State Farm Mut. Auto. Ins. Co. v. Penske Truck Leasing Co.

• Decision Date: 15 October 2021
• Docket Number: 20-55893
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Plaintiff-Appellee, v. PENSKE TRUCK LEASING CO., L.P., a Delaware Limited Partnership; OLD REPUBLIC INSURANCE COMPANY, a Pennsylvania Corporation, Defendants-Appellants, and MELBA FERNANDEZ; DOES, 1 through 20, inclusive, Defendants.
• Court: U.S. Court of Appeals — Ninth Circuit

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, an Illinois corporation, Plaintiff-Appellee,
v.
PENSKE TRUCK LEASING CO., L.P., a Delaware Limited Partnership; OLD REPUBLIC INSURANCE COMPANY, a Pennsylvania Corporation, Defendants-Appellants,

and MELBA FERNANDEZ; DOES, 1 through 20, inclusive, Defendants.

No. 20-55893

United States Court of Appeals, Ninth Circuit

October 15, 2021

NOT FOR PUBLICATION

Submitted June 15, 2021 ^* Anchorage, Alaska

Appeal from the United States District Court for the Central District of California No. 2:20-cv-01342-SVW-PVC Stephen V. Wilson, District Judge, Presiding

Before: RAWLINSON, CHRISTEN, and R. NELSON, Circuit Judges.

MEMORANDUM ^[*]

1

In the district court, State Farm Mutual Automobile Insurance Co. sought declaratory relief establishing that Penske Truck Leasing Co. and Old Republic Insurance Co. (collectively, "Defendants") are required to provide primary liability coverage to L&L subject to a combined single liability limit of $750, 000. We affirm the district court's order granting summary judgment to State Farm.

"We review de novo the district court's order granting summary judgment and its interpretation of state law." Diaz v. Kubler Corp., 785 F.3d 1326, 1329 (9th Cir. 2015) (citations omitted). We view the evidence in the light most favorable to the party opposing the summary judgment motion. Tabares v. City of Huntington Beach, 988 F.3d 1119, 1124 (9th Cir. 2021). In interpreting California law, we follow the California Supreme Court's decisions. Diaz, 785 F.3d at 1329. If there is no applicable California Supreme Court decision, we rely on state appellate court opinions, statutes and treatises. Id.

We start with the language of the Rental Agreement. United Nat'l Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772, 776 (9th Cir. 2009). "The clear and explicit meaning of the[] provisions, interpreted in their ordinary and popular sense, unless used by the parties in a technical sense or a special meaning is given to them by usage[, ] controls judicial interpretation." Bay Cities Paving & Grading, Inc. v. Lawyers' Mut. Ins. Co., 855 P.2d 1263, 1270 (Cal. 1993) (internal quotation

2

marks and citations omitted). California courts "construe [insurance policies] as would a reasonable layperson, not an expert, attorney, or a historian." E.M.M.I. Inc. v. Zurich Am. Ins. Co., 84 P.3d 385, 391 n.2 (Cal. 2004) (citation omitted). "A provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable." Int'l Bhd. of Teamsters v. NASA Servs., Inc., 957 F.3d 1038, 1044 (9th Cir. 2020) (quoting MacKinnon v. Truck Ins. Exch., 73 P.3d 1205, 1213 (Cal. 2003)).

We agree with the district court that the Penske Provides Coverage insurance provision is ambiguous. A layperson could reasonably interpret this provision in two ways: first, to cover the commercial vehicle being rented, as State Farm urges; or second, to cover non-commercial vehicles irrelevant to this transaction, as Defendants urge.

Defendants argue "basic automobile liability insurance" is unambiguous as a term of art defined by state code. But we are interpreting a contract, not a statute, and the contract did not use "basic automobile liability insurance" "in a technical sense" or give it "special meaning." See Bay Cities, 855 P.2d at 1270. The contract's proviso "with limits as required by the state financial responsibility law or other applicable statute" does not define "basic automobile liability insurance" or specify it is a term of art, and there are financial responsibility laws and statutes applicable to both commercial and personal vehicles. See E.M.M.I. Inc., 84 P.3d at 390;

3

Utah Prop. & Cas. Ins. Guar. Assn. v. United Servs. Auto. Assn., 230 Cal.App.3d 1010, 1021 (Ct. App. 1991) ("Laypersons cannot be expected to know of statutory limitations or exclusions on coverage not contained in their insurance policies.").

The term "basic automobile liability insurance" is ambiguous because "it is not defined in the policy and . . . a layperson's understanding would differ from the legal definition of the term." Lunsford v. Am. Guarantee & Liab. Ins. Co., 18 F.3d 653, 654 (9th Cir. 1994) (citations omitted). Indeed, Defendants themselves repeatedly refer to L&L's commercial vehicle policy with State Farm of $1 million liability coverage as "an automobile liability policy." If Defendants' "attorney[s]" and "insurance expert[s]" use the term "automobile liability" insurance interchangeably to cover commercial vehicles, a layperson would most likely do so as well. See Crane v. State Farm Fire & Casualty Co., 485 P.2d 1129, 1130 (Cal. 1971).

The contract as a whole also shows the insurance provision to be ambiguous. Bay Cities, 855 P.2d at 1271. The cover of the policy declares in bold font that it is for commercial rentals, and the Penske Provides Coverage insurance provision is in the Commercial Rental section. A layperson could think that the Penske Provides Coverage "basic automobile...