American States Ins. Co. v. Ramirez
Filed 7/23/12 American States Ins. Co. v. Ramirez CA4/2
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California
Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or
relying on opinions not certified for publication or ordered published, except
as specified by rule 8.1115(b). This
opinion has not been certified for publication or ordered published for
purposes of rule 8.1115.
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
FOURTH APPELLATE DISTRICT
DIVISION TWO
AMERICAN STATES INSURANCE COMPANY,
Plaintiff, Cross-defendant and Appellant,
v.
CHRISTINA RAMIREZ et al.,
Defendants, Cross-complainants
and Respondents.
E052849
(Super.Ct.No. CIVVS703193)
OPINION
APPEAL from the Superior
Court of San
Bernardino County. Steve Malone,
Judge. Reversed with directions.
Horvitz & Levy, Peter
Abrahams, Curt Cutting; Sedgwick, Gregory H. Halliday, Bruce D. Celebrezze, and
Chelsea N. Trotter for Plaintiff, Cross-defendant, and Appellant.
Shernoff Bidart Echeverria,
Michael J. Bidart, Gregory L. Bentley, and Steven M. Schuetze; the Ehrlich Law
Firm and Jeffrey Isaac Ehrlich for Defendants, Cross-complainants, and
Respondents.
A drunk driver caused a
traffic accident that took the life of one person and severely injured two
others. He was driving his own vehicle —
albeit in the course of his employer’s business — and he had liability coverage
under his own auto insurance policy for up to $300,000. His employer’s auto insurance policy, by its
terms, covered only certain company vehicles listed in the policy.
The issue in this appeal is whether an
objectively reasonable insured would nevertheless have expected coverage under
the employer’s policy, in light of an accompanying “stuffer” in which the
insurer requested information about “employees who drive their own vehicles on
company business . . . .”
The trial court ruled that it would; it therefore required the
employer’s insurer to pay $5,896,675.11.
Reviewing this ruling de novo, we conclude that it was erroneous. The policy itself was not ambiguous. It would have been objectively unreasonable
to view the stuffer as part of the policy.
Moreover, even if the stuffer was viewed as part of the policy, it would
have been objectively unreasonable to understand it as broadening the coverage
otherwise provided.
I
FACTUAL BACKGROUND
A. The American States
Policy.
Hector LaBastida was the principal of HLCD, Inc.
(HLCD), as well as its employee.
name="_ftnref1" title="">[1]
In October 2003, American States Insurance
Company (American States) issued a commercial auto insurance policy (the
policy) to HLCD. It was a renewal of a
previous policy. The policy was 39 pages
long. At trial, a copy of the policy was
Exhibit 1.
The declarations pages of the policy
of $750,000. They also stated that
liability coverage (along with the other coverages provided) “will apply only
to those ‘autos’ shown as covered ‘autos.’”
(Capitalization omitted.)
The declarations pages then used a system of
numerical symbols (defined elsewhere in the policy)
motor vehicles. The symbol “1” would
have meant any motor vehicle. The symbol
“2” would have meant all motor vehicles owned by the named insured. The symbol “9” would have meant motor
vehicles not owned, leased, rented, or borrowed by the named insured —
specifically including motor vehicles owned by the named insured’s employees —
that were used in connection with the named insured’s business.
In fact, the declarations pages used the symbol
“7,” which was defined as motor vehicles listed in the policy for which a
separate premium was paid. The
declarations pages listed two vehicles:
A 1997 Ford, at premium of $1,490, and a 1998 Chevrolet, at a premium of
$1,396.
“9” coverage, but that would have entailed a higher premium.
The declarations pages also included a list of
forms (by number and title) that were included in the policy.
One of the listed forms (“Company Common Policy
Conditions” (capitalization omitted)) stated:
“This policy consists of:
“Common
Policy Declarations . . . .
“Common
Policy Conditions.
“Coverage parts consist of one or more of the
following: [¶]
. . . [¶]
“Commercial Automobile [¶] . . . [¶]
“Each of the coverage parts consist of:
“One or more coverage forms
“One or more coverage part conditions
“Applicable endorsements.”
A second listed form (“Common Policy
Conditions”(capitalization omitted)) stated, “This policy contains all the
agreements between you and us concerning the insurance afforded.
. . . This policy’s terms can be amended or waived
only by endorsement issued by us and made a part of this policy.”
