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

• Decision Date: 02 June 1966
• Citation: 242 Cal.App.2d 619,51 Cal.Rptr. 554
• Court: California Court of Appeals Court of Appeals
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Appellant, v. Norton Shelton PRICE, Walter Cooke, Jack Robert Allstott, Madeleine L. Cooke, Ralph T. Knight and Richard T. Knight, Defendants and Respondents. Civ. 28518.

Page 554

51 Cal.Rptr. 554

242 Cal.App.2d 619

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff and Appellant, v. Norton Shelton PRICE, Walter Cooke, Jack Robert Allstott, Madeleine L. Cooke, Ralph T. Knight and Richard T. Knight, Defendants and Respondents.

Civ. 28518.

District Court of Appeal, Second District Division 4, California.

June 2, 1966.

Schell & Delamer and Fred B. Belanger, Los Angeles, for plaintiff and appellant.

Magana & Olney, Daniel C. Cathcart and Ellis J. Horvitz, Los Angeles, for defendants and respondents.

KINGSLEY, Justice.

Plaintiff, State Farm Mutual Automobile Insurance Company, a corporation, hereinafter called 'State Farm,' appeals from a judgment in favor of defendants in an action for declaratory relief.

State Farm issued a policy of insurance to Madeleine L. Cooke and to her son, Ronald Cooke: Madeleine and Ronald Cooke were listed in the policy as the 'named insured.' This liability insurance policy was in full force and effect at all times pertinent herein. The only automobile insured under the policy was a 1951 Ford two-door sedan, No. BILB 135711; prior to October 20, 1957, this 1951 Ford was the only automobile owned by either Ronald, Madeleine, or Walter Cooke, Madeleine's husband.

At all times herein material, Ronald was a minor. Madeleine could not remember whether or not she had signed his application for a driver's license and there is no direct evidence on that point. The car was registered in Ronald's name alone. Madeleine made the down payment; thereafter, until he entered the armed services, Ronald made payments on the balance of the purchase price out of his earnings. After Ronald went into service, Walter and Madeleine made the payments. Both Walter and Madeleine used the Ford at times.

On October 20, 1957, Walter Cooke (who resided in the same house as his wife Madeleine) jointly purchased a 1951 Frazer in a joint venture with Jack Robert Allstott and Norton Shelton Price, two fellow workmen, so that the three men could use the Frazer in going back and forth to their mutual place of employment. On October 23, 1957, three days after purchasing the Frazer, while Price was operating the Frazer, Ralph Knight was injured by Price, and a judgment was ultimately entered against Walter Cooke in the sum of $82,749.77. (Knight v. Cook (1963) 212 Cal.App.2d 613, 28 Cal.Rptr. 273.) The accident of October 23, 1957, was reported to plaintiff by Madeleine Cooke on October 28, 1957.

The Ford automobile remained in the home and continued in use after the accident involving the Frazer, and the Ford was in operating condition at the time of that accident.

The issue is whether or not Walter Cooke was afforded insurance under the policy so that State Fram would be liable (to the extent of the policy limits) for the judgment obtained by Knight against Walter because of the accident involving the Frazer. While the briefs discuss the possibility of coverage under clauses relating to a 'Temporary Substitute Automobile' and to 'Use of Other Automobiles,' we do not understand that defendants now claim coverage under any clause other than that relating to a 'Newly Acquired Automobile.' Since we conclude that that clause did afford coverage to Walter for the Frazer accident, we need not discuss the contentions as to the other two sets of clauses.

The portions of the policy relevant to this discussion read as follows:

'Insuring Agreements'

'I. Coverages.

Coverages A and B--(A) Bodily Injury Liability and (B) Property Damage Liability.

(1) To pay all damages which the insured shall become legally obligated to pay because of

(A) bodily injury sustained by other person, and

(B) injury to or destruction of property of others, caused by accident arising out of the ownership, maintenance or use, including loading or unloading, of the automobile.

Limits of Liability--Unless specifically amended in the declarations, the company's limit of liability shall not exceed under:

coverage A, $10,000 for all damages arising out of bodily injury sustained by one person in any one accident and subject to this provision $20,000 for two or more persons in any one occurrence;

'II. Definition of Insured, etc.

(a) Insured--with respect to the insurance afforded under coverages A and B, the unqualified word 'insured' includes the named insured and, if the named insured is an individual, his spouse if a resident of the same household, and also includes any person while using the automobile and any person or organization legally responsible for the use thereof, provided the actual use is by the named insured or such spouse or with the permission of either.

(f) Person--means a natural person and not a corporation, partnership, association or business name.

'III. Automobile Defined.

(a) Automobile. Except where stated to the contrary, the word 'automobile' means:

(1) Described Automobile--the motor vehicle or trailer described in the declarations;

(4) Newly Acquired Automobile--an automobile, ownership of which is acquired by the named insured or his spouse if a resident of the same household, if (a) it replaces an automobile owned by either and covered by this policy, or the company insures all automobiles owned by the named insured and such spouse on the date of its delivery, and (b) the named insured or such spouse notifies the company within thirty days following such delivery date. The named insured shall pay any additional premium required because of the application of the insurance to such newly acquired automobile.'

Paragraph 14 of 'Conditions' reads in part as follows:

'Joint and Several Interests. If two or more insureds are named in the declarations, this policy shall apply to them jointly and severally, but the inclusion of more than one insured shall not operate to increase the limits of the company's liability.'

I

Defendants do not contend that the Frazer is a 'replacement' automobile but defendants contend that it is covered by the alternate clause which provides for insurance of a newly acquired automobile when the company insures all automobiles then owned by the insured. Plaintiff says State Farm did not insure 'all automobiles owned by the named insured and such spouse on the date of delivery,' and therefore there is no coverage.

Plaintiff seems to construe the above quoted language to mean that the named insured and spouse must All own the insured car on the delivery date of the new automobile. However, this clause has not been so interpreted; it merely means that All cars owned by the insured (in this case only the 1951 Ford) must be covered by the policy.

A clause like the one in question was discussed in Birch v. Harbor Insurance Company (1954) 126 Cal.App.2d 714, at page 720, 272 P.2d 784, at page 788, where the court interpreted, the 'Newly Acquired Automobile' provision as follows:

'This provision is in the alternative, applicable either if a newly acquired car is a replacement or if at its delivery date the company insures all automobiles then owned by the insured. The court found, on undisputed evidence, that the latter situation here existed.'

The rule of the Birch case has been enunciated with approval in Inland Mutual Ins. Co. v. Stallings (4th Cir.1959) 263 F.2d 852, and Horace Mann Mutual Casualty Co. v. Bell (D.C.W.D.Ark.1955) 134 F.Supp. 307. These last two cases make it clear that the alternative clause is not limited to situations where the policy issued is a fleet policy which covers several automobiles, but is applicable where the insured only owns one vehicle.

Plaintiff cites Reserve Insurance Company v. Dearhart (1964) 219 Ga. 699, 135 S.E.2d 378, 379, where coverage failed under the 'Newly Acquired Automobile' clause because the company...