Transport Indemnity Co. v. Alo

• Decision Date: 16 March 1981
• Citation: 172 Cal.Rptr. 394,118 Cal.App.3d 143
• Court: California Court of Appeals Court of Appeals
• Parties: TRANSPORT INDEMNITY COMPANY, and Sheedy Drayage Company, Plaintiffs and Respondents, v. Robert ALO et al., Defendants and Appellants. Civ. 46480.

Page 394

172 Cal.Rptr. 394

118 Cal.App.3d 143

TRANSPORT INDEMNITY COMPANY, and Sheedy Drayage Company, Plaintiffs and Respondents, v. Robert ALO et al., Defendants and Appellants.

Civ. 46480.

Court of Appeal, First District, Division 2, California.

March 16, 1981.

Bronson, Bronson, McKinnon, David W. Gordon, San Francisco, for defendants and appellants.

Toff, Toff, Newton & Toff, Ronald I. Toff, Mountain View, for plaintiffs and respondents.

TAYLOR, Presiding Justice.

This is an appeal by Robert Alo (Alo), San Francisco Bay Area Council Boy Scouts of America (Scouts) and the Scouts' insurer, New Hampshire Insurance Company (New Hampshire), from a judgment declaring that as to property damage caused by Alo, the permissive user of a truck loaned to the Scouts by Sheedy Drayage Company (Sheedy), the coverage afforded by the New Hampshire policy was primary, and that afforded to Sheedy by Transport Indemnity (Transport), was excess. The questions on appeal are whether the applicable provision of Insurance Code section 11580.9 is subdivision (b), as the court below concluded, or subdivision (d), as New Hampshire argues; and in the alternative, whether the loss should be pro-rated between the two insurers. For the reasons set forth below, we have concluded that subdivision (d) applies.

The appeal is on a settled statement which sets forth the stipulated facts as follows:

On March 30, 1973, Sheedy, the owner of a flatbed truck, permitted Alo, a scoutmaster associated with the Scouts' Troop 379, to drive its truck to gather firewood in the Oakland Regional Park District. The Scouts planned to sell the firewood for profit as a fund-raising activity. As the result of a mechanical difficulty, Alo lost control of the loaded truck and hit a dwelling at 4091 Lincoln Avenue. There were no personal injuries but considerable property damage. Transport paid $20,062.27 to settle all of the property damage claims, and subsequently filed the instant action for declaratory relief. Sheedy was engaged in the business of renting commercial vehicles without drivers, although the rental operations were not a major part of its business. The transaction with Alo was not a rental; there was no monetary remuneration to Sheedy.

Sheedy was licensed by the State Public Utilities Commission (PUC). Accordingly, the PUC endorsement attached to Transport's comprehensive general auto policy increased the basic property damage limits from $10,000 ¹ to $50,000 per occurrence. New Hampshire listed the Scouts as named insured under a comprehensive auto policy with limits of $1,000,000, including property damage. Thus, the truck loaned by Sheedy to the Scouts was an "owned automobile" covered by the Transport policy, and a "non-owned" automobile covered by the New Hampshire policy. Both insurers admitted coverage and liability.

As indicated above, the trial court concluded that pursuant to Insurance Code section 11580.9, subdivision (b), the coverage afforded by New Hampshire was primary and that afforded by Transport excess. The court reasoned that since Sheedy was in the business of renting vehicles, subdivision (b) was applicable. ² The court attached no significance to the following: 1) the rental operations were only an occasional part of Sheedy's business; and 2) there was no rental or monetary remuneration involved in the transaction with Alo.