Yet another listed form (“Business Auto Coverage
Form” (capitalization omitted)) contained the insuring agreement. It provided:
“We will pay all sums an ‘insured’ legally must pay as damages because
of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused
by an ‘accident’ and resulting from the ownership, maintenance or use of a
covered ‘auto’.”
All of the other listed forms were headed, “THIS
ENDORSEMENT CHANGES THE POLICY. PLEASE
READ CAREFULLY.”
When HLCD received the policy, it was in an
envelope along with various printouts, forms, and notices — what American
States called “stuffers.” Neither the
policy pages nor the stuffer pages were fastened in any way. The stuffers were 20 pages long. At trial, a copy of the stuffers was Exhibit
2.
One of the stuffers was Form 6‑3124A.
“IMPORTANT - PLEASE REVIEW [¶] . . . [¶]
“Dear Valued Policyholder,
“We appreciate the opportunity to write your
commercial auto coverage. Please take a
minute to review your policy.
“Your policy has been issued based on the drivers
listing below. In order to insure that
your policy is issued with the most current information, please review this
list and update as necessary.
vehicles on company business or anyone who will drive an insured
vehicle. Contact your [i]ndependent
agent to advise of any changes.
“Also remember to report all newly hired
employees to your agent during the year.
“Thank you for your business!” (Italics added; boldface omitted.)
The only driver listed in Form 6‑3124A was
LaBastida.
Form 6‑3124A was a “generic letter” that
American States sent with every renewal of an auto insurance policy. It requested information about employees who
drive their own vehicles because some American States policies — though not
HLCD’s — provided coverage for employee-owned vehicles (i.e., symbol “9”-type
coverage).
Two of the stuffers stated, “This is a notice
only. The full and exact contract is
contained in the policy.” (Capitalization
omitted.) However, most — including Form
6‑3124A — did not.
B. The Wawanesa Policy.
LaBastida had a personal auto insurance policy
issued by Wawanesa Insurance Company (Wawanesa). That policy was subject to a limit of
$300,000. The Wawanesa policy covered
the 2003 Hummer that LaBastida personally owned.
C. The Accident.
In May 2004, LaBastida, while driving drunk, hit
another car. The driver of the other car
— Martin Ortiz, Jr. — was killed. Two
passengers in the other car — Christina Ramirez and her daughter, Alizah
Ramirez — were injured. LaBastida was
driving his personal vehicle, the 2003 Hummer.
However, he was acting within the course and scope of his employment.
D.
In 2005, Christina Ramirez, Alizah Ramirez, and
Patricia Cordes (the mother of Martin Ortiz, Jr.) (collectively the injured
parties) filed actions against HLCD and LaBastida (the underlying
actions). HLCD and LaBastida tendered
the defense to Wawanesa. Wawanesa
accepted the tender and provided a defense.
HLCD and LaBastida also tendered the defense to
American States. American States denied
coverage, on the ground that the Hummer was not covered under its policy.
In 2007, the injured parties offered to settle
their claims within the policy limits.
American States refused this settlement offer, again on the ground that
its policy did not provide coverage.
In 2008, the underlying actions resulted in a
judgment in favor of the injured parties and against HLCD and LaBastida for a
total of $6,196,675.11. Wawanesa paid
the injured parties its policy limits — $300,000.
rights against American States to the injured parties.
II
PROCEDURAL BACKGROUND
In 2007, American States filed this action
against the injured parties and others for declaratory relief. The injured parties filed a cross-complaint
against American States and others for breach of contract and for declaratory
relief.
parties were American States and the injured parties.
All of the parties entered into stipulations
regarding the issues, the law, and the facts.
In addition, two witnesses testified at trial: Lawrence Signaigo, Jr., the person most
knowledgeable regarding American States’s underwriting practices, and Michael
Carroll, the person most knowledgeable regarding American States’s denial of
the claim.
The trial court then rendered a statement of
decision. It found that the “average
insured” would not have known “which documents were the policy and which
documents were not.” Hence, “the
circumstances of this case require an examination of all the documents
contained in the envelope to determine what a reasonable insured would expect
. . . .” It further found
that Form 6‑3124A was ambiguous but that one “reasonable and plausible
interpretation . . . is that employees who drive their own vehicles
on company business are covered under the policy.” It concluded that American States had a duty
to defend.
