Wheeling v. Financial Indem. Co.

• Decision Date: 07 March 1962
• Parties: Turner D. WHEELING, Sheriff-Administrator of the Estate of R. P. Hester, Deceased, Plaintiff and Respondent, v. FINANCIAL INDEMNITY COMPANY, a California corporation, Defendant and Appellant. Civ. 25415.
• Court: California Court of Appeals Court of Appeals

Page 879

19 Cal.Rptr. 879

201 Cal.App.2d 36

Turner D. WHEELING, Sheriff-Administrator of the Estate of R. P. Hester, Deceased, Plaintiff and Respondent, v. FINANCIAL INDEMNITY COMPANY, a California corporation, Defendant and Appellant.

Civ. 25415.

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

March 7, 1962.

Hearing Denied May 2, 1962.

Bolton, Groff & Dunne and Henry E. Kappler, Los Angeles, for appellant.

Parker, Stanbury, McGee, Peckham & Garrett and Daren T. Johnson, Los Angeles, for respondent.

FOX, Presiding Justice.

This is an action against an insurance company on a policy of insurance to recover the amount of a default judgment rendered by a Virginia court against the insured.

Appellant insurance company issued a policy of automobile liability insurance to Arthur DeCosta in July of 1955, with reference to a 1954 Chevrolet. The policy was issued and delivered in California, and DeCosta was at the time a resident of this state. Appellant, by the terms of the policy, promised 'To pay on behalf of the Insured all sums which the Insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person, caused by accident and arising out of the ownership, maintenance, or use of the automobile.' The policy defines the word 'Insured' to include 'the named Insured and also * * * any person while using the automobile * * * with his permission.' A Military Exclusion Endorsement was included, providing that no coverage would be afforded when the vehicle was being driven by a member of the armed forces other than the insured (unless the insured was in the automobile).

The company further agrees to 'Defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false or fraudulent * * *.'

Insurance Code, section 11580, pursuant to which this action is brought, provides that a policy such as the one here involved shall not be issued without certain provisions and if one is issued without them, it shall be construed as if such provisions were embodied therein. Among the provisions thus deemed included is: '* * * whenever judgment is secured against the insured * * * in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment.' (Emphasis added.)

After the policy was issued, DeCosta, a member of the Air Force, left California and was stationed in Virginia. In October of 1955, his automobile was involved in an accident in Virginia in which one R. P. Hester was killed. Respondent, as 'Sheriff-Administrator' of the estate of Hester commenced an action in a Virginia court to recover damages for his death. ¹ DeCosta and one William Spraglin were named as defendants. The complaint, in that action, called 'Motion for Judgment' in Virginia, alleged that Hester had died and that respondent had been appointed administrator; that Hester's death 'was caused and was the direct and sole result of the grossly negligent and careless and reckless and wanton manner of operation of a motor vehicle being driven by the defendant, William D. Spraglin, on U. S. Route 1 in Stafford County, Virginia, at about 3:25 A.M. on the morning of October 2, 1955'; that the automobile driven by Spraglin was owned by DeCosta, and Spraglin 'was operating the said vehicle as agent' of DeCosta and with his full knowledge and consent. Personal service was made on the named defendants, and they did not appear. On October 2, 1956, a default was entered, evidence was reviewed, and a judgment was entered. DeCosta notified appellant of the action, and appellant refused to defend. Subsequently, respondent filed an action in Virginia to recover on the policy. Service was successfully quashed, and respondent thereafter filed the present action.

The pre-trial conference order reads in part as follows: 'It is stipulated that a true copy of the insurance policy may be admitted in evidence without any objection, and that the photocopy of proceedings in the Circuit Court of Prince William County, State of Virginia, is admitted in evidence and attached hereto as plaintiff's Exhibit 1 at the trial, and that said document is a valid judgment of a court of competent jurisdiction, but defendant does not waive special defenses set forth in the answer questioning the effect of the judgment as it may apply to the defendant in this action.' ² It was further stipulated that no witnesses were to be called, and the only issues to be raised were those arising out of the policy of insurance and the documents pertaining to the Virginia judgment.

