Truck Ins. Exch. v. Wilshire Ins. Co.

• Decision Date: 09 June 1970
• Citation: 87 Cal.Rptr. 604,8 Cal.App.3d 553
• Court: California Court of Appeals Court of Appeals
• Parties: TRUCK INSURANCE EXCHANGE et al., Plaintiffs and Respondents, v. WILSHIRE INSURANCE COMPANY et al., Defendants and Appellants. Civ. 1031.

Page 604

87 Cal.Rptr. 604

8 Cal.App.3d 553

TRUCK INSURANCE EXCHANGE et al., Plaintiffs and Respondents, v. WILSHIRE INSURANCE COMPANY et al., Defendants and Appellants.

Civ. 1031.

Court of Appeal, Fifth District, California.

June 9, 1970.

Hearing Denied Aug. 5, 1970.

[8 Cal.App.3d 556] Chinello, Chinello & Maddy, and John D. Chinello, Fresno, for defendants and appellants Wilshire Insurance Co. and Charlotte Preston.

Magana, Olney, Levy & Cathcart, and Richard Devirian, Los Angeles, for defendants and appellants Dudney.

Stammer, McKnight, Barnum, Bailey & Barnett, and James K. Barnum, Fresno, for plaintiffs and respondents.

OPINION

GARGANO, Associate Justice.

Plaintiffs, Arnold Wiebe, doing business as Arnold Wiebe Buick, and Truck Insurance Exchange, hereafter referred to as Exchange, brought this action in the court below to perform an insurance policy and for declaratory relief. They named Charlotte Preston, the heirs of George T. Dudney, hereafter referred to as the Dudneys, and the Wilshire Insurance Company, hereafter referred to as Wilshire, as defendants. After court trial the court ordered the policy reformed as prayed for in the complaint and declared that defendant Charlotte Preston was not covered by the Exchange policy as to her automobile accident with George T. Dudney; however, the court declared that she was covered by the Wilshire policy. All defendants have appealed. They present three main contentions for reversal: that the court's judgment reforming the policy is contrary to public policy; that the exclusion (endorsement ET--279) which the court ordered attached to the policy is violative of Insurance Code, section 11580.1 and is void; and that the evidence is insufficient to support the judgment.

The facts are these: In July 1965, Charlotte Preston transferred her interest in a 1964 Buick Electra to her husband, pursuant to a property settlement agreement. Then she went to Arnold Wiebe Buick to purchase a used automobile and was given a Rambler to try out to see if it met her needs. Some two or three weeks later Mrs. Preston telephoned Mr. Wiebe and informed him that she had decided to purchase the Rambler. However, before any documents were signed, she was involved in an automobile accident with George T. Dudney. Mr. Dudney died two days later as the result of injuries sustained from the accident.

At the time of her automobile accident with Mr. Dudney, Charlotte Preston was the named insured in a policy issued by Wilshire with limits of $10,000/$20,000. The policy named the 1964 Buick Electra, which Mrs. Preston transferred to her husband, as the assured automobile but also covered any other automobile not owned by the named insured or furnished for her regular use. At the same time, Arnold Wiebe Buick was the named insured in an automobile liability policy issued by Exchange with limits of $250,000/$500,000. This policy had been negotiated several months earlier by Arnold Wiebe and Duncan Earl Prince. Mr. Prince is District Manager of Farmers Insurance Group, and Exchange is a member of this group.

During the course of the negotiations Wiebe told Prince that he wanted a form of limited liability in the policy for loaner cars, because he wanted the customer's policy to apply in such cases. He was informed that the policy could include such a provision and that Arnold Wiebe Buick would receive a premium discount for it. Subsequently, Mr. William Piacentini, multiline underwriter for Exchange, prepared a quotation showing coverage and premium, and containing 'limited loaner car coverage' together with a premium discount of five per cent. The quotation was shown to Mr. Wiebe, who then signed an application for the policy; the application also incorporated the coverage and discount shown on the quotation. Afterward, Piacentini prepared a policy order specifying that endorsement ET--279 was to be attached. Under this endorsement the permissive users of Arnold Wiebe Buick's automobiles, other than its directors, stockholders, agents or employees, were covered under the policy 'only if no other valid and collectible automobile liability insurance, either primary or excess, with limits of liability at least equal to the minimum limits specified by the financial responsibility law of the state in which the automobile is principally garaged, is available to such person.' By mistake the endorsement was not physically incorporated or attached to the policy; instead, another endorsement, which also recited 'limited loan car coverage' and a billing form which gave a five per cent discount, were attached. These documents were seen by Prince and Wiebe when they received the policy and reviewed it.

Following the death of George T. Dudney, his heirs brought a wrongful death action against Mrs. Preston and Arnold Wiebe Buick. It was then discovered that endorsement ET--279 had been omitted from Exchange's policy. This action for reformation and declaratory relief followed.

Appellants do not deny that under subdivision (f) of section 11580.1 of the Insurance Code an insurance carrier may limit its exposure as to the permissive users of the named insured's vehicles if the named insured is engaged in the business of selling, repairing and servicing automobiles. Subdivision (f) provides:

'Where two or more policies are applicable to the same loss and one of such policies affords coverage to a named insured engaged in selling, repairing, servicing, delivering, testing, road testing, parking, or storing automobiles, such policies may contain a provision that the insurance coverage applicable to such motor vehicles afforded a person other than the named insured or his agent or employee shall not be applicable if there is any other valid and collectible insurance applicable to the same loss covering such person as a named insured or as an agent or employee of a named insured under a policy with limits at least equal to the financial responsibility requirements specified in Section 16059 of the Vehicle Code; and in such event, the two or more policies shall not be construed as providing cumulative or concurrent coverage and only that policy which covers the liability of such person as a named insured, or as an agent or employee of a named insured, shall apply. In the event there is no such other valid and collectible insurance, the coverage afforded a person other than the named insured, his agent or employee, may be limited to the financial responsibilities requirements specified in Section 16059 of the Vehicle Code.'

Appellant's contention that the court could not reform the Exchange policy is founded on the proposition that the strong public policy underlying the omnibus clause of section 11580.1, as articulated in Wildman v. Government Employees' Ins. Co., 48 Cal.2d 31, 307 P.2d 359 and Abbott v. Interinsurance Exchange, etc., 260 Cal.App. 528, 67 Cal.Rptr. 220, prohibits the reformation of an automobile liability insurance policy after an accident has occurred in order to limit coverage as to the permissive users of the named insured's vehicles. In short, they argue that if an action for reformation is brought after an accident has occurred, the innocent third party who was injured by the permissive user of a vehicle, and whom the overall basic public policy of this state is geared to protect, has no way of refuting collusive testimony.

3] There is no merit to this contention. It is fundamental that a written contract may be reformed by a court of equity where, due to mutual mistake on the part of the parties, it fails to express their true intentions (Lemoge Electric v. County of San Mateo, 46 Cal.2d 659, 663, 297 P.2d 638; Ranshaw v. Happy Valley Water Company, 114 Cal.App.2d 521, 250 P.2d 612; Civ.Code, § 3399). Moreover, it is settled that an insurance policy may be reformed to limit or exclude coverage if such was the intention of the parties, even where the rights of third party claimants who are not parties to the insurance contract are adversely affected (Utica Mut. Ins. Co. v. Monarch Ins. Co., 250 Cal.App.2d 538, 58 Cal.Rptr. 639). Thus, while it is true that section 11580.1 provides that no liability insurance policy shall be 'issued or delivered' unless it contains coverage for the permissive users of the named insured's vehicles, there is nothing in the language of this section which changes...