Accordingly, the trial court entered judgment
awarding the injured parties $5,896,675.11 (i.e., the $6,196,675.11 arbitration
award, minus the $300,000 already paid by Wawanesa), against American States.
III
DISCUSSION
A. General Legal
Principles.
One aspect of this case is somewhat unusual — the
parties entered into stipulations not only of fact, but also of law. By and large, these stipulations of law
appear correct.
title="">[11] Nevertheless, “we are not bound by
stipulations as to questions of law [citations] . . . .” (Reuter
v. Superior Court (1979) 93 Cal.App.3d 332, 340; see also
145, 171.) Hence, we do not rely on
them.
“‘“‘While insurance contracts have special
features, they are still contracts to which the ordinary rules of contractual
interpretation apply.’ [Citations.] ‘The fundamental goal of contractual
interpretation is to give effect to the mutual intention of the parties.’ [Citation.]
‘Such intent is to be inferred, if possible, solely from the written
provisions of the contract.’
[Citation.] ‘If contractual
language is clear and explicit, it governs.’
[Citation.]” [Citation.]’” (County
of San Diego v. Ace Property & Casualty Ins. Co. (2005) 37 Cal.4th 406,
415.)
“If the terms are ambiguous, we interpret them to
protect ‘“the objectively reasonable expectations of the insured.”’ [Citation.]
Only if these rules do not resolve a claimed ambiguity do we resort to
the rule that ambiguities are to be resolved against the insurer. [Citation.]”
(Boghos v. Certain Underwriters at
Lloyd’s of London (2005) 36 Cal.4th 495, 501.)
“‘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.]” (Haynes
v. Farmers Ins. Exchange (2004) 32 Cal.4th 1198, 1209.)
“[T]he trial court’s interpretation of the
insurance polic[y] in this case is subject to de novo review. [¶] The interpretation of an insurance contract,
as with that of any written instrument, is primarily a judicial function. [Citation.]
Unless the interpretation of the instrument turns upon the credibility
of conflicting extrinsic evidence, a reviewing court makes an independent
determination of the policy’s meaning.
[Citations.]” (
Co. (1995) 31 Cal.App.4th 1094, 1100.)
There is no conflicting evidence in this case. Indeed, most of the facts were stipulated.
B. An Objectively
Reasonable Insured Would Not Have Considered Form 6‑3124A to Be Part of
the Policy.
The policy was not ambiguous with respect to
whether employee-owned vehicles were covered.
They were not. The policy
specified that it applied only to “covered ‘autos.’” By using symbol “7,” it specified that the
only autos that were covered were those listed in the policy for which a
separate premium was shown. Two specific
vehicles were listed. Moreover, a
separate premium was shown for each of those two vehicles. The policy also indicated that, if symbol “1”
or “9” had been used, employee-owned vehicles would have been covered.
The trial court therefore found that the policy was
ambiguous, not so much with respect to what vehicles were covered, but rather
with respect to what documents constituted “the policy.”
declarations page lists all the forms and endorsements that comprise the policy
. . . .” Specifically,
the declarations pages stated, “The following forms currently apply to this
coverage part.” (Capitalization omitted.) They then proceeded to list some 14 forms by
number and name. This list did not include
Form 6‑3124A.
The injured parties rely on the general provision
that the policy included any “[a]pplicable endorsements.” They argue that a reasonable insured could
have understood Form 6‑3124A to be an endorsement. Every endorsement that came with the policy,
however, was both (1) specifically listed in the declarations pages, by number
and by name, and (2) headed, “THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ CAREFULLY.”
The injured parties respond that certain
“uncontested endorsements” do not use this language. The only two endorsements that they cite,
however, were issued after the
initial issuance of the policy (e.g., when the 1994 International was
added). Moreover, these specifically
noted that they “change[d]” the policy by “add[ing]” coverage. Thus, they do not alter our conclusion that a
reasonable insured who actually read the documents contained in the envelope
would have realized that Form 6‑3124A was not an endorsement.
In determining whether the policy was ambiguous,
the trial court quite properly considered the stuffers themselves. “The existence of a material ambiguity in the
terms of an insurance policy may not . . . be determined in the
abstract, or in isolation. The policy
must be examined as a whole, and in context, to determine whether an ambiguity
exists. [Citations.]” (Minkler
v. Safeco Ins. Co. of America (2010) 49 Cal.4th 315, 322.) We disagree, however, with its
conclusion. The trial court focused on
the fact that the policy and the stuffers arrived in the same envelope; there
was no clear physical demarcation between them.
