Meritplan Ins. Co. v. Universal Underwriters Ins. Co.

• Decision Date: 23 December 1966
• Citation: 247 Cal.App.2d 451,55 Cal.Rptr. 561
• Court: California Court of Appeals Court of Appeals
• Parties: MERITPLAN INSURANCE COMPANY, a corporation, Plaintiff, Cross-Defendant, Appellant and Respondent, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a corporation, Defendant, Cross-Complainant, Appellant and Respondent. Civ. 22170.

Page 561

55 Cal.Rptr. 561

247 Cal.App.2d 451

MERITPLAN INSURANCE COMPANY, a corporation, Plaintiff, Cross-Defendant, Appellant and Respondent, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a corporation, Defendant, Cross-Complainant, Appellant and Respondent.

Civ. 22170.

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

Dec. 23, 1966.

Channell & McNamara, William R. Channell, Walnut Creek, for plaintiff.

Ericksen, Ericksen, Kincaid & Bridgman, Richard D. Bridgman, Raymond W. Weaver, Jr., Oakland, for defendant.

SIMS, Justice.

In this action for declaratory relief between two liability insurance carriers, each has appealed from the judgment.

The judgment awards the plaintiff and cross-defendant Meritplan Insurance Company, the insurer under a policy which expressly covered the negligent driver and the car involved, contribution to the extent of one-half the amount expended in the settlement of one of two claims arising out of an accident involving its insured. It complains on appeal that it was entitled to a larger sum, first, because the respective liabilities of the insurers should have been prorated in accordance with the respective limits of insurance in force, and, second, because the trial court failed to order any contribution for the sums it disbursed in connection with the settlement of the second claim.

The judgment relieved the defendant and cross-complainant Universal Underwriters Insurance Company, the insurer under a policy which covered the seller of the vehicle involved and which also admittedly covered the purchaser-driver because of the seller's failure to comply with provisions of law controlling registration, of all liability other than that set forth above. It contends that the court erroneously required it to contribute a sum in excess of the amount necessary after plaintiff's coverage was exhausted. Universal further asserts that, if it is liable at all, the court correctly refused to require it to contribute more than one-half of the claim; and that it properly was not required to contribute to the second claim because Meritplan was a volunteer in settling that matter, without notice to, or consultation with Universal.

Application of established principles to the uncontradicted facts of the case reflects that plaintiff's contentions must be sustained and that the judgment is erroneous.

Meritplan's coverage

The court found that the driver-purchaser purchased an automobile from the dealer-seller on September 19, 1959; that on or about September 22, 1959, Meritplan issued to him a policy of liability insurance which described the automobile he purchased; and that up to the applicable policy limits, this insurance covered his liability arising out of an accident which occurred on September 30, 1959. The evidence reflects that the limits of bodily injury liability under this insurance were $10,000 for each person, and $20,000 for each accident.

Universal's coverage

The findings of the court reflect that in September 1959 the dealer-seller was insured with Universal; that following the sale to the driver-purchaser on September 19, 1959, the dealer-seller failed to comply with the provisions of sections 5900 and 5901 of the Vehicle Code; and that because of such failure Universal provided coverage, by operation of law, to the driver-purchaser, as well as to the dealer-seller, up to the applicable policy limits, for the injuries sustained by the claimant in the accident on September 30, 1959. The limits of bodily injury liability for this insurance policy were $200,000 for each person and $300,000 for each accident.

Relative liability

The trial court found that each insurer 'provided primary and co-equal insurance coverage * * * and that each should pay one-half. * * *' Its conclusions of law recite: 'that equitably both the policy issued by Meritplan * * * and the policy issued by Universal * * * provided primary and co-equal insurance coverage, and that each insurance company is obligated to pay one-half. * * *'

Universal acknowledges, as well it might, that under the foregoing circumstances its coverage is available for the payment of damages to the injured third person. ¹ (See Stoddart v. Peirce (1959) 53 Cal.id 105, 115, 346 P.2d 774; Truck Ins. Exchange v. Torres (1961) 193 Cal.App.2d 483, 487--488, 14 Cal.Rptr. 408; Harbor Ins. Co. v. Paulson (1955) 135 Cal.App.2d 22, 286 P.2d 870; Traders, etc., Ins. Co. v. Pac. Emp. Ins. Co. (1955) 130 Cal.App.2d 158, 162--163, 278 P.2d 493.)

It now contends that as between the two insurers the coverage provided by the insurer of the driver-purchaser should be exhausted before resort is had to the insurance furnished by its policy. Meritplan, not only resists this contention, but also asserts that as concurrent insurers the companies should apportion the loss according to their policy limits and equally.

