Utah Property & Casualty Ins. etc. Assn. v. United Services Auto. Assn.

• Decision Date: 29 May 1991
• Docket Number: No. C008392,C008392
• Citation: 230 Cal.App.3d 1010,281 Cal.Rptr. 917
• Court: California Court of Appeals Court of Appeals
• Parties: UTAH PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION, Plaintiff and Appellant, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant and Respondent.

Page 917

281 Cal.Rptr. 917

230 Cal.App.3d 1010

UTAH PROPERTY AND CASUALTY INSURANCE GUARANTY ASSOCIATION, Plaintiff and Appellant, v. UNITED SERVICES AUTOMOBILE ASSOCIATION, Defendant and Respondent.

No. C008392.

Court of Appeal, Third District, California.

May 29, 1991.

Shepard, Haven & Loewen, James B. Knezovich, Ronald R. Haven, Gregory H. Brown, Sacramento, and Tim Dalton Dunn, as pro hac vice, Huntington Beach, for plaintiff and appellant.

Gassett, Perry & Frank, Jacquelyn K. Wilson and Mary E. Wrightson, San Jose, for defendant and respondent.

SIMS, Acting Presiding Justice.

Insurance Code section 11580.2 requires all insurance policies on motor vehicles principally used in California to include uninsured motorist coverage. (All statutory references are to section 11580.2 the Insurance Code unless otherwise indicated.) The definition of an "uninsured motor vehicle" for purposes of this provision includes a vehicle for which liability insurance has been obtained, but the insurer has become insolvent. (Subd. (b)(2).)

Subdivision (b)(2) also provides in relevant part: "An insurer's solvency protection shall be applicable only to accidents occurring during a policy period in which its insured's motor vehicle coverage is in effect where the liability insurer of the tortfeasor becomes insolvent within one year of the accident." (Emphasis added.)

We must decide whether the statute's one-year limit on insolvency coverage is to be read into every California motor vehicle insurance policy, or whether an insurer may contract with its insured to provide greater insolvency protection than the statute requires. Specifically, when an insurance policy provides that the insurer will pay damages on any accident caused by the owner or operator of an uninsured motor vehicle where the tortfeasor's insurance company "is or becomes insolvent," without mention of any time limit on the coverage, is the one-year limit of subdivision (b)(2) incorporated into the policy by operation of law? We hold it is not.

The question arises in this case out of an action for declaratory relief. Plaintiff Utah Property and Casualty Insurance Guaranty Association (UPCIGA) assumed the coverages of a Utah insurance company which became insolvent more than one year after a fatal accident caused by its insured. UPCIGA brought suit to obtain a determination whether UPCIGA or defendant United Services Automobile Association (USAA), the decedent's insurer, was liable for paying the balance of a stipulated judgment in a wrongful-death action brought by the decedent's survivors. The case was tried by court trial on stipulated facts. The trial court found for defendant. We shall reverse.

FACTS

On May 22, 1983, Alice Lopiccolo died when the car driven by her husband Ernest Lopiccolo struck the rear of a stalled tractor-trailer in California. Mr. Lopiccolo, a California resident, carried an insurance policy issued by USAA (defendant herein) which included uninsured motorist coverage with limits of $300,000. This policy provided that coverage would apply to an accident caused by the owner or operator of an uninsured motor vehicle, defined so as to include a vehicle to which insurance applies at the time of the accident but the insuring company "is or becomes insolvent." The policy placed no restriction on the time within which the insuring company had to become insolvent.

The driver of the tractor-trailer was employed by Pacific States Transports, Inc. ("PST"), which owned the vehicle. PST, a company headquartered in Utah, was insured at the time of the accident by Enterprise Insurance Company ("Enterprise"). The Enterprise policy was issued in Utah.

Ernest Lopiccolo and his children timely sued PST in the United States District Court for the Eastern District of California for the wrongful death of Alice Lopiccolo.

In December 1986 the wrongful-death suit settled. It was agreed that the plaintiffs would receive $235,000. Of this, USAA agreed to pay $25,000 on plaintiff Ernest Lopiccolo's behalf pursuant to a counterclaim against him as the driver of the vehicle in which his wife was killed. Enterprise was to pay the remaining $210,000 on behalf of PST and its employee, the driver of the tractor-trailer.

In February 1987, before the completion and funding of the settlement agreement, Enterprise became insolvent. Because PST was a resident of Utah, UPCIGA (plaintiff herein), Utah's casualty insurance guaranty association, assumed PST's defense.

UPCIGA contended that under Utah law it was forbidden to pay any claim until all other sources of insurance had been exhausted, and that because USAA's uninsured-motorist coverage placed no time limit on insolvency protection, USAA was liable for the $210,000 balance of the settlement. USAA responded that its insolvency coverage was limited to one year following the date of the accident because the one-year limit of subdivision (b)(2) was incorporated into its policy as a matter of law.

