Spangle v. Farmers Ins. Exchange

• Citation: 166 Cal.App.4th 560,82 Cal. Rptr. 3d 763
• Decision Date: 29 August 2008
• Docket Number: No. B198340.,B198340.
• Court: California Court of Appeals Court of Appeals
• Parties: PAMELA SPANGLE, Plaintiff and Appellant, v. FARMERS INSURANCE EXCHANGE et al., Defendants and Respondents.

166 Cal.App.4th 560

82 Cal. Rptr. 3d 763

PAMELA SPANGLE, Plaintiff and Appellant, v. FARMERS INSURANCE EXCHANGE et al., Defendants and Respondents.

No. B198340.

Court of Appeals of California, Second District, Division Five.

August 29, 2008.

[166 Cal.App.4th 563]

Shernoff Bidart & Darras, Michael J. Bidart, Ricardo Echeverria; The Ehrlich Law Firm and Jeffrey Isaac Ehrlich for Plaintiff and Appellant.

Gordon & Rees, Peter Schwartz and David L. Jones for Defendants and Respondents.

OPINION

MOSK, J.

INTRODUCTION

Anthony McCarty purchased a used Chevrolet Blazer for his 16-year-old son, Kevin,¹ from Triple Crown Auto Sales, Inc. (Triple Crown). Approximately one week later, Kevin was driving the Blazer when he collided with and seriously injured plaintiff and appellant Pamela Spangle (plaintiff). Plaintiff obtained a judgment against Kevin far in excess of the insurance covering him. Plaintiff now seeks to recover against a "garage operations" liability policy issued to Triple Crown by defendant and respondent Mid-Century Insurance Company (Mid-Century).² Plaintiff's theory is that, because Triple Crown incorrectly filled out the Department of Motor Vehicles (DMV) paperwork, title never transferred to Kevin, Triple Crown was still an owner of the Blazer when the accident occurred, and therefore Kevin was insured as a permissive user of the Blazer under Mid-Century's policy.

This opinion concludes that (1) there are triable issues of material fact regarding title to the automobile and consequently whether Kevin was a permissive user of the automobile; (2) it cannot be established as a matter of law that Kevin was not covered by the policy if he was a permissive user. The summary judgment against plaintiff is reversed.

BACKGROUND³

In June 2000, Kevin lived in Oregon with his mother and stepfather. He flew to California to visit his father, Anthony. On June 28, Anthony purchased from Triple Crown a used Chevrolet Blazer automobile for Kevin, paying the full purchase price in cash. Triple Crown required Anthony to sign the purchase agreement because Triple Crown had a policy of not entering into purchase agreements for automobiles with minors. Although a minor, Kevin signed the DMV "Report of Sale—Used Vehicle" form as the purchaser of the Blazer. Kevin also executed the DMV power of attorney form authorizing Triple Crown to forward the necessary documentation to the DMV to transfer ownership of the Blazer. At the time, Triple Crown was insured under a commercial automobile and garage operations liability policy issued by Mid-Century.

On July 5, 2000, Kevin was driving the Blazer when he made a left turn into oncoming traffic. The Blazer collided with a car driven by plaintiff. Plaintiff was severely injured, and her passenger was killed. In October 2000, plaintiff sued Kevin and his family to recover for her personal injuries.

At the time of the accident, Kevin's mother and stepfather were insured by Progressive Classic Insurance Co. (Progressive). While plaintiff's suit against Kevin was pending, Progressive denied coverage for the accident and sought a judicial declaration from the United States District Court for the Eastern District of California (the Progressive action) that the Blazer was neither a "covered vehicle" nor a "non-owned vehicle" under the Progressive policy. On cross-motions for summary judgment, the district court concluded that the Blazer was a "non-owned vehicle" as defined in the Progressive policy because legal title had never passed from Triple Crown to Kevin pursuant to Vehicle Code section 5600. First, the court reasoned, it was undisputed that Anthony, not Kevin, was the actual purchaser of the vehicle. Triple Crown therefore should have transferred title to Anthony, who in turn could have transferred title to Kevin. Second, because Kevin was a minor, the power of attorney that Kevin had signed purporting to authorize Triple Crown to transfer title was void. The district court concluded that Kevin was therefore covered by the Progressive policy as a "relative" of his mother driving a "non-owned vehicle" with permission.

After the district court rendered its decision in the Progressive action, plaintiff made a claim against Triple Crown's policy with Mid-Century. Plaintiff asserted that Kevin was "insured" as a permissive user under the policy because, as legal title had never passed from Triple Crown to Kevin, Triple Crown was an "owner" of the Blazer at the time of the accident. Mid-Century rejected plaintiff's position, contending that Triple Crown was never the legal or registered owner of the Blazer,⁴ and was not an equitable owner because Anthony had paid the full purchase price and taken possession of the vehicle. Furthermore, Kevin was not an "insured" because the policy excluded from the definition of "insureds" those "customers" of Triple Crown who had other insurance available.

