Wagner v. State Farm Mutual Auto. Ins. Co., S.F. 24782

• Decision Date: 05 December 1985
• Docket Number: S.F. 24782
• Citation: 709 P.2d 462,40 Cal.3d 460,220 Cal.Rptr. 659
• Court: California Supreme Court
• Parties: , 709 P.2d 462 Lee A. WAGNER et al., Plaintiffs and Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al., Defendants and Respondents.

Page 659

220 Cal.Rptr. 659

40 Cal.3d 460, 709 P.2d 462

Lee A. WAGNER et al., Plaintiffs and Appellants, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY et al., Defendants and Respondents.

S.F. 24782.

Supreme Court of California In Bank.

Dec. 5, 1985.

Rehearing Denied Jan. 16, 1986.

Michaud, Weber, De Vries & Hernandez and Michael C. Weber, Cupertino, for plaintiffs and appellants.

Leonard Sacks, Encino, Robert H. Sulnick, Los Angeles, Robert E. Cartwright, San Francisco, Wylie A. Aitken, Santa Ana, Harlan Arnold, Beverly Hills, Glen T. Bashore, North Fork, Ray Bourhis, San Francisco, Richard D. Bridgman, Oakland, Edwin Train Caldwell, San Francisco, David S Casey, Jr., San Diego, Victoria De Goff, Berkeley, Douglas K. deVries, Sacramento, H. Grieg Fowler, San Francisco, Sanford M. Gage, Beverly Hills, Ian Herzog, G. Dana Hobart, Stanley K. Jacobs, Los Angeles, Harvey R. Levine, San Diego, John C. McCarthy, Claremont, Timothy W. Peach, San Bernardino, Arne Werchick, Sausalito and Stephen I. Zetterberg, Claremont, as amici curiae on behalf of plaintiffs and appellants.

Nagle, Vale, McDowall, Cotter & Schwartz and William D. McDowall, San Mateo, for defendants and respondents.

KAUS, Justice. ^*

Section 11580.2 of the Insurance Code ¹ provides for quasi-compulsory uninsured motorists (UM) coverage for most kinds of automobile liability policies. Among others, UM coverage protects as insureds the named insured, as well as family members living in the same household. ( § 11580.2, subd. (b).) Subdivision (d) of section 11580.2 (subdivision (d)) permits UM policies to provide "that if the insured has insurance available to him under more than one uninsured motorist coverage provision, any damages shall not be deemed to exceed the higher of the applicable limits of the respective coverages, and such damages shall be prorated between the applicable coverages as the limits of each coverage bears to the total of such limits." ²

In the case at bar the insured was covered by two UM coverages contained in identical, but separate policies issued by the same insurer. Each contained the following as part of condition 9: "... [Under UM coverage] if the insured has other similar insurance available to him against a loss covered by this coverage, then the damages shall be deemed not to exceed the higher of the applicable limits of liability of this insurance and such other insurance, and the company shall not be liable under this coverage for a greater proportion of the applicable limit of liability of this coverage than such limit bears to the sum of the applicable limits of liability of this insurance and such other insurance."

The issues on this appeal are: (1) whether condition 9 complies with subdivision (d); (2) whether the fact that the two policies were issued by the same insurer nullifies its effect; and (3) whether--assuming issues (1) and (2) are resolved in the insurer's favor--the record shows a triable issue on certain noncontractual theories pleaded, such as fraud, unfair practices, or breach of the covenant of good faith and fair dealing.

I

Plaintiff Susan K. Welch is the stepdaughter of plaintiff Lee A. Wagner and the daughter of plaintiff Barbara W. Wagner. She lived with the Wagners who had i n effect two liability policies issued by State Farm: (1) a policy on an Inte r national Travelall, first issued in 1973, and (2) a policy on a Porsche, wrrs t issued in 1975. Each policy provided for UM coverage, but contained conditi on 9, the anti-stacking clause. Each policy charged a semi-annual premium of $4.5 0 for UM coverage. Each policy's applicable limit of UM coverage was $15, 000.

On April 24, 1977, Susan was seriously injured in a collision between an uninsured automobile and an uninsured motorcycle on which she was riding as a passenger. Liability under State Farm's UM coverage is conceded. It is also undisputed that Susan's damages exceed $15,000. She demanded that State Farm pay her damages up to the policy limits of both policies--$30,000. State Farm refused, but did pay $15,000. Any additional liability was left to litigation.

