Ray v. Farmers Ins. Exchange

• Decision Date: 05 May 1988
• Docket Number: No. C000037,C000037
• Citation: 200 Cal.App.3d 1411,246 Cal.Rptr. 593
• Court: California Court of Appeals Court of Appeals
• Parties: James RAY, Plaintiff and Appellant, v. FARMERS INSURANCE EXCHANGE, Defendant and Respondent.

Page 593

246 Cal.Rptr. 593

200 Cal.App.3d 1411

James RAY, Plaintiff and Appellant, v. FARMERS INSURANCE EXCHANGE, Defendant and Respondent.

No. C000037.

Court of Appeal, Third District, California.

May 5, 1988.

As Modified May 27, 1988.

Nathaniel S. Colley, Sr., and John E. Wolfgram, Sacramento, for plaintiff and appellant.

Dennis M. Campos, Charity Kenyon, and Diepenbrock, Wulff, Plant & Hannegan, Sacramento, for defendant and respondent.

EVANS, Acting Presiding Justice.

Plaintiff James Ray (Ray) appeals from the judgment following a jury's general verdict for defendant Farmers Insurance Exchange (Farmers) on Ray's breach of contract and related actions. ¹ Ray asserts prejudicial instructional error and insufficiency of the evidence to support the verdict. The linchpin in Ray's case is Farmers's alleged obligation, under the terms of an automobile collision insurance policy, to compensate Ray, after repair of his wrecked car, for the car's diminution in market value because of its status as a wrecked car. We shall affirm the judgment.

FACTS

On October 25, 1979, a United Parcel Service (UPS) truck collided with Ray's 1978 Sapporo, which was parked in front of Ray's home. Ray had purchased the car about 10 months earlier, and it had a little over 8,000 miles on it at the time of the collision. The car was covered against loss by a collision insurance policy with Farmers.

Ray had the car towed to Vandenberg Motors for repair. He then phoned his insurance agent, Kevin Finn, to report the collision. Ray wanted a new car. Without denying coverage, Finn suggested that, because UPS's liability appeared clear, Ray might have the claim handled more expeditiously and would save putting out his deductible if he dealt directly with UPS.

Ray contacted UPS, which referred him to its insurer, Liberty Mutual Insurance Company. ² Liberty Mutual prepared a repair estimate, which was accepted by Vandenberg Motors with the understanding that it was subject to supplementation.

Meanwhile, Finn reported the loss to Farmers. Farmers audited and accepted Liberty Mutual's repair estimate, which was about $4,000. At the time of the collision, Ray's car had a market value of $7,100. After the collision, its salvage value was $1,650. Farmers notified Ray that it would pay for the cost of repair if Liberty Mutual did not. Both Farmers and Liberty Mutual refused Ray's demand, however, to replace the car or, alternatively, to guarantee the difference, if any, in the Vandenberg Motors repaired the car at a cost to Liberty Mutual, including supplemental work, of $4,521. The car was returned to Ray in March of 1980. Over the following 15 months, Ray took the car back to Vandenberg Motors several times for corrective mechanical and cosmetic work, all of which was done at no cost to Ray. Ray's primary complaint was a problem with the front end's shimmying at low speeds and with the car's pulling to the right upon braking. Vandenberg Motors worked on the problem, eventually "improv[ing] it a whole lot."

car's market value before the collision and after repair.

At trial, Ray presented evidence that the car continued to veer to the right upon hard braking. The evidence disclosed that the problem manifested itself, however, only at freeway speeds and not with city driving. About three or four months before trial (the trial was conducted in June 1984), an auto body expert examined Ray's car, using relatively new, state-of-the-art laser equipment. This examination revealed the cause of the car's handling problem to be misalignment of the front suspension cross-member and of the struts.

George Jump managed Vandenberg Motors's body shop at the time Ray had his car repaired there. Jump would not accept a wrecked car for repair work if it could not be repaired to a condition as good as or better than the car was in before the accident. Nor would Jump deliver to a customer a repaired car in an unsafe condition. Believing Ray's car repairable, Jump accepted the job for its repair. In Jump's opinion, Ray's car was returned in a well-repaired, safe, and cosmetically good condition.

Albert Bishop succeeded Jump as Vandenberg Motors's body shop manager in April of 1981. In the summer or late fall of 1981 or 1982, Ray brought his car into the shop and asked to have the front end checked because, he said, he was having continuing handling problems from the 1979 accident. An inspection of the car's underside revealed damage to the frame's right front cross-member, consistent with the car's having been driven over a cement parking stop. Bishop was skeptical of Ray's report that the front end problem he was experiencing was a result of the 1979 accident; the frame damage Bishop saw was fresh, at the most a month old. Bishop did not offer to repair the car, and Ray did not appear surprised by Bishop's assessment that the damage to the car's frame was recent.