This overlooks the fact that there was a clear textual demarcation between them.
Some of the stuffers indicated that they were
CONTAINED IN THE POLICY.” Another
similarly stated: “This notice
. . . contains a brief synopsis of the significant broadenings,
restrictions and classifications of coverage that were made in each policy form
and endorsement. Not every form and
endorsement discussed in this notice is applicable to your particular
policy. Please refer to your policy to determine which ones do apply.” (Italics added.) The injured parties argue that there was no
such wording on Form 6‑3124A itself.
Nevertheless, this would have made a reasonable insured aware that the
stuffers were not necessarily part of
the policy.
C. An Objectively
Reasonable Insured Would Not Have Understood Form 6‑3124A as Broadening
the Policy.
Even if Form 6‑3124A is viewed as part of
the policy, a reasonable insured would not have understood it as extending
coverage to employee-owned vehicles. It
did not purport to set forth — much less to change — any of the policy terms. It simply stated, “Your policy has been
issued based on the drivers listing below.
In order to insure that your policy is issued with the most current
information, please review this list and update as necessary. Include employees who drive their own
vehicles on company business or anyone who will drive an insured vehicle.” This was merely a request for information.
In the injured parties’ view, a reasonable
insured would have concluded that employees who drove their own vehicles on
company business were covered. However,
Form 6‑3124A specifically distinguished employees who drove their own
vehicles on company business, on the one hand, from “anyone” who drove “an
insured vehicle,” on the other hand.
Thus, it indicated that employee-owned vehicles were
Coverage under the policy was entirely
vehicle-based; HLCD was covered for any accident arising out of the ownership
or use of a covered vehicle, no matter who was driving it at the time. It was not driver-based.
policy had been issued “based on” LaBastida being the only driver could not
reasonably be understood as altering the very basis of coverage. That would have meant that Form 6‑3124A
eliminated the coverage that the
policy otherwise provided whenever someone other than LaBastida drove a covered
vehicle. Rather, it could only be
reasonably understood as stating a fact that American States had relied on in
issuing the policy. An insurance company
may consider the number of drivers or their driving records in setting a
premium or in deciding whether to issue a policy at all. That would not mean that the policy
necessarily provides coverage for particular drivers, if that is contrary to
its plain meaning.
In our view, a reasonable insured would have seen
Form 6‑3124A as exactly what it was — a ploy to sell more insurance. Suppose an insured notified his or her agent
that an employee had started driving a personal vehicle on company
business. If the policy did provide
coverage for employee-owned vehicles (e.g., symbol “9” coverage), American
States would have an opportunity to determine whether to charge an additional
premium. If, however, the policy did
vehicles, American States would have an opportunity to try to “upsell” the
insured to a policy that did. This would
be a more reasonable expectation than that such vehicles were covered without
being listed in the policy.
One of the cases cited by American States —
Cal.App.4th 1064 — is analogous. There, the
insurer issued an auto insurance policy in which Susan Hyung was the “named
insured,” and her fiancé, David Pearson, was a “designated person.” (Id.
at pp. 1066-1067.) The policy
provided third party coverage both for the named insured and for designated
persons. (Id. at pp. 1067-1069.)
However, subject to a number of exceptions, it provided first party
(i.e., uninsured motorist) coverage only for the named insured. (Id.
at pp. 1067, 1069.) A page at the
beginning of the policy, headed, “‘IMPORTANT NOTICE,’” stated, “‘Unless drivers
residing with the Insured are NAMED in the declarations, coverage may not be
afforded. If you desire coverage for
drivers other than those shown, request your agent/broker to have your policy
amended to list the additional drivers.’”
(Id. at p. 1068.)
