Transamerica Ins. Co. v. Tab Transportation, Inc.

• Decision Date: 29 December 1995
• Docket Number: No. S042745,S042745
• Citation: 906 P.2d 1341,48 Cal.Rptr.2d 159,12 Cal.4th 389
• Court: California Supreme Court
• Parties: , 906 P.2d 1341, 96 Cal. Daily Op. Serv. 91, 96 Daily Journal D.A.R. 129 TRANSAMERICA INSURANCE COMPANY, Plaintiff and Appellant, v. TAB TRANSPORTATION, INC., Defendant and Appellant.

Page 159

48 Cal.Rptr.2d 159

12 Cal.4th 389, 906 P.2d 1341, 96 Cal. Daily Op. Serv. 91,

96 Daily Journal D.A.R. 129

TRANSAMERICA INSURANCE COMPANY, Plaintiff and Appellant, v. TAB TRANSPORTATION, INC., Defendant and Appellant.

No. S042745.

Supreme Court of California.

Dec. 29, 1995.

Rehearing Denied Feb. 22, 1996.

Michel & Manning, Michael D. Michel and J. Martin Sproul, Walnut Creek, for Plaintiff and Appellant.

Long & Levit, J. Kevin Snyder and Edward Muramoto, Los Angeles, as Amici Curiae on behalf of Plaintiff and Appellant.

Hardin, Cook, Loper, Engel & Bergez, Ralph A. Lombardi, Oakland, and Kevin J. Chechak, San Francisco, for Defendant and Appellant.

Peter Arth, Jr., Sacramento, Anne K. Mester and Joel T. Perlstein, San Francisco, as Amici Curiae, on behalf of Defendant and Appellant.

KENNARD, Justice.

A 1989 collision between an Amtrak train and a truck owned by a licensed highway carrier, Tab Transportation, Inc. (hereafter Tab), caused the deaths of three persons and injured several others, resulting in $6 million in legal claims for wrongful death, personal injury, and property damage against Tab. Tab sought recovery under three insurance policies issued by different insurers for different policy periods. Pertinent here is a $500,000 one-year liability policy issued by Transamerica Insurance Company (hereafter Transamerica).

Under the terms of the Transamerica policy, coverage commenced on February 1, 1980, and ended on February 1, 1981. Ordinarily, an insurance company incurs no liability for an accident that occurs after the policy period has ended. But this is not an ordinary case, as explained briefly below.

Highway carriers licensed in California are subject to a regulatory scheme administered by the Public Utilities Commission (hereafter PUC), requiring them to obtain adequate liability insurance and to submit proof thereof to the PUC. Underlying this requirement is the recognition of the need to protect the public " 'against ruinous carrier competition and such possible attendant evils as ... inadequate insurance....' [Citation.]" (Samson To ensure that the public is so protected at all times, the regulatory scheme requires--by means of a standard PUC form endorsement attached to the policy--that a liability policy issued to a highway carrier continue "in full force and effect until canceled," by giving 30 days' written notice to the PUC. The effect of attaching the endorsement to the policy, as we held in Samson v. Transamerica Ins. Co., supra, 30 Cal.3d 220, 231, 178 Cal.Rptr. 343, 636 P.2d 32, is to automatically incorporate the provisions of the endorsement into the policy. Here, incorporation of the provisions of the endorsement into the Transamerica policy converted it from a one-year term policy that covered the period from February 1, 1980, until February 1, 1981, to a policy that remained continuously in effect until canceled. Because Transamerica failed to give the PUC the required notice of cancelation when there was no policy renewal by Tab, the policy was still in effect and thus provided coverage for Tab at the time of the 1989 accident.

v. Transamerica Ins. Co. (1981) 30 Cal.3d 220, 233, 178 Cal.Rptr. 343, 636 P.2d 32.)

Transamerica, however, is entitled to reimbursement from Tab for any payments made under the policy. The reason is this: The standard form endorsement just mentioned states that the highway carrier "agrees" to reimburse the insurer for any payment the insurer would not have been obligated to make under the provisions of the policy "except for the agreement contained in [the] endorsement." Because, as explained earlier, Transamerica would not have been liable for the damages incurred in the 1989 accident under the policy it issued to Tab "except for the agreement contained in [the] endorsement" (that its policy remain in effect until canceled by written notification to the PUC), Transamerica has a right to indemnity from Tab.

I

Tab is a commercial trucking company regulated by the PUC under the Highway Carriers' Act. (Pub.Util.Code, §§ 3501, 3511.) ¹ The statutory scheme requires highway carriers such as Tab to maintain liability protection in specified amounts (§ 3631) and to provide the PUC with proof of such protection (§ 3632). Such proof may be established by filing a "certificate of insurance" with the PUC. (§ 3633.)

