Pacific Indem. Co. v. Liberty Mut. Ins. Co.

• Decision Date: 13 January 1966
• Citation: 48 Cal.Rptr. 667,239 Cal.App.2d 346
• Parties: PACIFIC INDEMNITY COMPANY, Plaintiff and Respondent, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant and Appellant. Civ. 28148.
• Court: California Court of Appeals Court of Appeals

Page 667

48 Cal.Rptr. 667

239 Cal.App.2d 346

PACIFIC INDEMNITY COMPANY, Plaintiff and Respondent, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant and Appellant.

Civ. 28148.

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

Jan. 13, 1966.

Spray, Gould & Bowers, Los Angeles, for appellant.

Ball, Hunt & Hart and Clyde C. Beery, Long Beach, for respondent.

KAUS, Justice.

Defendant, Liberty Mutual Insurance Company, appeals from a judgment to the effect that its policy covered the owner and the driver of a forklift as well as his employer and that, as between its policy and a policy issued by plaintiff, Pacific Indemnity Company, the former was primary and the latter excess.

On August 1, 1959 Don Carr Trucking Inc., (Carr) defendant's named insured, owned a Yale forklift which it had rented to Refiners Marketing Company (Refiners), plaintiff's named insured. On that day Halloran, an employee of Refiners, was operating the forklift in the course of his employment and it collided with a motorcycle operated by one Richardson. Richardson sustained very serious personal injuries and filed suit against Refiners, Carr and Halloran.

In effect at the time was a comprehensive liability policy issued by Pacific Indemnity to Refiners as the named insured. It is not questioned that this policy covers the accident in question and all defendants to the Richardson action as named or additional insureds. ¹

Pacific Indemnity caused Messrs. Ball, Hunt and Hart to appear for all three defendants. About ten months later it notified Liberty Mutual of its contention that the Pacific Indemnity policy was excess over a Liberty Mutual policy issued to Carr and demanded that Liberty Mutual assume the defense of the action. This being refused, Pacific Indemnity continued to defend the action and the Richardson case went to trial on March 21, 1961. At the trial Richardson dismissed against Carr and Halloran and a stipulated judgment with Refiners in the sum of $35,000.00 was entered and satisfied by Pacific Indemnity. Before the settlement, demand was made on Liberty Mutual that it agree to pay the $35,000.00 settlement offer which Richardson had then made, but the demand was refused.

The finding of the trial court that the sum of $35,000.00 was a fair and reasonable figure in compromise and settlement of the suit is not attacked on appeal.

The present action was filed shortly after the payment to Richardson. Standing to pursue Refiners' right under the Liberty Mutual policy is claimed by reason of paragraph fifteen of the Pacific Indemnity policy which provides in effect that if the insurer makes any payment under the policy, it is subrogated to all of Refiners' rights of recovery against any other person or organization.

The Piece de resistance of the litigation is the Liberty Mutual policy. The basic issue with respect to that policy is the question whether or not the forklift involved in the accident was a vehicle insured thereby.

The Liberty Mutual policy consists of two parts. The first part, called 'Automobile Policy' is an automobile policy in the usual form providing insurance to Carr, the named insured, to any driver driving an automobile with Carr's permission (Halloran) and to any a organization legally responsible for the use thereof (Refiners). The standard insuring clause obligates Liberty Mutual to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sustained by any person, caused by accident and arising out of the ownership, maintenance or use of any automobile.

Assuming that the forklift in question was an automobile, it is obvious that the accident and the defendants in the Richardson litigation are covered by the policy unless Liberty Mutual can pull quite a rabbit out of the hat.

This is supposed to be it: the first part of the policy, which we have partially described, provides that certain declarations are made a part thereof. These declarations are a document of some thirty pages. Item 3, appearing on the front page, reads in part as follows: 'The insurance afforded is only with respect to such and so many of the following coverages and hazards thereunder as are indicated by specific premium charge or charges.' The same page also shows that an 'advance premium' was charged for all the coverages listed. ² Made a part of the declarations is a schedule listing forty-one vehicles. The first thirty-six among those are all trucks, tractors, trailers and forklifts, the one in question being number thirty-six. Vehicles thirty-seven through forty-one are automobiles whose purpose of use is described as 'pleasure and business.' This schedule further shows premium charges in varying amounts for coverage E (collision) for some of the vehicles, but not all. No such charge is shown for the forklift in question, but that fact is not relevant to any issue on the appeal. A summary sheet has the somewhat cryptic notation that premiums for coverages A and B are 'included in gross receipts.' A schedule which is part of the declarations indicates that the premium rates for bodily injury and property damage liability are $1.66 and .71 per $100.00 of gross receipts respectively. The declarations further contain a definition of the word 'premium,' the pertinent portion of which we quote in the footnote. ³ It is thus apparent that Liberty Mutual adopted the gross receipts of Carr during the policy year as the measure which would determine the premium. There is absolutely nothing in the definition of 'premium' which would exclude rental for the forklift from gross receipts, nor for that matter has our attention been drawn to any provision in the policy to the effect that if the receipts due to a particular piece of equipment were excluded from gross receipts, as defined in the policy, that vehicle was not insured.

At the trial Liberty Mutual attempted to introduce evidence that when the premium was calculated after the policy year, its auditors deducted the sum of $59.00 received by Carr for 'pallet or lift rental' from the total gross receipts. From this premise it is then argued that no receipts for the rental of the forklift were included in the gross receipts which formed the premium base and that therefore the forklift was not an insured automobile under the policy.

While we are inclined to agree with counsel for Pacific Indemnity that there was no evidence before the trial court that the deduction of $59.00 referred to rentals received for the use of this particular forklift--the schedule lists several others--we do not rest our affirmance of the finding that the policy covered the forklift in question on that basis.

Defendant's entire argument is based on a fallacy. As already noted, item 3 of the declarations reads as follows: 'The insurance afforded is only with respect to such and so many of the following coverages and hazards thereunder as are indicated by specific premium charge or charges.' (Our emphasis.) There is, of course, a specific premium charge indicated for coverages A and B, namely $1.66 and .71 per $100.00 of gross receipts. Liberty Mutual not only reads the policy as if the word 'automobiles' were used instead of 'coverages and hazards'--it also argues that failure to include the revenue realized by Carr from a particular vehicle in the premium base, means that it is not covered because there was no 'specific premium charge' for that vehicle. The fact is that there was no 'specific' premium charged for any vehicle, since the premiums for coverages A and B were two lump sums.

The most that can possibly be said for Liberty Mutual's position is that their auditor, when calculating the premium after the end of the policy year, erroneously allowed Carr a credit of $59.00 for the rental receipts from renting pallets and forklifts, possibly from the forklift in question. This, of course, cannot affect the insurance which was in force at the time of the subject accident. As we read the definition of gross receipts which includes 'the total amount received from the rental of equipment, with or without drivers,' rentals for forklifts were clearly part of gross receipts.

Liberty Mutual introduced a great deal of evidence from three of its employees, the net effect of which was that under their interpretation of this insurance contract they did not think that the forklift in question was covered by the policy under consideration. We do not doubt their sincerity which was considerably buttressed by the existence of another policy issued to Carr which...