The decisions in this state support Meritplan. Under circumstances similar to those in this case it has been held that the insurer of the seller must contribute pro rata in accordance with the limits of coverage of the respective policies. (Truck Ins. Exchange v. Torres, supra, 193 Cal.App.2d 483, 489--492, 14 Cal.Rptr. 408; Traders, etc., Ins. Co. v. Pac. Emp. Ins. Co., supra, 130 Cal.App.2d 158, 164--167, 278 P.2d 493.)

Universal acknowledges that the foregoing authorities are contrary to its position but seeks to avoid their effect on several grounds. An alleged conflict with the decision of this court in Canadian Indem. Co. v. Motors Ins. Corp. (1964) 224 Cal.App.2d 8, 36 Cal.Rptr. 159 is not cognizable. That action involved collision insurance and the issue of who was the owner of the damaged property. The opinion pointed out that the provisions of the Vehicle Code were designed 'to afford relief to Third persons who suffer damage as the result of the driver's negligence and not to the driver who is himself responsible for the accident.' (224 Cal.App.2d at p. 14, 36 Cal.Rptr. at p. 162) It concluded that for the purpose at hand the sale should be recognized despite failure to comply with the provisions of the Vehicle Code sections (id., p. 18, 36 Cal.Rptr. 159).

Similarly it has been held that failure to comply with the provisions of the Vehicle Code will not give an attaching creditor of the transferor rights superior to a prior buyer with equitable title. (Henry v. General Forming, Ltd. (1948) 33 Cal.2d 223, 227, 200 P.2d 785.) The court stated: "The requirements for registration of title and ownership, as indicated by the Code provisions, were enacted in the interest of the public welfare to protect innocent purchasers and afford identification of vehicles and person responsible in cases of accident and injury." The foregoing purpose was also alluded to in Venne v. Standard Accident Ins. Co. (1959) 171 Cal.App.2d 242, 247, 340 P.2d 30, 33. In Venne the court reversed a judgment which had provided pro rata contributions from the seller's insurer. The owner's compliance with the provisions of section 178 (now 5602) of the Vehicle Code by endorsement and delivery of the certificates of ownership and registration relieved him and his insurer of further liability. (171 Cal.App.2d 245--246, 340 P.2d 30.) The court went on to point out that the purchaser could not be a permissive user, even though title had not fully passed under the provisions of the Vehicle Code, where he not only had dominion over the vehicle, but also had the indicia of ownership (id., pp. 246--248, 340 P.2d 30).

From the foregoing, Universal asserts that since between the seller and the purchaser the latter was the owner, equitable principles should be applied in these proceedings, where no third persons are involved, and the purchaser's insurance should first be applied to the loss.

Where the question one of first impression the fact that the purchaser's insurer has specifically selected him as a risk, whereas he is merely an additional insured of the seller's policy as a statutory (Veh.Code, § 16451) permissive user, might have some persuasive effect. It is well established, however, that both the seller and the purchaser may be considered as 'owners' under the circumstances present in this case. 'There is no doubt that the word 'owner' as used in section 402 for the purpose of creating a liability thereunder, is not synonymous with that word as used in the ordinary sense of referring to a person or persons whose title is good as against all others. Under the Vehicle Act there may be several such 'owners' at any one time. One or more persons may be an 'owner,' and thus liable for the injuries of a third party, even though no such 'owner' possesses all of the normal incidents of ownership (citation).' (Stoddart v. Peirce, supra, 53 Cal.2d 105, 115, 346 P.2d 774; and see Truck Ins. Exchange v. Torres, supra, 193 Cal.App.2d 483, 487--488, 14 Cal.Rptr. 408.) Contentions similar to those advanced herein by Universal were advanced by the seller's insurer in Traders etc., Ins. Co. v. Pac. Emp. Ins. Co., wherein the court rejected the suggestion that the driver-purchaser's insurance be considered primary, and that of the seller, secondary (130 Cal.App.2d at pp. 165--166, 278 P.2d 493). The court also refuted a further contention that the seller and his insurer should be only secondarily liable because they were entitled to be subrogated to rights against the driver, and pointed out that the seller's insurance directly covered the liability of the driver as a permissive user (Veh.Code, § 16451) as well as the owner's vicarious liability. Veh.Code, §§ 17150, 17151).

The equitable considerations referred to in Amer. Auto. Ins. Co. v. Seaboard Surety Co. (1957) 155 Cal.App.2d 192, 195--196, 318 P.2d 84; Colby v. Liberty Mutual Ins. Co. (1963) 220 Cal.App.2d 38, 46--47, 33 Cal.Rptr. 538; and Truck Ins. Exchange v. Torres, supra, 193 Cal.App.2d 483, 489--490, 14 Cal.Rptr. 408, do not affect this case. In each of these cases such considerations were...