Pearson was injured by an uninsured
motorist. (Mercury Ins. Co. v. Pearson, supra,
169 Cal.App.4th at p. 1066.) He
argued that the “‘IMPORTANT NOTICE’” created an ambiguity, because it implied
that, as long as he was named in the declarations, his coverage was coextensive
with Hyung’s. (Id. at p. 1070.) The
appellate court disagreed: “Construed
according to its plain meaning, the ‘Important Notice’ is simply a courtesy
warning to the policyholder that drivers
residing with the named insured who are not listed on the declarations page are
not necessarily afforded the same coverage under the policy as additional
notice. This notice simply warns
policyholders of the fact that the liability
provisions of the policy — the only provisions that apply exclusively to
drivers who reside with the named insured, depending on whether such persons are
or are not listed as additional drivers in the declarations page. The notice cannot reasonably be construed as
a promise that, notwithstanding the actual language of the policy, a driver
named in the declarations automatically receives the same coverage as the named
insured for every type of loss, liability, or accident covered by the
policy.” (Id. at pp. 1070-1071, fn. omitted.) It concluded that the policy “is clear and
explicit that the uninsured motorist coverage would not provide coverage for bodily
injury sustained by Pearson . . . , and that he had no coverage
under any portion of the policy unless he was operating or occupying a motor
vehicle listed in the declarations.” (
Here, almost identically, the policy was clear
and explicit that it covered only vehicles specifically listed on the
declarations pages. Form 6‑3124A
was simply a “courtesy warning” that, if (1) someone other than LaBastida
started driving an “insured vehicle,” or (2) an employee started driving his or
her own vehicle on company business, American States should be notified. It could not reasonably be construed as a
promise that, notwithstanding the actual language of the policy, employee-owned
vehicles would be covered without any further action on the part of either
American States or HLCD.
On the other hand, the case that comes closest to
supporting the injured parties’ position, Fryer
v. Kaiser Foundation Health Plan, Inc. (1963) 221 Cal.App.2d 674, is
distinguishable. There, when the insured
received his group medical policy, he also received a membership card, which
listed phone numbers to be called in case of emergency, as well as two
booklets, which likewise listed phone numbers to be called “[d]ay or night” in
case of emergency. (Id. at pp. 677-678.)
The court stated:
“We think that all these documents must be read together as part of a
single contract [citation] and that, when so read, they amount to a contract on
the part of defendant to maintain a 24-hour telephone answering service for use
in case of emergency as well as a 24-hour emergency ambulance service. The several documents were prepared by
defendant, all relate to the same general subject — namely, the benefits
granted by the group insurance scheme; they are not contradictory, but rather supplement
each other, in that the two booklets explain, in greater detail, the methods by
which defendant proposed to carry out the duties summarily listed in the basic
documents. If there be any ambiguity, it
must be resolved against the insurance company which drafted them. [Citations.]”
(Fryer v. Kaiser Foundation Health
Plan, Inc., supra, 221 Cal.App.2d
at p. 678.)
Here, however, the policy itself listed the
documents that constituted the policy.
It does not appear that this was the case in Fryer. Moreover, Form 6‑3124A
(at least as construed by the injured parties) contradicted, rather than
supplemented, the policy. Accordingly,
For these reasons, we conclude that the policy
was not ambiguous and that an objectively reasonable insured would not have
understood it as affording coverage for employee-owned vehicles. Thus, American States was entitled to
judgment in its favor.
IV
DISPOSITION
The judgment is reversed. The matter is remanded to the trial court
with directions to enter judgment in favor of American States and against the
injured parties. American States is
awarded costs on appeal against the injured parties.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
CODRINGTON
J.
I
concur:
McKINSTER
Acting P.J.
KING,
J., Dissenting.
I
disagree with the majority on a number of grounds. Rather than applying a de novo standard of
review to the question of whether Exhibit 3 is part of the insurance policy, I
believe we should use the substantial evidence test. Based thereon, substantial evidence supports
the conclusion that Exhibit 3 is part of the underlying insurance
agreement. Lastly, the language of the insurance policy is ambiguous in that it is
susceptible to more than one reasonable interpretation in the context of the
policy as a whole. I would therefore
affirm the lower court judgment.
is part of the insuring agreement under the substantial evidence test.
At page 2 of its opinion, the
majority states, “ Reviewing [the trial court’s] ruling de novo, we conclude
that it was erroneous.” With this said,
the majority embarks on a discussion in which it determines that the insurance
“policy specifie[s] that it applie[s] only to ‘covered “autos,”’” and “[a]s a
witness testified at trial, ‘the declarations page lists all the forms and
endorsements that comprise the policy . . . .’” (Maj. opn. ante, at pp. 11-12.)
In so concluding, the majority
has ignored the proper standard of review as it relates to the determination of
which documents comprise the insurance contract. The majority has concluded, based on a de
novo review, that the policy is as represented by American States. This reasoning is identical to the insurance
company’s approach at trial where the following colloquy occurred between the
court and American States’s counsel:
“THE
COURT: Well, [defendants] said all these
documents were provided in the same envelope loosely, not attached, and they
are all just combined together.
