Zubia v. Farmers Ins. Exchange, A053427

• Decision Date: 26 March 1993
• Docket Number: No. A053427,A053427
• Citation: 18 Cal.Rptr.2d 65,14 Cal.App.4th 790
• Court: California Court of Appeals Court of Appeals
• Parties: Jose ZUBIA et al., Plaintiffs and Appellants, v. FARMERS INSURANCE EXCHANGE, Defendant and Respondent.

Page 65

18 Cal.Rptr.2d 65

14 Cal.App.4th 790

Jose ZUBIA et al., Plaintiffs and Appellants, v. FARMERS INSURANCE EXCHANGE, Defendant and Respondent.

No. A053427.

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

March 26, 1993.

As Modified April 22, 1993.

Review Denied July 15, 1993.

Ernest M. Thayer, A Professional Corp., Laurence F. Padway, Padway & Padway, A Professional Corp., Oakland, for plaintiffs and appellants.

Stephen A. McFeely, James C. Martin, Joseph P. Mascovich, Thomas R. Burke, Crosby, Heafey, Roach & May, Professional Corp., Oakland, for defendant and respondent.

BENSON, Associate Justice.

Plaintiffs Jose Zubia, Anita Zubia, Suzanne Zubia, Sylvia Zubia, and Jesus Ramos, Sr. (plaintiffs) appeal from a judgment in favor of defendant Farmers Insurance Exchange (Farmers). The trial court held a reimbursement provision in an automobile insurance policy issued by Farmers to plaintiff Jose Zubia was valid and enforceable as applied to medical expense payments made under the policy. Plaintiffs contend the trial court should have held the reimbursement provision to be unenforceable because it is not set forth conspicuously in the policy and is ambiguous as to whether it applies to medical expense coverage. We disagree and affirm.

I. FACTUAL AND PROCEDURAL BACKGROUND

On or about December 8, 1987, Farmers issued a written automobile insurance policy entitled "Your E-Z-Reader Car Policy" (the Policy) to plaintiff Jose Zubia. While the Policy was in effect, plaintiffs Jose Zubia, Anita Zubia, Suzanne Zubia and Sylvia Zubia and Jesus Ramos, Jr., the minor son of plaintiff Jesus Ramos, Sr., sustained bodily injuries in an automobile accident. They incurred medical expenses totaling $21,094.59 as a result of the accident. At the time of the accident, they were riding in the automobile insured under the Policy.

After the accident, plaintiffs submitted a claim to Farmers under the medical expense provision of the Policy, which provides, "We will pay reasonable expenses incurred within three years from the date of accident for necessary medical services and funeral expenses because of bodily injury sustained by an insured person." (Emphasis omitted.) ¹ This provision is contained under the bold-faced heading "PART III--MEDICAL" and the bold-faced subheading "Coverage E--Medical Expense Coverage." Farmers paid plaintiffs the $10,000 Policy limit on medical expense coverage but reserved its right to seek reimbursement for the payment in the future.

After receiving the $10,000 payment from Farmers, plaintiffs settled their personal injury claims against two third parties involved in the accident for an undisclosed sum. Plaintiffs incurred costs, expenses, and attorney fees in connection with the settlement. Farmers then demanded reimbursement for its full $10,000 payment, later reducing this demand to $7,000. Farmers based its reimbursement demand on a Policy provision contained under the bold-faced heading "PART V--CONDITIONS" and the bold-faced subheading "5. Our Right to Recover Payment." This provision provides, "In the event of any payment under this policy, we are entitled to all the rights of recovery of the person to whom payment was made against another. That person must sign and deliver to us any legal papers relating to that recovery, do whatever else is necessary to help us exercise those rights and do nothing after loss to prejudice our rights. [p] When a person has been paid damages by us under this policy and also recovers from another, the amount recovered from the other shall be held by that person in trust for us and reimbursed to us to the extent of our payment. [p] This condition does not apply if prohibited by state law." (Emphasis added.)

Plaintiffs took the position the reimbursement provision of the Policy is inapplicable to medical expense coverage, placed the disputed funds into a trust account, and filed the instant action. The action was styled as a class action, but a class was never certified. Plaintiffs' second amended complaint, which is the operative pleading for the purposes of this appeal, contains causes of action for declaratory relief, breach of contract, fraud, breach of statutory duties, breach of the covenant of good faith and fair dealing, and money had and received. The trial court sustained Farmers' demurrer to the fraud, breach of statutory duties, and breach of the covenant of good faith and fair dealing causes of action without leave to amend. The court then severed the declaratory relief cause of action from the remaining causes of action and advanced it for trial.

