Smith v. Travelers Indemnity Co.

• Decision Date: 18 June 1973
• Docket Number: No. 1671,1671
• Citation: 108 Cal.Rptr. 643,32 Cal.App.3d 1010
• Parties: Dallas R. SMITH et al., Plaintiffs and Appellants, v. The TRAVELERS INDEMNITY COMPANY, Defendant and Respondent.
• Court: California Court of Appeals Court of Appeals

Page 643

108 Cal.Rptr. 643

32 Cal.App.3d 1010

Dallas R. SMITH et al., Plaintiffs and Appellants, v. The TRAVELERS INDEMNITY COMPANY, Defendant and Respondent.

No. 1671.

Court of Appeal, Fifth District, California.

June 18, 1973.

As Modified on Denial of Rehearing July 12, 1973.

R. W. Levy, Fresno, for plaintiffs-appellants.

Stammer, McKnight, Barnum & Bailey and James N. Hays, Fresno, for defendant-respondent.

OPINION

FRANSON, Associate Justice.

United Pacific Insurance Company (hereinafter 'Appellant') filed a complaint for breach of a liability insurance policy alleging that respondent failed to defend and indemnify Dallas Smith (hereinafter 'Smith') and Linda Iskenderian (hereinafter 'Linda') in a third party action and other third party claims for bodily injury and property damage, that appellant was subrogated to the rights of Smith and Linda resulting from respondent's breach of duty and that it is entitled to damages in the amount it paid out in defending and settling the action and the other claims. By its answer respondent denied any duty to defend and indemnify Smith or Linda and by way of affirmative defense, alleged that its coverage was excess as to any liability arising out of the accident and that appellant acted as a volunteer in settling the third party action and other claims without the consent of respondent.

On appeal, appellant asks this court to direct entry of judgment against respondent for its prorata share of the settlement and defense costs of the third party action and claims with interest and costs of suit.

On September 20, 1966, a Honda motorcycle operated by Roy Parsley and owned by Joyce Parsley collided with a 1959 Chevrolet pickup owned by Smith and driven by Linda. Leatherwood was a passenger on the motorcycle. The pickup was pulling a horsetrailer owned by Linda's father, Asan Iskenderian; Linda was using the trailer with permission of her father.

Linda was making a left turn at an intersection and the motorcycle came in contact with the right rear of the pickup; apparently there was no physical contact between the motorcycle and the trailer. ¹

At the time of the accident, appellant had in effect an automobile liability policy issued to Smith as the named insured and covering the pickup truck. The policy insured permissive users of the pickup; Linda was driving the pickup with the permission of Smith. The policy provided bodily injury liability coverage of $10,000 for each person and $20,000 for each accident and $5,000 property damage liability coverage.

At the time of the accident, respondent had in effect a 'comprehensive' liability policy which included a personal automobile liability endorsement issued to Asan Iskenderian as the named insured. The policy insured permissive users of owned automobiles and the word 'automobile' is defined to include a trailer.

Respondent's policy provided prorata liability coverage with other insurance except that the coverage for nonowned automobiles was excess over other insurance. The limits of liability under respondent's policy were $100,000 for each person and $300,000 for each accident, for bodily injury, and $10,000 for automobile property damage.

On July 3, 1967, Leatherwood filed an action against Linda and Smith alleging that he sustained personal injuries and damages as a result of Linda's negligent operation of the pickup truck; the complaint did not mention the trailer. Appellant undertook a defense of the action.

Respondent did not receive a report of the accident or a demand for defense of the lawsuit from either Linda or Smith. However, on January 24, 1968, appellant notified respondent in writing of the details of the accident including the fact that Linda was pulling the horsetrailer at the time of the accident; appellant requested that respondent furnish a prorata defense of the action. After investigation of the facts respondent refused to participate in the defense.

Appellant ultimately compromised and settled the third party action by paying $3,751.00 for the personal injuries of Leatherwood and $1,407.34 for attorney's fees and expenses in defending the action. The trial court found the amount of the settlement and defense costs to be reasonable. Appellant also paid Roy Parsley $151.63 for his personal injuries and paid Joyce Parsley $348.37 for damage to the motorcycle.

The trial court ruled that respondent was not obligated to defend the third party action or to pay any sum toward the bodily injury and property damage liability arising from the accident. It concluded that although respondent's policy covered the operation and use of the horsetrailer being towed by the pickup 'no liability attached under said policy in connection with . . . the use of the said horsetrailer.' The court's rationale as indicated by its findings was that there was no evidence of negligent conduct by Linda in the operation of the trailer nor was any such negligence a proximate cause of the accident. The court also relied on the fact that the complaint filed in the personal injury action did not mention the horsetrailer; that no notice of the accident was given by the insured under respondent's policy nor was any demand or request for coverage made on respondent until it received notice from appellant on January 24, 1968.

