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

• Decision Date: 09 July 1970
• Citation: 9 Cal.App.3d 508,88 Cal.Rptr. 246
• Court: California Court of Appeals Court of Appeals
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation, Plaintiff and Respondent, v. ALLSTATE INSURANCE COMPANY, a corporation, et al., Defendants and Appellants. Civ. 12167.

Page 246

88 Cal.Rptr. 246

9 Cal.App.3d 508

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, a corporation, Plaintiff and Respondent, v. ALLSTATE INSURANCE COMPANY, a corporation, et al., Defendants and Appellants.

Civ. 12167.

Court of Appeal, Third District, California.

July 9, 1970.

Rehearing Denied Aug. 6, 1970.

Hearing Denied Sept. 3, 1970.

Rich, Fuidge, Dawson, Marsh & Morris, by Charles Dawson, Marysville, for plaintiff-respondent.

Johnson, Davies & Greve, by Claire Greve, Sacramento, for cross defendant-cross complainant appellant Pacific Indem.

Douglas B. McDonald, Sacramento, and Cyril Viadro, San Francisco, for defendant-cross defendant appellant Allstate.

Fitzwilliam, Memering, Stumbos & DeMers, by T. D. Bolling, Sacramento, for cross defendant-respondent American Motorists.

Rust, Hoffman & Mills, by John S. Gilmore, Sacramento, for cross defendant-respondent St. Paul.

James F. Perley, Fremont, for defendant-cross respondent Weimken.

Carlton & Asbill, by Daniel Carlton, Redding, for defendant-respondent Alsbury.

Jere E. Hurley, Jr., Redding, for defendant-respondent Faucett.

FRIEDMAN, Associate Justice.

This is an appeal from a declaratory judgment determining the obligations of five insurance companies for the payment of personal injury judgments against Dean Wiemken. Another phase of the appeal involves an award of damages for breach of an insurer's obligation to defend.

In December 1965 Wiemken was the operator of a Christmas tree lot in Fremont, Alameda County. Wiemken's employee, Rose, was driving Wiemken's 1955, one and one-half ton Dodge truck in Shasta County and collided with an automobile, injuring the latter's two occupants, Alsbury and Faucett. The two injured men sued Wiemken and Rose. Alsbury was awarded damages of $40,000 and Faucett $110,000.

At the time of the accident Wiemken had the following casualty insurance policies:

(1) An automobile policy issued by Allstate Insurance Company with a limit of $100,000/$300,000, specifically covering a 1955 Chevrolet pickup truck, a 1965 Pontiac sedan, a 1957 Ford convertible, plus several defined classes of vehicles, including Temporary substitute automobile.

(2) An automobile policy issued by St. Paul-Mercury Insurance Company with a limit of $50,000/$100,000 covering a 1959 Ford station wagon.

(3) A comprehensive liability policy ¹ with a limit of $300,000 issued by Pacific Indemnity Company, designating Wiemken's Christmas tree lot (including The ways immediately adjoining as the premises and covering The ownership, maintenance or use of the premises, and all operations necessary or incidental thereto.

(4) A homeowner's liability policy issued by American Motorists Insurance Company with a $25,000 limit.

A fifth insurer, State Farm Mutual Automobile Insurance Company, is involved because of liability policies it had issued to Rose's father. Rose was apparently a minor at the time of the accident and a resident of his father's household. The father had the following State Farm policies:

(1) A homeowner's liability policy with a limit of $10,000/$20,000.

(2) Three separate automobile liability policies, each for a designated vehicle.

A bizarre twist imparted an impetus to the liability proceedings following the accident. Be it remembered that one of Wiemken's three vehicles designated in the Allstate policy was a 1955 Chevrolet pickup truck. Wiemken was using the 1955 Chevrolet around his Christmas tree lot, but the vehicle developed a knock which worsened until Wiemken feared it would 'throw a rod.' Because of the Chevrolet's condition he bought the 1955 Dodge truck on November 25, 1965. When he learned from the Department of Motor Vehicles that the annual registration fee would not be prorated over the remainder of 1965, he did not register the truck. Instead, he removed the license plates and registration slip from the 1955 Chevrolet pickup and put them on the 1955 Dodge truck. Wiemken did not inform Allstate that he had acquired the Dodge truck, believing that under his policy he had 30 days to do so. The collision occurred on December 9, 1965, while Rose was enroute through Shasta County to pick up Christmas trees.

The day after the accident Wiemken notified Allstate that the 1955 Dodge truck he had bought on November 25 was involved in an accident. After an investigation, beclouded by the switch of license plates, Allstate on February 23, 1966, mailed a disclaimer of coverage and did nothing more by way of investigation or defense. Alsbury and Faucett filed their personal injury suits in Shasta County. Wiemken engaged an attorney to defend his interests.