In July 2004, plaintiff obtained a judgment against Kevin for $2.32 million. Plaintiff's attorney made a policy limits settlement demand of $1 million on Mid-Century. Mid-Century rejected the settlement demand, contending that regardless of whether Triple Crown might be deemed an "owner" of the Blazer at the time of the accident, Kevin and Anthony were excluded from coverage as "customers" of Triple Crown. Further, Mid-Century asserted that the accident did not "result[] from" Triple Crown's "garage operations" under the policy, reasoning that the coverage for "garage operations" applied only to the service and repair of automobiles. Along with used car sales, Mid-Century asserted, Triple Crown's business, for which the "garage operations" coverage applied, included "`Complete Auto Service.'"

In plaintiff's first amended complaint against Mid-Century, she alleged claims for insurance bad faith and breach of contract, and a claim as a judgment creditor for direct recovery against a debtor's insurer, pursuant to Insurance Code section 11580, subdivision (b)(2). Plaintiff moved for summary adjudication of the coverage issues pursuant to Code of Civil Procedure section 437c, subdivision (f). Mid-Century cross-moved for summary judgment or, in the alternative, summary adjudication.

The trial court denied plaintiff's motion for summary adjudication⁵ and granted Mid-Century's motion for summary judgment. The trial court granted Mid-Century's motion on the basis that there was no relationship between Kevin's use of the Blazer at the time of the accident and Triple Crown's "garage operations," as defined in the policy; as a result, the accident did not "result[] from" Triple Crown's "garage operations" and was not covered. The trial court declined to grant summary judgment on the ground that Kevin was a "customer," concluding that the term "customer" was ambiguous when applied to a minor. The trial court also declined to grant summary judgment on the ground that Triple Crown was not an "owner" of the Blazer, concluding that Mid-Century had failed to meet its threshold burden of production on the issue. The trial court entered judgment in favor of Mid-Century. Plaintiff timely appealed.

DISCUSSION

A. Standard of Review

"`When determining whether a particular policy provides a potential for coverage . . ., we are guided by the principle that interpretation of an insurance policy is a question of law. [Citation.]' [Citation.] [¶] `The insurer is entitled to summary adjudication that no potential for indemnity exists . . . if the evidence establishes as a matter of law that there is no coverage. [Citation.] We apply a de novo standard of review to an order granting summary judgment when, on undisputed facts, the order is based on the interpretation or application of the terms of an insurance policy.' [Citations.]" (Powerine Oil Co., Inc. v. Superior Court (2005) 37 Cal.4th 377, 390 [33 Cal.Rptr.3d 562, 118 P.3d 589] (Powerine).)

(1) The California Supreme Court set forth the rules governing the interpretation of insurance contracts in Powerine, supra, 37 Cal.4th 377. "In reviewing de novo a superior court's summary adjudication order in a dispute over the interpretation of the provisions of a policy of insurance, the reviewing court applies settled rules governing the interpretation of insurance contracts. . . . [¶] `"While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply." [Citations.] "The fundamental goal of contractual interpretation is to give effect to the mutual intention of the parties." [Citation.] "Such intent is to be inferred, if possible, solely from the written provisions of the contract." [Citation.] "If contractual language is clear and explicit, it governs." [Citation.]' [Citation.] [¶] `"A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable." [Citations.] The fact that a term is not defined in the policies does not make it ambiguous. [Citations.] Nor does "[d]isagreement concerning the meaning of a phrase," or "`the fact that a word or phrase isolated from its context is susceptible of more than one meaning.'" [Citation.] "`[L]anguage in a contract must be construed in the context of that instrument as a whole, and in the circumstances of that case, and cannot be found to be ambiguous in the abstract.'" [Citation.] "If an asserted ambiguity is not eliminated by the language and context of the policy, courts then invoke the principle that ambiguities are generally construed against the party who caused the uncertainty to exist (i.e., the insurer) in order to protect the insured's reasonable expectation of coverage." [Citation.]' [Citation.]" (Powerine, supra, 37 Cal.4th at pp. 390-391; accord, TRB Investments, Inc. v. Fireman's Fund Ins. Co. (2006) 40 Cal.4th 19, 27 [50 Cal.Rptr.3d 597, 145 P.3d 472].)

B. "Garage Operations" Coverage⁶

Mid-Century argues that the policy covers only liability "resulting" from the "ownership,...