“[AMERICAN
STATES’S COUNSEL]: Okay. That’s what they are saying. I’m saying that that doesn’t mean it’s part
of the policy.
“THE
COURT: You have to look at it to
determine if it is, don’t you
“[AMERICAN
STATES’S COUNSEL]: No, you do not.”
In disagreeing with both
American States and the majority, I believe that the question as to what
documents comprise the insurance policy is a factual question for the trier of
fact, and that our review should be guided by the substantial evidence test,
not a de novo review.
As stated in Civil Code
section 1642, “[s]everal contracts relating to the same matters, between the
same parties, and made as parts of substantially one transaction, are to be
taken together.” As evident from the
record, American States does not disagree with this; as argued by its counsel
at trial: “That’s how it works, and
that’s how you get—after you have a policy in the first place, that’s how you
get additional endorsements onto a policy.”
Thus, as American States concedes, more than one document may comprise the
insuring agreement and, under Civil Code section 1642, they
“[W]hen there is a question as
to whether a part of a written agreement was intended by the parties to become
a part of such agreement, the inquiry is directed to the identity of the real contract entered into between the
parties. Such question is one of fact
for the jury to be determined from all the circumstances surrounding its
execution, and extrinsic evidence is competent to determine what constitutes
the real contract.” (
657, 671-672.) “Under section 1642 of
the Civil Code, it is the general rule that several papers relating to the same
subject matter and executed as parts of substantially one transaction, are to
be construed together as one contract. . . . The documents need not be executed
contemporaneously; it is a question of fact as to whether several writings
comprise one transaction.” (
338 [Fourth Dist., Div. Two].) “‘[T]he
use of extrinsic evidence to show [whether] several written instruments were
intended to constitute a single contract does not involve a violation of the
parol evidence rule.’ [Citation.] The applicability of Civil Code section 1642
is a question of fact for the trial court, and the appellate court will affirm
the court’s resolution if it is supported by substantial evidence.” (Versaci
v. Superior Court (2005) 127 Cal.App.4th 805, 814-815.) Where the record is silent, we must presume
that the trial court found all of the necessary facts to support a conclusion
that multiple documents comprise one contract.
(Pellegrini v. Weiss (2008)
165 Cal.App.4th 515, 534.) Lastly, in
determining whether the documents at issue are part of a single contract, any
ambiguity as to the issue must be resolved against the insurer. (Fryer
v. Kaiser Foundation Health Plan (1963) 221 Cal.App.2d 674, 678 [the court
concluded that a booklet and membership card which accompanied the insuring
agreement were part of the insurance contract].)
Furthermore, the fact that
“[t]here is no conflicting evidence in this case,” does not support the
majority’s de novo standard of review.
(See maj. opn. ante, at p.
11.) From the record before us, it is
clear that the trial court drew a number of inferences from the undisputed
facts to support its conclusion that Exhibit 3 was part of the insurance
contract. As stated in
351, 355, “even where the probative facts are undisputed, the question as to
the inferences to be drawn therefrom is still within the exclusive province of
the trial court, and if there is any substantial evidence to support them this
court is bound by the determination of the trial court. In other words, it is just as much the
function of the trial court to resolve a conflict between opposing inferences
as it is to resolve a conflict between contradictory statements of fact.” (See Blix
Street Records, Inc. v. Cassidy (2010) 191 Cal.App.4th 39, 49 [“When
different inferences may be drawn from undisputed facts, the appellate court
should accept the inference drawn by the trial court, unless that inference is
inconsistent with clear, positive and uncontradicted evidence.”]; see also
(2007) 157 Cal.App.4th 1101, 1119; Holmes
v. Kizer (1992) 11 Cal.App.4th 395, 401.)
Thus, contrary to the
majority’s de novo approach, the first question which must be addressed is
whether there is substantial evidence to support the trial court’s conclusion
that Exhibit 3 is part of the insurance contract. I believe there is.
court’s implied finding that Exhibit 3 is part of the insurance policy.