Although State Farm Mutual denied coverage of Rose, it did undertake to defend him in the Alsbury-Faucett lawsuits. In January 1967, while the Alsbury- Faucett damage actions were awaiting trial, State Farm instituted the present declaratory relief action, naming Allstate and a number of Does as defendants. In April 1967 Wiemken's attorney requested Pacific Indemity to defend Wiemken in the personal injury actions. Pacific Indemnity accepted the tender of defense, subject to a reservation of the right to disclaim coverage. The damage actions were tried together in May 1967 and resulted in the judgments against Wiemken and Rose.

The other insurance carriers appeared in this declaratory relief action. Wiemken too entered the lawsuit, seeking general damages, legal fees and costs, premised upon allegedly wrongful disclaimers of defense. The two judgment creditors, Alsbury and Faucett, filed pleadings, seeking to fasten various of the insurers with liability. The trial court ruled that the 1955 Dodge truck was a Temporary substitute automobile covered by the Allstate policy; held that both Allstate and Pacific Indemnity were obligated to defend Wiemken and to indemnify him; declared that both were liable to pay the Alsbury-Faucett judgments; found that Allstate's refusal to defend Wiemken had been unjustified; gave Wiemken compensatory damages against Allstate; exonerated the other insurance carriers. Both Allstate and Pacific Indemnity appeal.

PACIFIC INDEMNITY'S LIABILITY

Under the so-called 'Wildman doctrine' all applicable statutes become incorporated in insurance policies, including statutory extension of automobile insurance coverage to the continental United States. (Veh.Code, § 16451; Wildman v. Government Employees' Ins. Co. (1957) 48 Cal.2d 31, 307 P.2d 359.) At the time of the trial court's decision California case law--particularly Pacific Employers Ins. Co. v. Maryland Casualty Co. (1966) 65 Cal.2d 318, 54 Cal.Rptr. 385, 419 P.2d 641--lent support to the proposition that a comprehensive liability policy covering automobile-related accidents on the insured's premises and The ways immediately adjoining was perforce transformed into a vehicle liability policy. In that state of the law the trial court concluded that the Alsbury-Faucett judgments were within the coverage of Wiemken's general liability policy issued by Pacific Indemnity Company.

During the pendency of this appeal, the Supreme Court filed its decisions in Herzog v. National American Ins. Co. (1970) 2 Cal.3d 192, 84 Cal.Rptr. 705, 465 P.2d 841, and Huggins v. Yoshiwara (1970) 2 Cal.3d 200, 84 Cal.Rptr. 709, 465 P.2d 845. The parties have submitted supplemental briefs in the light of these two decisions. Generally, these decisions hold that a homeowner's general liability policy covering automobile-related accidents on the insured's premises and The ways immediately adjoining does not thereby become an automobile liability policy mandatorily extended to cover the continental United States; that the phrase Ways immediately adjoining is not so ambiguous as to defy reasonable construction in the context of a particular case; that in the cases before the Supreme Court the homeowners' policies were to be interpreted to exclude automobile accidents on highways miles away from the premises of the insured.

The Owners', Landlords' and Tenants' Liability Policy issued by Pacific Indemnity Company provided bodily injury liability coverage for a hazard designated as Division 1--Premises--Operations. The ownership, maintenance or use of the premises, and all operations necessary or incidental thereto. The address of the Christmas tree lot was given as the location of the premises, which were defined to include The ways immediately adjoining. The policy listed various exclusions, among them the operation or use of automobiles If the accident occurs away from the premises. The premium was $15 for the period November 23, 1965, to January 1, 1966.

In determining whether the Pacific Indemnity policy became an automobile liability policy subject to the Wildman doctrine, the court must take cognizance of the parties' reasonable expectations in entering into the agreement. (Herzog v. National American Ins. Co., supra, 2 Cal.3d at p. 197, 84 Cal.Rptr. 705, 465 P.2d 841.) The policy is to be considered as an entirety, each clause lending meaning to the other. (Jurd v. Pacific Indemnity Co. (1962) 57 Cal.2d 699, 704, 21 Cal.Rptr. 793, 371 P.2d 569.) According to its general tenor, the policy was designed to provide 'on premise' comprehensive liability coverage. True, the hazard was defined to include All operations necessary or incidental to the use of the premises. This relatively broad reference to the kind of covered activity was accompanied by two limitations as to the location of the covered activity: the circumscription to the Ways immediately adjoining the premises and the express exclusion of automobile-connected accidents Away from the premises. Policy limitations which run counter to the policyholder's reasonable expectations must be 'conspicuous, plain and clear' and are construed against the carrier. (Paramount Properties Co. v. Transamerica Title Ins. Co. (1970) 1 Cal.3d 562, 569, 83 Cal.Rptr. 394, 463 P.2d 746.) Here the limitations paralleled and did not defeat the policyholder's reasonable...