On October 8, 1990, plaintiffs filed a motion for summary adjudication of issues. By this motion, they sought to establish that the reimbursement provision of the Policy is not conspicuous and is ambiguous as to whether it applies to medical expense coverage. Farmers filed a cross-motion which sought to establish the reimbursement provision is conspicuous, unambiguous, and enforceable. The trial court denied plaintiffs' motion and granted Farmers' cross-motion for summary judgment on the declaratory relief cause of action. The parties then stipulated that were Farmers to move for summary judgment on the remaining causes of action for breach of contract and money had and received, the trial court would grant the motion on the same grounds. Accordingly, the court entered judgment in favor of Farmers. This timely appeal followed.

II. DISCUSSION

A. The Reimbursement Provision is Conspicuous.

Plaintiffs contend the reimbursement provision is unenforceable because it is not conspicuous. The law governing such a claim is well established. Exclusionary clauses in insurance policies must be conspicuous, and, if they are not, they will be strictly construed against the insurer. (Merrill & Seeley, Inc. v. Admiral Ins. Co. (1990) 225 Cal.App.3d 624, 630, 275 Cal.Rptr. 280.) "Courts have invalidated exclusions under the conspicuous requirement where (1) they are not included under the exclusion section and are placed on an overcrowded page; (2) they are included in a 'General Limitations' section but in a dense pack format; or (3) they are hidden in fine print in a policy section bearing no clear relationship to the insuring clause. [Citation.]" (Id. at pp. 630-631, 275 Cal.Rptr. 280.)

Plaintiffs assert the reimbursement provision at issue here "lurks inconspicuously in the nether reaches of the insurance policy." We cannot agree. The Policy is only six pages long. The reimbursement provision is contained on page five and is printed in the same black typeface as the other provisions of the Policy. It appears under the descriptive subheading "5. Our Right to Recover Payment," which is printed in the same green bold-faced type as the other subheadings of the Policy and, like the other subheadings, is listed in the Policy's table of contents. Contrary to plaintiffs' suggestion, the fact that the reimbursement provision and its subheading are printed in the same typeface as other provisions and subheadings does not render the reimbursement provision inconspicuous. (See National Ins. Underwriters v. Carter (1976) 17 Cal.3d 380, 384, 131 Cal.Rptr. 42, 551 P.2d 362 [provision in typeface of same size and intensity as rest of policy is conspicuous]; Cal-Farm Ins. Co. v. TAC Exterminators, Inc. (1985) 172 Cal.App.3d 564, 577-578, 218 Cal.Rptr. 407 [same].)

Plaintiffs also contend the reimbursement provision is inconspicuous because the medical expense coverage provisions of Part III of the Policy do not expressly reference the reimbursement provision contained in Part V of the Policy. Again, plaintiffs' argument is mistaken. "[A] contractual insurance provision need not be 'perfectly drafted' so long as it is ' "conspicuous, plain and clear." ' [Citation.]" (National Auto. & Casualty Ins. Co. v. Stewart (1990) 223 Cal.App.3d 452, 460, 272 Cal.Rptr. 625.) This is not a case in which an exclusionary clause is "hidden in fine print in a policy section bearing no clear relationship to the insuring clause. [Citation.]" (Merrill & Seeley, Inc. v. Admiral Ins. Co., supra, 225 Cal.App.3d at p. 631, 275 Cal.Rptr. 280.) Rather, the reimbursement provision is prominently featured under the descriptive heading "Part V--CONDITIONS," which is printed in the same bold-faced type as the other headings of the Policy. As such, it is conspicuous as a matter of law. (Cf. National Ins. Underwriters v. Carter, supra, 17 Cal.3d at p. 384, 131 Cal.Rptr. 42, 551 P.2d 362 [provision under bold-faced heading "EXCLUSIONS" is conspicuous]; Cal-Farm Ins. Co. v. TAC Exterminators, Inc., supra, 172 Cal.App.3d at pp. 577-578, 218 Cal.Rptr. 407 [same].)

B. The Reimbursement Provision is Unambiguous.

Plaintiffs next argue the reimbursement provision is unenforceable because it is ambiguous. The principles for analyzing a claim of ambiguity were recently summarized by the Supreme Court as follows: "Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation. (Civ.Code, § 1636.) Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639.) The 'clear and explicit' meaning of these provisions, interpreted in their 'ordinary and popular sense,' unless 'used by the parties in a technical sense or a special meaning is given to them by usage' (id., § 1644), controls judicial interpretation. (Id., § 1638.) Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning. [Citations.] [p] If there is ambiguity, however, it is resolved by interpreting the ambiguous provisions in the sense the promisor (i.e., the insurer) believed the promisee understood them at the time of formation. (Civ.Code, § 1649.) If application of this rule does not eliminate the ambiguity, ambiguous language is construed against the party whocaused the uncertainty to exist. (Id., § 1654.) ...