After UPCIGA, USAA, and Lopiccolo entered into a stipulation to preserve the amount due on the settlement and UPCIGA funded that amount, UPCIGA filed this action for declaratory relief against USAA in Sacramento County Superior Court.

After a hearing, the trial court found that subdivision (b)(2)'s time limitation was incorporated into USAA's policy by operation of law, relying on Samson v. Transamerica Ins. Co. (1981) 30 Cal.3d 220, 178 Cal.Rptr. 343, 636 P.2d 32. Judgment was thereafter entered for defendant. UPCIGA's appeal followed.

DISCUSSION

I

The Policy on Its Face Provides for Coverage.

"The rights of the parties are to be determined by the terms of their policy, provided such policy grants benefits equal to or greater than is required by the Uninsured Motorist Act. [Citations.]" (Lumberman's Mut. Cas. Co. v. Wyman (1976) 64 Cal.App.3d 252, 257, 134 Cal.Rptr. 318; Grunfeld v. Pacific Auto. Ins. Co. (1965) 232 Cal.App.2d 4, 6, 42 Cal.Rptr. 516, and authorities there cited.) "The policy should be read as a layman would read it and not as it might be analyzed by an attorney or an insurance expert. [Citation.]" (Crane v. State Farm Fire & Cas. Co. (1971) 5 Cal.3d 112, 115, 95 Cal.Rptr. 513, 485 P.2d 1129.)

The instant policy says it covers a vehicle to which insurance applies at the time of the accident but the insuring company "is or becomes insolvent." Because no time limitation is placed upon insolvency, a layperson reading the policy would have no reason to suspect that the insolvency would have to occur within a year of the accident. Rather, a straightforward reading of the policy would lead the reader to conclude that if a vehicle was insured at the time of the accident, the vehicle would be covered, provided the insurer of the vehicle became insolvent at some time in the future. In short, if one looks exclusively at the USAA policy, there is coverage for the subject accident as UPCIGA contends.

II

The One-Year Limitation of Subdivision (b)(2) is Not Incorporated In the Insurance Policy; Rather, the Policy Affords Greater Coverage Than is Required By Law.

USAA contends that even if the policy on its face provides for coverage, there can be no coverage because section 11580.2 forbids it. USAA first argues the one-year limitation in subdivision (b)(2) is incorporated in the insurance policy as a matter of law.

USAA first cites the case relied on by the trial court: Samson v. Transamerica Ins. Co., supra, 30 Cal.3d 220, 178 Cal.Rptr. 343, 636 P.2d 32. USAA finds the following language from Samson dispositive: "Where insurance coverage is required by law, the statutory provisions are incorporated into the insurance contract. 'The obligations of such a policy are measured and defined by the pertinent statute, and the two together form the insurance contract....' (6c Appleman, Insurance Law and Practice (Buckley ed. 1979) § 4463, pp. 615-617[ ].)" (Id. at p. 231, 178 Cal.Rptr. 343, 636 P.2d 32.)

However, there are two problems with USAA's reliance upon Samson. The first is that USAA's theory cannot be reconciled with Lumberman's Mut. Cas. Co. v. Wyman, supra, 64 Cal.App.3d 252, 134 Cal.Rptr. 318.

At issue in Lumberman's was subdivision (c)(3) which provides:

"(c) The insurance coverage provided for in this section does not apply either as primary or as excess coverage:

"...

"(3) To bodily injury of the insured with respect to which the insured or his or her representative shall, without the written consent of the insurer, make any settlement with or prosecute to judgment any action against any person who may be legally liable therefor."

The uninsured motorist provisions of the applicable insurance policy contained the following exclusion: "This policy does not apply ...: ... [p] '(b) to bodily injury to an insured with respect to which such insured, his legal representative or any person entitled to payment under this coverage shall, without written consent of the company, make any settlement with any person or organization who may be legally liable therefor; ...' " (Lumberman's, supra, at pp. 256-257, 134 Cal.Rptr. 318.) This language tracked subdivision (c)(3), except that it did not contain the additional statutory exclusion "or prosecute to judgment any action...." (Id. at pp. 255, 257, 134 Cal.Rptr. 318.)

The appellant in Lumberman's, after dismissing two of three defendants to an action arising out of an accident in which he was struck by a motorcycle, proceeded to judgment against the third defendant and lost; he then sought to recover under the policy. The insurer denied coverage on the ground that all the statutory exclusions of subdivision (c)(3) formed part of appellant's policy as a matter of law, even though the provision "or prosecute to judgment any action" was not set forth in the policy. (Id. at p. 254, 134 Cal.Rptr. 318.) The trial court rendered judgment for the insurer.

The reviewing court reversed, concluding the rights of the parties to an insurance policy under section...