The trial court found it to be 'true, as stipulated, that during the effective period of the policy * * *, plaintiff's deceased * * * was killed as a result of the negligent operation of the vehicle described in the policy, on the public highways of Virginia, outside of any military reservation, by one William D. Spraglin, a member of the military, with the permission of Arthur DeCosta, named insured, and that the named insured was not in said automobile at that time.' (Emphasis added.) The Virginia judgment was found to be valid, and conditions precedent set forth by the policy were found to have been met. The court concluded that the Military Exclusion Endorsement was invalid, and granted respondent recovery on the policy as a proper third party beneficiary.

The principal question decided below, which decision appellant contends was incorrect, concerns the effect of the Military Exclusion Endorsement. First, since the contract of insurance was made and delivered in California, and did not specify a place of performance, we must look to California law in assessing the validity of its provisions. (Civil Code, § 1646; Blair v. New York Life Ins. Co., 40 Cal.App.2d 494, 104 P.2d 1075; Baekgaard v. Carreiro, 9 Cir., 237 F.2d 459.) At all times pertinent to this section, section 415 of the Vehicle Code (now sections 16450-16455) required that all motor vehicle liability policies 'insure the person named therein and any other person using * * * said * * * vehicle * * * with the * * * permission of said assured.' (Emphasis added.) It further required that the policy 'insure every said person on account of the maintenance, use or operation of every motor vehicle therein covered within the continental limits of the United States against loss from the liability imposed by law arising from such maintenance, use or operation' to $5,000. (Emphasis added.)

In Wildman v. Government Employees' Ins. Co., 48 Cal.2d 31, 307 P.2d 359, it was held that a provision in a policy was invalid insofar as it attempted to limit coverage to the named insureds and their immediate family. At page 39, 307 P.2d at page 364, it was stated: 'It appears that section 415 must be made a part of every policy of insurance issued by an insurer since the public policy of this state is to make owners of motor vehicles financially responsible to those injured by them in the operation of such vehicles.' The same question was raised in Bonfils v. Pacific Auto Ins. Co., 165 Cal.App.2d 152, 331 P.2d 766. There, as here, the complainant had recovered a default judgment which was unsatisfied, and later sued the insurance company. The company contended that someone other than the named insured was driving at the time of the accident and the policy excluded coverage for anyone but the named insured. Following the lead of the Wildman case, the opinion states at page 158, 331 P.2d at page 769: 'Every motor vehicle liability policy of insurance issued in this state, by virtue of law, covers both the owner * * * and every person using the * * * [automobile] with the owner's consent; any omission of an express provision in such a policy resulting in a failure to effect this dual coverage is supplied by implication of law; by the same standard, any provision therein which expressly excludes such coverage, being contrary to public policy, is rendered ineffectual by law.' It could not be more clear that the Military Exclusion Endorsement is invalid. The Wildman case was reaffirmed in Exchange & Casualty and Surety Co. v. Scott, 56 Cal.2d 613, 15 Cal.Rptr. 897, 364 P.2d 233. ^*

McFarland v. New Zealand Ins. Co., 176 Cal.App.2d 422, 1 Cal.Rptr. 482, cited by appellant, is not in point. It was there held that section 415 and the Wildman and Bonfils cases did not go so far as to prevent the issuing of a policy which applied only to accidents occurring within the boundaries of a military reservation. There is a standard order at most military bases that personnel cannot operate automobiles on the base without insurance. The policy involved in the McFarland case was typical of those highly limited policies put out to meet the need thus arising. It contained a restrictive endorsement which limited coverage as mentioned above, and also stated: 'The insurance shall not be construed to comply with the motor vehicle financial responsibility law of any state or province.' (Emphasis ours.) Such a limitation was held to be valid in the absence of an express statutory prohibition. Far from expressing such a limitation, DeCosta's policy states: 'Such insurance as is afforded by this policy for bodily injury liability or property damage shall comply with the provisions of the motor vehicle financial responsibility law of any state or province which shall be applicable with respect to any such liability arising out of the ownership, maintenance or use of the automobile during the policy period, to the extent of the coverage and limits of liability required by such law * * *.' (Emphasis added.)

Appellant's contention is that the laws of Virginia should apply since the contract was to be 'performed' in Virginia. It...