State Farm Mut. Auto. Ins. Co. v. Johnston

• Decision Date: 03 April 1973
• Citation: 107 Cal.Rptr. 149,507 P.2d 1357,9 Cal.3d 270
• Parties: , 507 P.2d 1357 STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Appellant, v. Billy Milton JOHNSTON et al., Defendants and Respondents. Sac. 7944. In Bank
• Court: California Supreme Court

Page 149

107 Cal.Rptr. 149

9 Cal.3d 270, 507 P.2d 1357

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Appellant, v.Billy Milton JOHNSTON et al., Defendants and Respondents.

Sac. 7944.

Supreme Court of California,

In Bank.

April 3, 1973.

Rehearing Denied May 3, 1973.

Bledsoe, Smith, Cathcart, Johnson & Rogers and Robert A. Seligson, San Francisco, for plaintiff and appellant.

Raymond E. Bright, John J. Healy, Warren A. Staiger and Hutchins, Staiger & Preston, San Francisco, for defendants and respondents.

McCOMB, Justice.

This is an appeal from a declaratory judgment that an insurance policy issued by plaintiff covered defendantBilly Milton Johnston for an accident on March 9, 1968, when he was driving a 1964 Chevrolet Impala.The trial court found coverage under the 'temporary substitute automobile' provision of the policy.The record sustains the propriety of that ruling, and other points raised by the parties need not be discussed.

Facts: The facts are not essentially disputed.On March 13, 1967, plaintiff issued a policy to Milton H. Johnston covering a 1957 Chevrolet, and this policy was in full force and effect on the date of the accident here involved.Milton was the registered owner of the car and paid the premiums to plaintiff.However, the car was actually purchased for the use of his son Billy under an arrangement whereby Billy was to pay for the car, its upkeep, and insurance, while the car would remain in Milton's name.Billy was then under 18 years of age and was living with his parents in their Lodi home.

On September 30, 1967, shortly after he was 18 years old, Billy married and moved with his wife to Stockton.He took with him the 1957 car with the consent of his father that he would continue to use it as before when he was at his parents' home.In December 1967, the car became inoperable by reason of a frozen engine.Sometime in January 1968, Billy found a 1964 Chevrolet Impala suitable for the same use as the 1957 car.Billy purchased the 1964 Chevrolet with his father's approval, but this time the car was registered in Billy's name.Billy used the 1964 car for his driving needs the same as he had previously used the 1957 car, and he then sold the inoperable 1957 car.On March 9, 1968, while driving the 1964 car, Billy collided with another vehicle driven by John Mathew Shinn.Mr. Shinn was seriously injured, and his wife was killed.This tragic accident occurred four days before expiration of the policy period.Milton had not bought another car or cancelled his 1967 policy with its coverage provisions.On March 21, 1968, Billy went to plaintiff to inquire about future coverage for his 1964 car; and it was then that plaintiff learned of the March 9th accident, Billy's purchase of the 1964 car, and his sale of the 1957 car.

Question: Did plaintiff's policy give defendantBilly Milton Johnston coverage for the subject accident'

Yes.Plaintiff's policy provided coverage for the 'owned automobile'--meaning the described vehicle and including a 'temporary substitute automobile,' which was defined as 'an automobile not owned by the named insured or his spouse while temporarily used with the permission of the owner as a substitute for the described automobile when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction.'This clause commonly found in automobile liability insurance policies is primarily designed for the benefit of the insured.The purpose is not to defeat liability but reasonably to define coverage by limiting the insurer's risk to one operating vehicle at a time for a single premium.(12 Couch on insurance (2d ed. 1964) § 45.219, p. 261.)

The policy itself fixes no limit in time during which the temporary extended coverage is to be effective.'Temporary' is a word of much elasticity and considerable indefiniteness.(Eastman v. Piper, 68 Cal.App. 554, 229 P. 1002.)It has no fixed meaning in the sense that it designates any fixed period of time.(Fleckenstein v. Citizens' Mut. Automobile Ins. Co., 326 Mich. 591, 40 N.W.2d 733, 736.)As commonly accepted, 'temporary' is an antonym of 'permanent.'(McKee v. Exchange Insurance Association, 270 Ala. 518, 120 So.2d 690, 692.)Here, it is unclear whether plaintiff, in its use of the word 'temporary,' was attempting to put a time limitation on the use of the substitute automobile.Any doubt as to its meaning must be resolved in accord with settled rules for interpreting an insurance contract.As said in Continental Cas. Co. v. Phoenix Constr. Co., 46 Cal.2d 423, at pages 437--438, 296 P.2d 801, at page 809: 'It is elementary in insurance law that any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer.(Citations.)If semantically permissible, the contract will be given such construction as will fairly achieve its object of securing indemnity to the insured for the losses to which the insurance relates.(Citation.)If the insurer uses language which is uncertain any reasonable doubt will be resolved against it; if the Doubt relates to extent or Fact of coverage, whether as to peril insured against (citations), the amount of liability (citations) or the person or persons protected (citations), The language will be understood in its most inclusive sense, for the benefit of the insured.'(Italics added.)

