Security Nat. Ins. Co. v. Hand

• Decision Date: 21 March 1973
• Citation: 31 Cal.App.3d 227,107 Cal.Rptr. 439
• Court: California Court of Appeals Court of Appeals
• Parties: SECURITY NATIONAL INSURANCE COMPANY, a corporation, Plaintiff and Respondent, v. Norman W. HAND et al., Defendants and Appellants. Civ. 39305.

Page 439

107 Cal.Rptr. 439

31 Cal.App.3d 227

SECURITY NATIONAL INSURANCE COMPANY, a corporation, Plaintiff and Respondent, v. Norman W. HAND et al., Defendants and Appellants.

Civ. 39305.

Court of Appeal, Second District, Division 5, California.

March 21, 1973.

As Modified April 18, 1973.

Linder, Schurmer, Drane & Bullis, and Walter H. Drane, Los Angeles, for defendants and appellants.

Hagenbaugh & Murphy, Van A. Hagenbaugh, and William D. Stewart, Los Angeles, for plaintiff and respondent.

KAUS, Presiding Justice.

Defendants ('claimants') appeal from a declaratory judgment to the effect that they recover nothing under the uninsured motorist coverage of plaintiffs' policy although claimants' uncompensated damages caused by an uninsured motor vehicle exceed the amount of such coverage.

THE PROBLEM IN SCHEMATIC OUTLINE

Motorist H is involved in a three car collision. His damages are in excess of $30,000 and are caused by the concurrent negligence of the other two drivers, X and M. There is no rational way to apportion the damages between X and M. X and his car are uninsured. M has liability insurance with a $15,000 per person limit. H's own policy includes the customary uninsured motorist coverage ('UMC') with a similar limit of $15,000. With his insurer's consent H collects $15,000 from M's insurer, which leaves him at least $15,000 short of being made whole. Is H's own insurer nevertheless discharged from any obligation under the UMC?

The trial court answered this question in the affirmative. We must disagree.

THE ACTUAL FACTS

The manner in which the parties had to proceed to submit the issue squarely to the court reveals possible practical shortcomings in the provisions of section 11580.2 of the Insurance Code, the statute which provides for semi-compulsory UMC. ¹ The action is one for declaratory relief, filed by Security National Insurance Company ('Security'), the insurer of defendant Norman W. Hand. On the day of the accident Mr. Hand and his wife Margaret were struck by one Maae who was drunk. Maae was insured by Mercury Casualty Company ('Mercury'). His policy had the statutory minimum limits of $15,000 per injury and $30,000 per accident. (Veh.Code § 16059.) Maae had been caused to collide with the Hand vehicle by X, a hit-and-run driver and, therefore, an uninsured motorist under the statute. (Ins.Code § 11580.2(b).) Mr. Hand received personal injuries, his wife was killed. The defendants to Security's present action for declaratory relief are Hand and the other heirs of Margaret. ('Claimants.')

Mercury and claimants agree, at least for present purposes, that Hands' damages for his own personal injuries exceed $30,000 and that a fair evaluation of claimants' wrongful death claim is also in excess of $30,000.

Claimants filed an action against Maae. Mercury offered to pay its policy limit of $30,000 to claimants. At this point certain provisions of section 11580.2 posed a dilemma for both sides to this litigation: claimants, who contended that even after accepting the $30,000 from Mercury they would still be entitled to collect a like amount from Security under the UMC, were afraid of losing their rights if they settled with Mercury without Security's consent. (Ins.Code § 11580.2(c)(3).) Security, on the other hand, while willing to give such consent, was afraid that it might thereby be deemed to waive its right of subrogation which only applies 'to the extent that payment was made.' (Ins.Code § 11580.2(g).) Since Security's entire argument to the effect that it owes claimants nothing was--and is--based on the proposition that if it pays its own $30,000 limits to claimants, it could get the money right back from Mercury as claimants' statutory subrogee, it was vital to its position that its status as such should be preserved.

The parties, therefore, very sensibly entered into a contract under which Security consented to claimants' accepting $30,000 from Mercury. In consideration for this consent it was agreed that in the present action for declaratory relief the court 'shall consider the matter as though Security had paid uninsured motorist benefits of ($15,000) on the wrongful death case of Mrs. Hand . . . and ($15,000) ² on the bodily injury case of Mr. Hand . . . and that the $30,000 will be paid by Mercury to (claimants) ($15,000 on the bodily injury case and $15,000 on the wrongful death case) after the final decision in the declaratory relief action. . . .' ³

As noted at the outset, the trial court reached the conclusion that the payment by Mercury in effect discharged Security from all further obligations. This result was reached with great reluctance under the supposed compulsion of subdivision (g) of section 11580.2 which reads as follows:

'(g) Subrogation. The insurer paying a claim under an uninsured motorist endorsement or coverage shall be entitled to be subrogated to the rights of the insured to whom such claim was paid against any person causing such injury or death to the extent that payment was made. Such action may be brought within three years from the date that payment was made hereunder.'