Plaintiffs later filed the present action in which they assert State Farm's liability in excess of $15,000 on a number of theories. Before the action was at issue, however, plaintiffs had filed a separate petition to compel arbitration. The petition was opposed by State Farm on the theory that since plaintiffs were bound to lose the arbitration, there was nothing to arbitrate. The petition was denied. Plaintiffs did not appeal. (Code Civ.Proc., § 1294, subd. (a).)

Eventually State Farm moved for summary judgment on two grounds, (1) the validity and applicability of the anti-stacking provisions of its policies; and (2) the res judicata effect of plaintiffs' still-born attempt to arbitrate. The motion was granted and summary judgment in State Farm's favor was eventually entered.

On appeal State Farm seeks to uphold the judgment on both grounds urged in the trial court. Since we agree that the anti-stacking clauses of the State Farm policies limited plaintiffs' recovery to $15,000--the amount already paid--we need not discuss State Farm's more questionable res judicata point.

II

Attempting to avoid the impact of subdivision (d) altogether, plaintiffs attack condition 9. They claim, in wholly conclusory fashion, that it is uncertain, ambiguous, "all but incomprehensible" and "contractual gobbledygook." When one examines plaintiffs' argument, however, the real complaint coincides with their argument that subdivision (d) and, hence, condition 9, do not apply where both policies are issued by the same insurer. ³ As such it will be dealt with in part III of this opinion.

In any event it appears to us that the policy condition is as clear as subdivision (d) allows. ⁴ The statute limits the damages to the higher of the applicable limits. The policy condition does the same, using almost identical language. The statute then provides for prorating among the applicable coverages "as the limits of each coverage bears to the total of such limits." The policy condition expresses precisely the same formula from the point of view of the carrier. While condition 9 uses a few more words than the statute, that is inherent in the nature of the problem and hardly turns a quite clearly expressed formula into "gobbledygook."

III

We now turn to the central problem of this appeal: the applicability of subdivision (d) to multiple policies issued by the same insurer. As background to our discussion we note that anti-stacking clauses in UM coverages have spawned a surprising number of reported cases. ⁵ These, in turn have provoked a certain amount of scholarly comment. ⁶ As may be expected, the various courts' attitudes toward anti-stacking clauses vary all the way from ready acceptance to open hostility. No useful purpose would be served in surveying the field in detail, since we are confronted with an almost ⁷ unique situation: the effect of anti-stacking clauses in separate policies issued by the same insurer to the same insured, where a state statute expressly authorizes such clauses.

Actually there is a surprising dearth of California cases involving subdivision (d) and policy conditions written pursuant thereto. We count precisely two. ⁸

The first is Mid-Century Ins. Co. v. Koch (1970) 11 Cal.App.3d 1019, 90 Cal.Rptr. 280, a case identical with ours, except that two different companies were involved. Without extended discussion the court denied the insured's claim that he was entitled to UM benefits under both policies. Even brisker was the same division of the same Court of Appeal in Rudder v. Farmers Ins. Exchange (1980) 107 Cal.App.3d 158, 165 Cal.Rptr. 562, which involved four policies, with limits totalling $60,000. Each policy contained the condition permitted by subdivision (d). The cumulative liability was held to be limited to $15,000. ⁹

Thus we finally reach the issue presented by this appeal: whether subdivision (d) and policy conditions written pursuant thereto are of no effect where the policies are issued by the same company. Two arguments in favor of this proposition are advanced: (1) Application of the anti-stacking condition is unfair where both policies are written by the same company, because the insured pays two premiums but receives nothing for the second which he does not already have by virtue of the first; and (2) subdivision (d) which provides for prorating between insurers is not applicable where, because of the identity of carriers, there is nothing to prorate.

In support of the first argument plaintiffs look myopically at the injured plaintiff Susan K. Welch. They point out that each of the two UM coverages involved was obtained for an identical premium payment of $4.50. If only the first policy had issued and, therefore, only one premium had been paid, she would have received $15,000. State Farm contends, of course, that she should get no more than that even though it issued two policies and received two premiums. Why, ask plaintiffs, should State Farm get a windfall of, possibly, as much as $15,000? What did plaintiffs get for the second premium? The answer is simple: additional protection for additional risks. While this additional protection does not increase the maximum payable to any particular member of plaintiffs' family, the reason why two premiums were paid was that two cars were being operated with a correspondingly greater risk of injury to more persons on a greater number of occasions. The issue is beautifully laid to rest by a leading writer in the field: "If there were but a single insured, and only he ever drove an automobile, obviously he can drive only one vehicle at a time and the reasoning of such courts might then be logical. But, in considering basic underwriting and the actuarial computation of rate structures, we must take into consideration the customary procedures of mankind. Automobile policies are now written...