Metz v. Universal Underwriters Ins. Co.

• Decision Date: 11 September 1973
• Citation: 10 Cal.3d 45,109 Cal.Rptr. 698
• Court: California Supreme Court
• Parties: , 513 P.2d 922 Richard William METZ, a minor, etc., et al., Cross-Complainants and Respondents, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Cross-Defendant and Appellant. L.A. 29857.

Page 698

109 Cal.Rptr. 698

10 Cal.3d 45, 513 P.2d 922

Richard William METZ, a minor, etc., et al., Cross-Complainants and Respondents, v. UNIVERSAL UNDERWRITERS INSURANCE COMPANY, Cross-Defendant and Appellant.

L.A. 29857.

Supreme Court of California In Bank.

Sept. 11, 1973.

Ball, Hunt, Hart, Brown & Baerwitz, Joseph A. Ball and Albert H. Ebright, Beverly Hills, for cross-defendant and appellant.

Olney, Levy, Kaplan, Tenner, Jack Tenner and Magana, Olney, Levy & Cathcart, Los Angeles, for cross-complainants and respondents.

Peter Burrows, Los Angeles, as amicus curiae.

TOBRINER, Justice.

The accident which generated this litigation occurred when Richard Metz sustained severe injuries in a collision of his motorcycle with an automobile driven by Gomer Hamlin. Hamlin had leased the automobile from National Auto Leasing Corporation (hereafter National). Universal Underwriters Insurance Company (hereafter Universal) insured all cars owned by National. Although Universal here contends that its policy excludes or limits coverage of Hamlin as a permissive user of such a car, the trial court rendered a declaratory judgment holding Universal liable to Richard and Elmo Metz for the sum of $162,749.38; Universal appeals.

This opinion rejects Universal's contention, and reaches the following conclusions: (1) The exclusion in the policy issued by Universal to National of cars 'while rented to others' constituted an attempt to exclude a class of permissive users, and consequently conflicted with Insurance Code section 11580.1, subdivision (d). ¹ (2) The provision in the garage endorsement denying coverage to permissive users who have other applicable insurance does not, for two reasons, serve to bar coverage of Hamlin in the case at bar. First, in Universal Underwriters Ins. Co. v. Gewirtz (1971) 5 Cal.3d 246, 95 Cal.Rptr. 617, 486 P.2d 145, we held that an identical endorsement did not unambiguously exclude coverage of permissive users for accidents such as the instant one, distant from the business premises of the named insured. Second, that endorsement, by denying coverage to a class of permissive users, violated section 11580.1, subdivision (d). (3) The policy's attempt to limit coverage of permissive users to the minimum coverage permitted by Vehicle Code section 16059 violated the requirement of Insurance Code section 11580.1, subdivision (d), that permissive users be insured 'to the same extent' as the named insured.

1. Statement of facts.

Universal issued to National, together with Ogner Bros., Ltd., and Danny McGroo, Inc., as named insureds, a one-year comprehensive liability policy (General-Automobile), with coverage limits of $250,000 per person and $500,000 per accident, with coverage commencing October 1, 1965. ² Prior thereto, on May 21, 1965, National had leased a new Lincoln Continental to Hamlin for 36 months. Pursuant to the provisions of his lease with National, Hamlin purchased a policy from Allstate Insurance Company (hereafter Allstate) with limits of $10,000/$20,000 and an excess policy from Reserve Insurance Company (hereafter Reserve) with limits of $90,000/$280,000; both policies listed Hamlin and National as insureds.

On June 23, 1966, Hamlin, while driving the Lincoln, struck a motorcycle operated by Richard Metz, causing him severe injury. Elmo Metz, individually and as guardian ad litem for his son, sued Hamlin and National, and recovered judgment for $254,593.74, apportioned $10,000 against National (its liability as owner of the vehicle under Veh.Code, §§ 17150 and 17151 as of 1966) and $244,593.74 against Hamlin. The insurers engaged by Hamlin--Allstate and Reserve--paid a total of $100,000, the limits of their policies, in partial satisfaction of the judgment.

In this declaratory relief action initiated by Reserve, the Metzes filed a cross-complaint seeking to recover from Universal $154,593.74, the balance of the judgment after crediting the amounts paid by Allstate and Reserve. Granting the Metzes' motion for summary judgment, the trial court found Universal liable to them for $162,749.38, the unsatisfied balance of the judgment including accrued interest.