In determining whether Exhibit
3 is part of the insurance contract, we look to the intent of the parties. “[T]he relevant intent is ‘objective’—that
is, the objective intent as evidenced by the words of the instrument, not a
party’s subjective intent.” (
(1997) 58 Cal.App.4th 44, 54-55.) “The
parties’ intent must, in the first instance, be ascertained objectively from
the contract language.” And, the use of
extrinsic evidence is not prohibited. (
814-815.) On appeal, “if there is any
substantial evidence to support the verdict or finding it cannot be set aside
by the reviewing court, although said court may believe the great preponderance
of the evidence was the other way. The
power of the appellate court begins and ends with a determination as to whether
there is any substantial evidence, contradicted or uncontradicted, which will
support the conclusion of the trier of the facts. . . . When two or more inferences can be reasonably
deduced from the facts, the reviewing court is without power to substitute its
deductions for those of the trial judge or jury.” (Jackson v. Burke (1954) 124 Cal.App.2d 519, 521-522.)
Here, the evidence cuts both
ways. In support of American States’s
approach, there is a 52-page insurance policy, which contains declaration
pages, the main body of the policy, and various endorsements setting forth the
fact that they represent a “policy change.”
(Exhibit 1.) The documents
contained in Exhibit 2, which includes Exhibit 3, are miscellaneous documents
that generally relate to and discuss various portions of the policy. None of the documents are entitled
“endorsement” and none state that they are a “policy change.” As such, there is substantial evidence to
support a conclusion that a reasonable insured would not objectively believe
that Exhibit 3 was part of the policy.
On the other hand, all of the
documents were sent loosely in the same envelope. They all deal with the subject insurance in
one fashion or another.
name="_ftnref15" title="">[15] The
main body of the policy and the endorsements appear as preprinted documents and
do not reference the name of the insured or the policy number. The declaration pages as well as the “policy
change” pages do, however, reference the named insured and the policy
number. Of the remaining documents
contained in the envelope (i.e., those comprising Exhibit 2), Exhibit 3, like
the declaration pages and the “policy change” pages, is only one of two
documents that references the named insured as well as the policy number. Each of the endorsements indicate that they
change the policy and that the insured should “Please Read Carefully.” Of the documents in Exhibit 2, Exhibit 3 is
the only document that informs the insured: “IMPORTANT - PLEASE REVIEW.” Furthermore, in reading Exhibit 3, it appears
to directly relate to the coverage provided by the policy and the fact that
Hector LaBastida is a covered driver; and in order to cover employees who drive
their own cars in the business, the carrier needs to be advised of their
identity. Viewing these documents as a
whole, there is substantial evidence from which the trier of fact could
conclude that a reasonable insured would objectively believe that Exhibit 3 was
part of the policy. Substantively,
Exhibit 3 appears by its terms to affect the coverage afforded. Additionally, its likeness in form to the
“policy change” documents could lead one to objectively believe it is part of
the policy.
ambiguous in that it is susceptible to more than one reasonable interpretation
in the context of the policy as a whole.
“‘The
interpretation of an insurance contract, as with that of any written
instrument, is primarily a judicial function.
[Citation.] Unless the
interpretation of the instrument turns upon the credibility of conflicting
extrinsic evidence, a reviewing court makes an independent determination of the
policy’s meaning.’ [Citation.]” (Lockheed
Martin Corp. v. Continental Ins. Co. (2005) 134 Cal.App.4th 187, 196.)
“‘“The fundamental rules of contract interpretation are
based on the premise that the interpretation of a contract must give effect to
the ‘mutual intention’ of the parties. . . . ‘Such intent is to be inferred, if possible,
solely from the written provisions of the contract. [Citation.]
The “clear and explicit” meaning of these provisions, interpreted in
their “ordinary and popular sense” . . . controls judicial
interpretation. [Citation.]’” [Citation.]’
[Citation.] ‘Thus, if the meaning
a layperson would ascribe to contract language is not ambiguous, we apply that
meaning. [Citations.]’ [Citation.]”
(Clarendon America Ins. Co. v.
North American Capacity Ins. Co. (2010) 186 Cal.App.4th 556, 566 [Fourth
Dist., Div. Two].)
provision is ambiguous when it is susceptible to two or more reasonable
constructions. [Citation.] Language in an insurance policy is
“interpreted as a whole, and in the circumstances of the case
. . . .” [Citation.] “The proper question is whether the
[provision or] word is ambiguous in the context of this policy and the
circumstances of this case.
