enterprise is a corporation authorized to do business in California for, among other things, the short term rental of automobiles to the general public. As owner of the vehicles it rents, Enterprise complies with California's financial responsibility laws by posting a cash deposit pursuant to Vehicle Code section 16054.2.

Enterprise was the owner of a certain 1993 Nissan, which it had rented to Toyet Thi Nguyen pursuant to a rental agreement. Nguyen was insured under a policy issued by National Colonial Insurance Company ("National Colonial"). National Colonial was a member insured of CIGA.

On May 23, 1993, while Okamoto was a passenger in the rental vehicle operated by Nguyen, the rental vehicle was involved in an accident in Clark County, Nevada. As a result of the accident, on September 1, Okamoto brought an action against Nguyen and Enterprise alleging Nguyen had negligently operated the rental vehicle and that negligence was the cause of Okamoto's injuries. Okamoto alleged he incurred medical expenses and suffered lost earnings totaling at least $68,673.

National Colonial was declared insolvent within one year of the accident, triggering the statutory rights, duties and protections of CIGA.

On January 7, 1994, Okamoto presented a claim to Mercury under the UM coverage of the Policy.

After Enterprise was served and filed its answer, it engaged in an exchange of pre-trial discovery with Okamoto through July 7, after which time, it learned Mercury allegedly had made a payment in settlement of Okamoto's claim.

Before making the payment in settlement of the claims of its insured, Mercury attempted to elicit Enterprise's coverage position for the alleged losses from ELCO Administrative Services ("ELCO"), Enterprise's in-house claims handling office.

On March 18, Mercury wrote to Enterprise requesting that Enterprise state its position in writing with respect to Okamoto's claim. Neither Enterprise nor ELCO responded to the letter prior to June 14.

Prior to the settlement, on May 26, a Mercury representative telephoned and spoke with Ralph Thompson of ELCO. Thompson "advised that ELCO acknowledged its financial responsibility as owner of the vehicle involved in the accident, however, ELCO's position was that it would pay on the claim only after the case had been tried to a conclusion and a judgment entered against the driver. At this time, Mr. Thompson advised, ELCO might consider paying the judgment and suing the driver for reimbursement."

On May 27, counsel for Okamoto in the underlying action demanded in writing that Mercury settle the UM claim for the $30,000 policy limit. Counsel attached correspondence from CIGA, dated December 9, 1993, advising that pursuant to section 1063.1, et seq., the subject claim would be a "covered claim" only if there was no other insurance available, including collision and UM coverage under any other policy. CIGA's letter stated, "If uninsured motorist coverage is provided under an automobile policy, this claim must first be presented to that carrier." (Original emphasis.)

Also attached to the demand letter was a January 11, 1994, letter from Enterprise to CIGA, which requested that CIGA accept the tender of the defense of the claim, stating in part that Enterprise was "permissibly uninsured" for the loss. The letter quoted parts of the rental agreement:

"'Owner does not provide, extend, or afford any insurance coverage to renter, passenger, or authorized operator through this agreement.'"

"'Renter shall defend, indemnify, and hold owner harmless from all losses, liability, damages, injuries, claim demands, lawsuits, etc . . .'"

As a result of Okamoto's claim against the Policy, Mercury paid its $30,000 limit under the UM provisions of the Policy. The settlement of Okamoto's claim was concluded on about June 10. The settlement was concluded pursuant to a release and trust agreement.

The Policy required Okamoto to submit proof to Mercury that Enterprise's ownership financial responsibility limit of $15,000 per person pursuant to section 17151 had been exhausted by payment of either settlement or judgment. At no time before the settlement was concluded, had Okamoto submitted such proof to Mercury.

II. This Action

In June 1996, Mercury filed this action against Enterprise, CIGA and Nguyen, asserting causes of action for declaratory relief, subrogation, equitable indemnity and negligent entrustment of the rental vehicle. Mercury sought to recover the UM benefits of $30,000 it had paid to Okamoto. An amended complaint was filed adding a breach of statutory duty cause of action against CIGA. Enterprise later dismissed Nguyen from the action and dismissed the negligent entrustment cause of action.

The parties stipulated to a set of facts, and each party filed a summary judgment motion. The court denied all three motions.

Subsequently, Enterprise and CIGA filed separate second motions for summary judgment based on the same stipulated facts. The court granted both motions. As to Enterprise, the court ruled the loss vehicle was insured by Enterprise, and as such, was an "insured vehicle" pursuant to section 11580.2, subdivision (p)(1) and an "underinsured" vehicle pursuant to section 11580.2, subdivision (p)(2) in that Enterprise's financial responsibility was for an amount less than the UM limits provided in the Mercury policy, and as Mercury's insured "failed to exhaust, or file proof of the exhaustion of, [Enterprise's] financial responsibility limits, . . . [] [Mercury] had no obligation to make payment to its insured" pursuant to section 11580.2, subdivision (p)(3). As a result, Mercury was not entitled to any rights of subrogation, equitable indemnity or contribution.

In respect to CIGA, the court ruled that Mercury's claim was an obligation to an insurer excluded from "covered claims," pursuant to section 1063.2, subdivision (e) and section 1063.1, subdivision (c)(4). The claim was not a "covered claim" pursuant to section 1063.1, subdivision (c)(5), which excludes the portion of any claim in excess of any applicable limits provided in the now insolvent carrier's policy.2 The claim was also not a "covered claim" pursuant to section 1063.1, subdivision (c)(9) because it was covered by other insurance, i.e., Enterprise's cash deposit. Lastly, the court ruled the claim did not fall within the statutory exception of section 1063.2, subdivision (c)(1), granting a UM insurer a right of subrogation against CIGA.

After the court entered judgments on both motions, appellant filed a timely notice of appeal from those judgments.

DISCUSSION
I. Introduction

In this action, Mercury sought to recover from Enterprise and CIGA the UM benefits it had paid its insured. The trial court granted summary judgments in favor of Enterprise and CIGA. Summary judgment motions are subject to independent review. (Buss v. Superior Court (1997) 16 Cal.4th 35, 60.) Mercury contends it is entitled to recover $15,000 each from Enterprise and CIGA.

Mercury posits its payment was made in good faith and it was not a volunteer.

Mercury contends the law is unresolved regarding whether UM coverage is triggered solely on the status of the driver or whether both the owner and driver must be uninsured for UM coverage to apply. Mercury further contends that the lack of resolution in the law could have subjected it to a bad faith action if it had not paid its insured.

In support of its position, Mercury cites a treatise in which the authors opine that the Legislature intended for uninsured protection to apply when either one of the responsible parties lacked the requisite coverage so that if either the owner or operator is not insured, the vehicle is uninsured, and the car qualifies as an uninsured motor vehicle under the section 11580.2, subdivision (b). (Clifford & Eisler, Cal. Uninsured Motorist Law (5th ed. 1993) 6.40, pp. 6-10 -- 6-12.)

However, another treatise defines an "uninsured motor vehicle" as including "one for which no bodily injury liability insurance is...

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