Although the Universal policy provides coverage against liability arising from the use of any automobile owned by National, and defines 'insured' as including anyone using such a car with National's permission, Universal maintains that its policy excludes coverage for Hamlin's liability to Metz. It first contends that the policy excludes coverage for the Lincoln, because the policy's description of 'hazards insured against' states that 'It is agreed that there is no automobile liability or medical payments coverage applicable to any vehicle While rented to others by the named insured.' ³ (Emphasis added.) A garage endorsement (number UU--3159), and a customer rental endorsement (number UU--3169), attached to the policy, reiterate the exclusion of automobiles 'while rented to others.' ⁴

Universal secondly argues that under the garage endorsement (UU--3159) coverage for Hamlin is excluded by a provision stating that coverage of permissive users 'shall not be applicable if there is any other valid and collectible insurance applicable to the same loss covering such person as a named insured . . . under a policy with limits of liability at least equal to the requirements of the Financial Responsibility Law.'

Universal thirdly contends that if the previously quoted exclusions are invalid as an unlawful restriction upon the coverage of permissive users, then its liability is limited to $10,000 pursuant to endorsement UU--3050, which states that 'When . . . a person or organization not insured under the provisions of this policy and attached forms becomes an Insured in conformity with the Financial Responsibility Laws or other laws of the State in which the accident occurs, such insurance as is afforded by this policy for bodily injury liability or for property damage liability shall comply with the provisions of such law which shall be applicable with respect to any such liability arising out of the ownership, maintenance, or use during the policy period of any automobile insured hereunder, to the extent of the coverage and limits of liability required by such law, but in no event in excess of the following limits of liability: Bodily injury liability-automobile . . . $10,000 each person . . . $20,000 each accident.'

2. The policy's exclusion of vehicles 'while rented to others' conflicts with the mandatory coverage of permissive users, imposed, as of the policy date, by Insurance Code section 11580.1, subdivision (d).

In Wildman v. Government Employees' Ins. Co., (1957) 48 Cal.2d 31, 307 P.2d 359, we held that the required coverage of permissive users 'must be made a part of every policy of insurance issued by an insurer since the public policy of this state is to make owners of motor vehicles financially responsible to those injured by them in the operation of such vehicles. . . . (F)or an insurer to issue a policy of insurance which does not cover an accident which occurs when a person, other than the insured, is driving with the permission and consent of the insured, is a violation of the public policy of this state.' (48 Cal.2d at p. 39, 307 P.2d at p. 364.)

Vehicle Code section 415, the statute at issue in Wildman, was reenacted as sections 16450 and 16451 in the 1959 revision of the Vehicle Code. In 1963, the Legislature amended section 16450 to provide that the requirements set forth in that and subsequent Vehicle Code sections 'shall apply only to those policies which have been certified as proof of ability to respond in damages as provided in Section 16431.' To govern noncertified policies, the Legislature enacted Insurance Code section 11580.1, and in subdivision (d) of that section required that every policy of automobile insurance contain a 'provision insuring the insured named therein and to the same extent that coverage is afforded such named insured in respect to said described motor vehicles, any other person using, or legally responsible for the use of, said motor vehicles, provided the motor vehicles are being used by the named insured or with his permission, express or implied.'

The net result of these enactments is that Vehicle Code section 16451 no longer mandates coverage of permissive users in ordinary automobile insurance policies, but only in certified policies (see State Farm Mut. Auto Ins. Co. v. Allstate Ins. Co. (1970) 9 Cal.App.3d 508, 525, 88 Cal.Rptr. 246); Insurance Code section 11580.1, however, applied to noncertified policies the same duty of mandatory coverage of permissive users as previously embodied in Vehicle Code section 16451. The 1963 legislation thus carried on the legislative policy of protecting those persons injured by the negligence of permissive users by requiring that all policies, certified or noncertified include permissive user coverage. (See Great American Ins. Co. v. Globe Indem. Co. (1970) 8 Cal.App.3d 938, 944--945, 87 Cal.Rptr. 653.) ⁵

Although Universal's policy provides coverage for permissive users, it unambiguously excludes automobiles 'while rented to others.' The issue before us thus must be whether this exclusion conflicts with Insurance Code section 11580.1, subdivision (d). ⁶ Universal concedes that a provision excluding coverage of renters would be an exclusion of a class of permissive users and hence void. (See Interinsurance Exchange v. Ohio Cas. Ins. Co. (1962) 58 Cal.2d 142, 150, 23 Cal.Rptr. 592, 373 P.2d 640; Financial Indem. Co. v. Hertz Corp. (1964) 226 Cal.App.2d 689, 697, 38 Cal.Rptr. 249.) It maintains, however, that its policy does not exclude a class of users, but a class of automobiles, namely, those rented to persons other than the named insured.

Universal points out that no statute or public policy requires an insurer to cover all vehicles owned by the named insured. (See Martinez v. Allstate Ins. Co. (1968) 261...