[Citation.]”’” (
Capacity Ins. Co., supra, 186 Cal.App.4th at pp. 566-567.) “The language of an insurance policy is
ambiguous if it is susceptible of more than one reasonable interpretation in
the context of the policy as a whole.” (
“‘“‘[A]mbiguous language is construed against
the party who caused the uncertainty to exist.
[Citation.]’ ‘This rule, as
applied to a promise of coverage in an insurance policy, protects not the
subjective beliefs of the insurer but, rather, “the objectively reasonable
expectations of the insured.”’”
[Citation.] “Any ambiguous terms
are resolved in the insureds’ favor, consistent with the insureds’ reasonable
expectations.”’ [Citation.]” (E.M.M.I.
Inc. v. Zurich American Ins. Co. (2004) 32 Cal.4th 465, 470-471.)
In looking to the policy as a whole,
including Exhibit 3, we first attempt to determine whether the policy
provisions clearly and unambiguously set forth what is a covered loss. I begin by noting that the policy in question
appears to be a form policy which can apply in nine different scenarios,
depending upon how one defines a “covered ‘auto.’” Under the policy, a “covered ‘auto’” can be a
nonowned auto, an owned auto, an owned private passenger auto, an owned auto
other than a private passenger auto, a specifically described auto, a hired
auto, or a combination thereof. The only
designation in the policy that sets forth specifically what kind of auto the
particular policy applies to is a number ranging from one to nine. The page of the policy that defines
specifically which autos are “covered ‘autos’” is four pages removed from the
page setting forth the “Schedule of Coverages and Covered Autos.” Thus, in an attempt to have “one size fits
all,” the carrier has not clearly set forth what autos the policy applies to
and what autos it does not apply to.
The “one size fits all” aspect is further
illustrated by the testimony of Lawrence Signaigo, who was a commercial underwriting
specialist with American States. He
testified that Exhibit 3 was a generic document and that it was “sent on all
renewals.” He further indicated that the
reason for the specific wording in Exhibit 3 is that some of the policies
issued by American States provide nonowned auto coverage.
Thus, in its attempt to standardize its
approach to all of its insureds, American States has not clearly and explicitly
set forth what is a covered loss. To
further confuse the issue, one need only look to the specific language of
Exhibit 3. In its relevant portion,
Exhibit 3 states: “Your policy has been
issued based on the drivers listing below.
In order to insure that your policy is issued with the most current
information, please review this list and update as necessary. Include employees who drive their own
vehicles on company business or anyone who will drive an insured vehicle. Contact your agent to advise of any changes. [¶]
Also remember to report all newly hired employees to your agent during
the year. . . .
“NAME
OF DRIVER
DATE
OF BIRTH
DRIVERS
LICENSE
NUMBER
STATE
DATE
OF
HIRE
LABASTIDA
HECTOR
04-23-68
C5192148
04”
The above clearly tells the insured
that the identity of drivers is important as to the specific insurance policy
at issue.
title="">[16] The
import of Exhibit 3 is to state that Hector LaBastida is the only covered
driver under the insurance policy. And,
for purposes of covering employees who drive their own cars or anyone else
driving a listed vehicle, it is necessary for the named insured to contact the
carrier. Taken as a whole, it tells the
named insured that the policy is driver based.
All told, the policy is not clear
and explicit and is susceptible to more than one reasonable
interpretation. One reasonable
construction is that the policy covers only named autos. An equally reasonable construction is that
the policy is driver based and that Hector LaBastida was a covered driver while
driving on company business, regardless of what automobile he was driving.
When dealing with the duty to defend
on a declaratory relief cause of action, “the insured must prove the existence
of a potential for coverage, while
the insurer must establish the absence of
any such potential. In other words,
the insured need only show that the underlying claim may fall within policy coverage; the insurer must prove it
(Montrose Chemical Corp. v.
Superior Court (1993) 6 Cal.4th 287, 300.)
In that under the present facts there are two or more reasonable
constructions, the ambiguity must be resolved against the insurer and in favor
of the defendant’s right to a defense.
(See Smith Kandal Real Estate v.
Continental Casualty Co. (1998) 67 Cal.App.4th 406, 414-416.)
As
such, I would affirm the present judgment.
KING
J.
>
Construction and Development.
policy as originally issued, which was 39 pages long, but also 13 pages of
subsequent changes and amendments, for a total of 52 pages. The trial court mistakenly found that policy