For the reasons hereafter stated, we hold that the trial court's findings and conclusions are erroneous as a matter of law.

Irrefragably, Linda's act of towing the trailer behind the pickup was a 'use' of the trailer. (St. Paul Fire & Marine Insurance Co. v. Hartford Accident & Indemnity Co., 244 Cal.App.2d 826, 831--832, 53 Cal.Rptr. 650; American Fire & Casualty Co. v. Allstate Insurance Co., (4th Cir.) 214 F.2d 523.) Linda was using the horsetrailer in the manner contemplated by respondent and its named insured, that is, by towing it behind an automobile. (See St. Paul Fire & Marine Insurance Co. v. Hartford Accident & Indemnity Co., Supra, 244 Cal.App.2d 826, 831, 53 Cal.Rptr. 650.)

The pivotal question is whether the accident arose out of that use. In Insurance Company of North America v. Royal Indemnity Co., (6th Cir. 1970) 429 F.2d 1014, a diesel tractor insured by Royal was pulling a trailer insured by INA when the tractor-trailer unit went out of control, crossed over the center of the highway and collided head-on with an oncoming vehicle. The INA policy provided that the insurance there afforded was primary insurance except when stated to apply in excess of or contingent upon the absence of other insurance. The INA policy further provided that the insurance was excess with respect to hired or nonowned automobiles. The reviewing court first concluded that since the trailer was owned by the named INA insured, the INA policy provided primary insurance on the trailer. The court next concluded that if the accident did not arise out of the use of the trailer, INA was liable only as an excess insurer of the tractor, even though it was the primary insurer of the trailer.

The trial court found 'There was no evidence that the trailer was defective or physically came in contact with the Williams vehicle (the other car in the accident), and it did not figure in the accident other than being a part of the tractor-trailer unit.' INA contended that under this finding the accident did not arise out of the use of the trailer.

The reviewing court stated that the phrase 'arising out of the use of the automobile' does not require a finding that the injury was directly and proximately caused by the use of the trailer; the phrase requires only a causal connection with the accident.

'The fact that the trailer did not come into physical contact with Williams' automobile is not determinative. The trailer was being used at the time of the accident. It cannot be said that the occurrence did not 'arise out of the use' of the trailer.' (Insurance Company of North America v. Royal Indemnity Co., Supra, at p. 1019) (See also American Fire & Cas. Co. v. Allstate Ins. Co., (4th Cir.) 214 F.2d 523.

As stated in Universal Underwriters Ins. Co. v. Aetna Ins. Co., 249 Cal.App.2d 144 at pages 150--151, 57 Cal.Rptr. 240, at page 246:

"The term 'using' when (employed) in the policy without restrictive terms, must be understood in its most comprehensive sense. It does not require that the injury be the direct and proximate result in any strict legal sense of the active movement of the motor vehicle covered by the policy.'

'. . . Thus, the fact that the operation of the motor vehicle . . . was not the proximate cause of the accident is immaterial; the accident did arise out of the use of the automobile. . . .'

Respondent's reliance on Truck Insurance Exchange v. Webb, 256 Cal.App.2d 140, 63 Cal.Rptr. 791, and Pacific Indemnity v. Truck Insurance Exchange, 270 Cal.App.2d 700, 76 Cal.Rptr. 281, is misplaced. These cases involved situations where the court found that the injury was directly caused by an independent act or intervening cause disassociated from and unrelated to the use of the insured vehicle. Both cases recognize that the insured vehicle need not be the proximate cause of the injury; they stand only for the proposition that if the accident was caused by a peripheral activity wholly independent of the use of the vehicle the injury does not 'arise out of' such use.

We conclude that the accident arose out of the use of the trailer; Linda used the trailer by towing it behind the pickup and her Negligent operation of the combined rig caused the accident. ² Because the third party plaintiff was injured as the result of Linda's use of the trailer, respondent's excess insurance provision as to coverage for nonowned automobiles does not come into play. ³

Respondent cannot escape liability for primary coverage merely because, in addition to Linda's use of the trailer, a nonowned automobile (the pickup) was involved. (Pacific Employers Insurance Co. v. Maryland Casualty Co., 65 Cal.2d 318, 54 Cal.Rptr. 385, 419...