Plaintiff argues that since Billy purchased the 1964 car to use in place of the inoperable 1957 car, and then sold the 1957 car, his use of the 1964 car was not a 'temporary substitute' but rather a 'permanent replacement.'In this regard, plaintiff would limit the coverage of the policy to operation of the substituted automobile during the period of repair until the automobile named in the policy is restored to use.But this argument adds a requirement not found in plaintiff's policy and relates the word 'temporarily' to the insured car rather than to use of the substitute car.Certainly, plaintiff's policy contemplated that the insured car might never be restored to use during the term of the policy, for it provided for a 'temporary substitute' when the insured car should be withdrawn from normal use because of 'breakdown . . . loss or destruction.'Here, the breakdown of the 1957 car apparently was such that it did not warrant repair but rather replacement for the remainder of the policy period.The important consideration for coverage under this provision of the policy was not the length of time of use but, rather, the purpose of the substitution and the substantial similarity between the use of the originally insured automobile and its substitute.In short, it is contemplated between the insurer and the insured that the Same use of the Substitute vehicle will be made as the one originally insured.(Lewis v. Bradley, 7 Wis.2d 586, 97 N.W.2d 405, 411--412.)Here, Billy used the 1964 car substitute for the same driving needs that he had used the 1957 car; Milton, his father, knew of the substitution and approved of its use for the same purposes as had applied with the 1957 car (Hemphill v. Home Ins. Co., 121 Ga.App. 323, 458, 174 S.E.2d 251); and the sale of the inoperable 1957 car would not preclude coverage for the 1964 car as a 'temporary substitute automobile' for the remainder of the policy period.(Continental Cas. Co. v. Ocean Accident & Guar.Corp., Del.Super., 209 A.2d 743.)

In Nelson v. St. Paul Mercury Insurance Company, 83 S.D. 32, 153 N.W.2d 397, at page 400, where substantially the same 'temporary substitute automobile' provision was considered, the Supreme Court of South Dakota said: 'The word 'temporarily' relates to and is a restriction on the use of the substitute vehicle.The policy does not similarly require that the insured vehicle be 'temporarily' withdrawn from normal use.This phase of the insurance contract is without time limit.Harte v. Peerless Insurance Company, 123 Vt. 120, 183 A.2d 223.Furthermore, the policy does not require the replacement, or an intention to replace, the insured vehicle in use after being withdrawn from normal use.A breakdown, repair, loss or destruction might be permanent in nature.Obviously, there would never be an intention to replace in use an automobile damaged beyond repair, as in the present case, or one that has been lost or destroyed.Nevertheless, the substitute automobile clause is clearly designed to extend coverage to an insured in those cases during the remainder of the policy period.The insured is thereby afforded protection paid for and the insurer's risk is confined to one operating vehicle at a time.'

Here, if plaintiff's policy, for which a premium was paid, be held to apply to any risk at all, it could apply only to the operation of the 1964 car operated by Billy when the accident occurred.No other risk existed at that time.Plaintiff's risk with respect to the use and operation of the 1957 car ceased with its breakdown and sale.(Veh.Code, § 5602.)An insurer charges a premium for assuming a risk covered by the policy.An insurer earns a premium only when there is a risk involved.(Ins.Code, § 481(1).)The risk to plaintiff under the policy was the same whether Billy operated the 1957 car or the later substituted 1964 car for the same basic purposes--only one operating vehicle was covered at the given time.The policy makes clear that its purpose was to extend coverage, without payment of additional premium, to a 'temporary substitute automobile' used in place of the insured automobile withdrawn from normal use for reasons stated in the policy.

Plaintiff unavailingly relies on Travelers Indemnity Co. v. American Cas. Co. of Reading, Pa., D.C., 226 F.Supp. 354, andHays v. Robertson, 20 Utah 2d 186, 435 P.2d 925, for the proposition that a newly acquired car cannot qualify for coverage as a 'temporary substitute automobile.'The two cases actually concerned automobiles which were withdrawn from normal use for distinguishable reasons--repossession in...