In 1980, to comply with the insurance requirements of the Highway Carriers' Act, Tab purchased from Transamerica a policy providing liability coverage for the period February 1, 1980, to February 1, 1981. As proof of insurance, Transamerica filed the requisite certificate of insurance with the PUC. The certificate, a standard PUC form, provided in relevant part: "Transamerica Insurance Company ... has issued to Tab Transportation, Inc. ... the policy of Automobile Bodily Injury Liability and Property Damage Liability Insurance herein described which, by the attachment of the Public Utilities Commission of the State of California Endorsement TL 675-Series, has been amended to provide the liability protection authorized or required for motor carriers of property pursuant to General Order No. 100-Series and by the pertinent rules, orders and regulations of the Public Utilities Commission." The certificate also stated that the policy was "Effective 2-1-80 Until Canceled."

Shortly before the February 1, 1981, expiration date of the Transamerica policy, Tab replaced it with a one-year term policy issued by Federal Insurance Company (hereafter Federal), which then filed the requisite certificate of insurance with the PUC. In 1989, Tab purchased a $1 million liability policy from Home Indemnity Company (hereafter Home) to cover the period April 1, 1989, to April 1, 1990. As proof of coverage, Home filed a certificate of insurance with the PUC. Although Tab had replaced the Transamerica policy with the Federal policy, which in turn was replaced by the Home policy, neither Transamerica nor Tab ever notified the PUC of the cancelation of the Transamerica policy. ² On December 19, 1989, one of Tab's tractor-trailer trucks collided with an Amtrak passenger train at a railroad crossing in Stockton, killing the Tab driver and two Amtrak crewmen, and injuring several Amtrak passengers. When sued for $6 million for wrongful death and personal injuries, and for property damage to the train and the tracks, Tab demanded coverage under each of the three insurance policies just mentioned. Two of the three insurers, Federal and Home, each contributed the policy limits (a total of $1.6 million) to a global settlement in which Tab admitted liability, leaving the question of damages to be determined at trial. The third insurance company, Transamerica, did not participate in the settlement.

In May 1992, Transamerica filed this action for a declaratory judgment that it was not liable for damages arising from the 1989 train collision under the policy it had issued to Tab in February 1980. According to Transamerica, that policy had expired of its own terms on February 1, 1981. In the alternative, Transamerica asserted that if liable on the policy, it was entitled under PUC regulations to be reimbursed by Tab for any payments made under the policy. Tab cross-complained, asserting entitlement to coverage under the policy. Tab pointed out that the "certificate of insurance" that Transamerica had filed with the PUC expressly stated its policy was "Effective 2-1-80 Until Canceled." Tab argued that the policy continued in effect because of Transamerica's failure to give the PUC the requisite 30 days' written notice of cancelation. The trial court granted Tab's motion for summary adjudication on this basis.

The case proceeded to trial on the remaining issue of whether Transamerica was entitled to reimbursement by Tab. Transamerica offered into evidence the PUC's Endorsement TL 675-Series (hereafter at times referred to as the standard form endorsement). The endorsement reads: "TO BE ATTACHED TO AND MADE A PART OF ALL POLICIES INSURING MOTOR VEHICLES SUBJECT TO REGULATION BY THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA." The endorsement contains certain provisions that the PUC requires in highway carrier liability policies, including one providing for the highway carrier to reimburse the insurer for any payment made as the result of obligations arising under the endorsement. Based on this latter provision, the trial court ruled that Transamerica was entitled to reimbursement from Tab for payment of damages resulting from the 1989 train accident.

Both parties appealed. Transamerica challenged the trial court's summary adjudication in favor of Tab on the issue of coverage. Tab cross-appealed on the issue of Transamerica's right to reimbursement. The Court of Appeal reversed on the coverage issue. It concluded that the Transamerica policy had expired of its own terms on February 1, 1981, and that Transamerica therefore had no obligation to give 30 days' written notice to the PUC of its intent to cancel the policy. Because it determined the issue of coverage in favor of Transamerica, the Court of Appeal did not address Transamerica's right to reimbursement. We granted Tab's petition for review, which challenged the Court of Appeal's holding as contrary to the PUC's regulatory scheme.

II

The Highway Carriers' Act (§ 3501 et seq., hereafter the Act), which has been in effect since 1935, regulates the operation of commercial truckers on California's public highways. Its preamble states: "The use of the public highways for the transportation of property for compensation is a business affected with a public interest. It is the purpose of this chapter to preserve for the public the full benefit and use of public highways consistent with the needs of commerce without unnecessary congestion or wear and tear upon such highways; to secure to the people just and reasonable rates for transportation by carriers operating upon such highways; and to...