The pertinent provisions of Insurance Code section 11580.9 are set forth below. ³

As the facts were stipulated, the questions before us are matters of law to be determined on the basis of the two policies here involved and the applicable statutes. Accordingly, we may independently interpret the applicable policy provisions (Estate of Dodge, 6 Cal.3d 311, 318, 98 Cal.Rptr. 801, 491 P.2d 385; Parsons v. Bristol Development Co., 62 Cal.2d 861, 865, 44 Cal.Rptr. 767, 402 P.2d 839; Furtado v. Metropolitan Life Ins. Co., 60 Cal.App.3d 17, 131 Cal.Rptr. 250; Pacific Export Packers v. Chub/Pacific Indem. Group, 57 Cal.App.3d 186, 129 Cal.Rptr. 86; Becker v. State Farm Mut. Auto. Ins. Co., 52 Cal.App.3d 282, 284, 124 Cal.Rptr. 739).

Insurance Code section 11580.9, quoted above, was enacted to reduce the volume of cases in this area (Ins. Code, § 11580.8; ⁴ Ohio Cas. Ins. Co. v. Aetna Ins. Co., 85 Cal.App.3d 521, 524, 149 Cal.Rptr. 562). Subdivision (d) of the statute is controlling except where subdivisions (a) through (c) apply (Zurich-American Ins. Co. v. Liberty Mut. Ins. Co., 85 Cal.App.3d 481, 486, 149 Cal.Rptr. 472).

Subdivision (b) of section 11580.9 was based on Pacific Indemn. Co v. Liberty Mut. Ins. Co., 269 Cal.App.2d 793, 75 Cal.Rptr. 559, which held that the policy issued to a long-term lessee would be primary because his use of the leased vehicle was identical to that of an owner (see D. Melnick, California Automobile Insurance Law Guide (Cont.Ed.Bar 1973) § 11.14, p. 161). The purpose of subdivision (b) is to insure that coverage follows the realities of the particular transaction in question. For example, if a passenger vehicle is leased or rented for less than six months, the economic benefit and the risk of ownership remains with the owner/lessor and his policy is primary; if the passenger vehicle is leased for a term exceeding six months, the ownership risk shifts to the lessee and the insurance policy issued to the owner/lessor becomes excess (Melnick, supra, § 11.16, p. 163).

As to leased or rented commercial vehicles, the emphasis is on the business use of the equipment. A commercial vehicle leased without an operator is most likely to be used in a business operation. As such a commercial lessee usually will be making a profit from the use, his policy should be primary. "It is not until the hirer relinquishes control of the automobile for longer than six months, or until the person operating the vehicle is himself making a profit thereby, that the owners' insurance is no longer primary." (Government Employees Ins. Co. v. Carrier Ins. Co., 45 Cal.App.3d 223, 229, 119 Cal.Rptr. 116; emphasis partially added). Thus, subdivision (b) was designed to apply in a business setting where a commercial vehicle is leased to a profit-making entity. Here, admittedly, there is no rental or lease and no commercial operation. The truck owned by Sheedy was loaned without consideration to a charitable organization.

New Hampshire argues that since the Scouts were making a profit from the sale of the logs, the situation is analogous to a vehicle "loaned" to an owner while his own vehicle is being repaired by a person in the business of repairing vehicles. (Cf. Tilley v. Truck Ins. Exchange, 84 Cal.App.3d 263, 148 Cal.Rptr. 520; Truck Ins. Exchange v. Wilshire Ins. Co., 8 Cal.App.3d 553, 87 Cal.Rptr. 604).

We cannot agree with the trial court's reasoning that the absence of a commercial situation or rental is insignificant in determining therelevance of subdivision (b). In our opinion, the loan transaction that gave rise to the loss in the instant case precludes the applicability of that subdivision. The emphasis below on Sheedy's occasional rental of commercial vehicles is not justified. Sheedy's overall business operations cannot be used to invoke subdivision (b) and produce a result not intended by the statute (cf. Zurich-American Ins. Co. v. Liberty Mut. Ins. Co., supra, 85 Cal.App.3d 481, 488, 149 Cal.Rptr. 472).

Here, the proper rule is the general one of subdivision (d). Subdivision (d), quoted above at footnote 3, page 4, provides that if none of the other subdivisions applies, the policy which describes or...