Ray testified that, in his opinion, his car's market value after repair was about $5,500. John Vandenberg, an automobile dealer, testified that he discounts a car's value by 50 percent if it has sustained collision damage costing more than half of the car's pre-accident value to repair.

DISCUSSION

This case is fundamentally a matter of contract interpretation--i.e., whether Ray's collision insurance policy with Farmers provided coverage for diminution in the market value of his repaired car because of its status as a wrecked car. Ray contends the evidence at trial compelled a verdict in his favor on this point. He also contends instructional error misled the jury and had the effect of removing the issue from its consideration. ³ We need not consider the latter contention or the other assignments of error; they all fail because they are premised on a faulty foundation--that Farmers had a contractual obligation to pay the diminution in value claimed.

We begin our discussion with some basic propositions. The meaning to be ascribed to an insurance policy, as with any contract, is a question of law. It is a matter, in the first instance, for the trial court's determination, not the jury's. And unless interpretation of the policy turns on the credibility of extrinsic evidence, an appellate court may independently determine the policy's meaning regardless of what the trial court may have concluded. (See Bareno v. Employers Life Ins. Co. (1972) 7 Cal.3d 875, 881, 103 Cal.Rptr. 865, 500 P.2d 889; Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 865, 44 Cal.Rptr. 767, 402 P.2d 839; California Shoppers, Inc. v. Royal Globe Ins. Co. (1985) 175 Cal.App.3d 1, 35, 221 Cal.Rptr. 171; Evid.Code, § 310, subd. (a).) As a general rule, ambiguities and uncertainties in a policy of insurance are resolved in favor of the insured. (Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 269, 54 Cal.Rptr. 104, 419 P.2d 168.) An insurance policy is not rendered ambiguous or uncertain, however, because of a strained or grammatically incorrect reading of the policy's terms. (Atlas Assurance Co. v. McCombs Corp. (1983) 146 Cal.App.3d 135, 144, 194 Cal.Rptr. 66.) "Although we construe all provisions, conditions, or exceptions that tend to limit liability strictly against the insurer [citation], strict construction does not mean strained construction. [Citations.] We may not, under the guise of strict construction, rewrite a policy to bind the insurer to a risk that it did not contemplate and for which it has not been paid." (Safeco Ins. Co. v. Gilstrap (1983) 141 Cal.App.3d 524, 532-533, 190 Cal.Rptr. 425.) The words used in a policy of insurance are to be construed according to the plain meaning a layman would ordinarily attach to them, and the policy is to be construed as a whole, each clause helping to interpret the other. (McBride v. Farmers Ins. Group (1982) 130 Cal.App.3d 258, 260-261, 181 Cal.Rptr. 539.)

The insurance policy at issue here includes the following provision limiting coverage for loss caused by collision: "The limit of the Company's liability for loss shall not exceed the actual cash value of the damaged ... property, or if the loss is of a part, its actual cash value, at the time of loss, nor what it would then cost to repair or replace the damaged ... property or part with other of like kind and quality, less depreciation." The policy further provides: "The Company may pay for the loss in money or may repair or replace the damaged ... property or any of its parts, ..." Thus, the policy unambiguously gave Farmers the right to elect to repair Ray's vehicle if the cost to repair to "like kind and quality" was less than the actual cash value of the vehicle at the time of loss.

In Owens v. Pyeatt (1967) 248 Cal.App.2d 840, at page 849, 57 Cal.Rptr. 100, the court construed nearly identical policy provisions: "The type and extent of repair contemplated by this provision were such as would place the automobile in substantially the same condition it was before the accident.... If the damage was such the automobile could not be restored to this condition [the insurer] was required to pay the actual cash value thereof at the time of loss." The question presented was whether the insurer's election to repair is conclusive. The answer was yes, provided the repair places the automobile substantially in its pre-accident condition. If it does not, then the automobile is deemed a total loss and the insurer is liable for the pre-accident value of the car. We do not read Owens as requiring the insurer, under these circumstances, to repair the automobile to both its pre-accident condition and market value. "Where the insurer, in the exercise of its option to repair, restores the automobile to its normal running condition, there is by hypothesis no total loss of the insured vehicle." (15 Couch on Insurance (2d ed. 1983) § 54:29, p. 432, emphasis added.) Ray's reliance on Merchant etc. Assn. v. Kellogg E. & D. Co. (1946) 28 Cal.2d 594, at page 600, 170 P.2d 923, for the proposition that Farmers is liable for...