The court's reasoning was simply that Security's right to subrogation 'against any person' included the right to be subrogated to claimants' rights against Maae and his insurer Mercury. (Mills v. Farmers Insurance Exchange, 231 Cal.App.2d 124, 41 Cal.Rptr. 650.) Thus if Security had paid its limits of $30,000 to claimants, it would have been subrogated to their claim against Maae and could have collected and pocketed Mercury's limits of $30,000. The net effect of all this would be that Security is out nothing, while claimants collect $30,000. The agreement between the parties merely avoided this circuity.

DISCUSSION

We cannot agree that any such inequitable result was visualized by the Legislature. The coverage demanded by section 11580.2(a) is one which insured 'the insured . . . for all sums . . . which he . . . shall be legally entitled to recover as damages for bodily injury or wrongful death from the owner or operator of an uninsured motor vehicle.' It is agreed between the parties that claimants' total damages against Maae and X exceed $60,000. Thus even after Mercury's payment of $30,000, claimants are still entitled to recover at least another $30,000 from X. Under applicable principles of tort law the fact that Mercury's insured was also responsible for the full $60,000 in no way alters the fact that claimants are, as of this time, uncompensated to the extent of at least $30,000 'for bodily injury (and) wrongful death from the . . . operator of an uninsured motor vehicle.' $30,000 of that shortage is precisely what the statute and Security's policy as issued obligates it to pay. Elementary principles tell us that if there is any legitimate way to avoid holding that the Legislature took away in subsection (g) what it granted in subsection (a), we must do so. ⁴ Unless, by language that is 'conspicuous, plain and clear' the subrogation provisions of subsection (g) nullify the insuring provisions of the statute and the policy, the subsection simply cannot have the effect contended for by Security. (Gray v. Zurich Insurance Co., 65 Cal.2d 263, 273, 54 Cal.Rptr. 104, 419 P.2d 168; Oil Base, Inc. v. Continental Cas. Co., 271 Cal.App.2d 378, 388--389, 76 Cal.Rptr. 594. See also Steven v. Fidelity & Casualty Co., 58 Cal.2d 862, 878, 27 Cal.Rptr. 172, 377 P.2d 284.)

The issue which divides the parties can be posed in terms of the purpose of section 11580.2: was it intended that if the motorist who has paid his premium for UMC and whose damages are far in excess of the minimum statutory and policy limits for that coverage has been partly made whole by a concurrent tort feasor, the UMC never comes into play? Or, was it the intent of the Legislature that to the extent that the injured motorist who has purchased UMC cannot be made whole because of the financial irresponsibility of some of those who caused his loss, the Mills tried to establish that the statute its monetary limits? ⁵ The language of subsection (g) throws little light on the answer to this question. ⁶ Obviously it was not drafted with our problem in mind. Thus where it speaks of an 'insurer paying a claim under an uninsured motorist endorsement or coverage' it does not necessarily--'conspicuously, plainly or clearly,' if you will--refer to a situation where payment of the claim makes the insured only half-whole. Where the subsection speaks of a right to subrogation 'to the extent that payment was made,' it does not necessarily say that this right of subrogation takes precedence over the insured's unsatisfied claim for damages, concurrently asserted against the same source. It seems obvious that if the Legislature had intended that the problem presented by this case should be solved as Security claims it must be, it could, should and would have done so with clarity. The authorities teem with recognition of the remedial purpose of section 11580.2 and the compelled liberal construction of the statute for the purpose of carrying out its objective 'of providing compensation for those injured through no fault of their own.' (Katz v. American Motorist Ins. Co.,244 Cal.App.2d 886, 890--891, 53 Cal.Rptr. 669, 672; see also authorities gathered in Valdez v. Federal Mut. Ins. Co., 272 Cal.App.2d 223, 226--227, 77 Cal.Rptr. 411.) We have found no authority which would justify us in holding that the Legislature intended that subsection (g) be construed to thwart that purpose.

To support the proposition that the UMC insurer is entitled to subrogation against the tort feasor before its insured is made whole, Security refers us to the cases which dealt with the 'under-insured motorist' situation: Taylor v. Preferred Risk Mut. Ins. Co., 225 Cal.App.2d 80, 37 Cal.Rptr. 63; Calhoun v. State Farm Mutual Auto Ins. Co., 254 Cal.App.2d 407, 62 Cal.Rptr. 177 and Kirkley v. State Farm Mut. Ins. Co., 17 Cal.App.3d 1078, 95...