Hartford Ins. v. Rush Truck Centers

Filed 2/20/08 Hartford Ins. v. Rush Truck Centers 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NOT TO BE PUBLISHED IN OFFICIAL REPORTS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 This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.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

APPEAL from the Superior Court of Riverside County. Affirmed. Edward D. Webster, Judge. Affirmed.

Haight Brown & Bonesteel, Thomas N. Charchut; Noveck & Moore and Thomas A. Moore for Plaintiff and Appellant.

Sonnett & Associates, Anthony E. Sonnett and Jocelyn A. Julian for Defendants and Respondents.

I. INTRODUCTION

Hartford Fire Insurance Co. (Hartford) filed the present subrogation action against PACCAR Inc. (PACCAR or Peterbilt) and Rush Truck Centers of California, Inc. (Rush) (collectively defendants). Hartford seeks to recover approximately $156,518.40, or the amount paid its insureds, Dix Leasing (Dix) and All American Asphalt (All American), for property losses they incurred as a result of an August 2002 fire that severely damaged two Peterbilt trucks. PACCAR manufactured the trucks and Rush, a retail seller, sold the trucks to Dix. At the time of the fire, All American was leasing the trucks from Dix. In its complaint, Hartford claims that a manufacturing or design defect caused the fire.

Defendants moved for summary judgment. They claimed that on November 22, 2002, after Hartford indemnified its insureds but before Hartford notified defendants of its subrogation claim, Dix settled with defendants in exchange for PACCARs payment of $85,000 and Dixs release of defendants from any and all claims related to the fire. The trial court granted the motion, concluding that (1) Dixs release of any and all claims barred Hartfords subrogation claim, and (2) there was no triable issue of material fact concerning whether defendants knew of Hartfords subrogation claim at the time they entered into the settlement agreement with Dix and obtained Dixs release of any and all claims related to the fire. Accordingly, the trial court entered judgment in favor of defendants on Hartfords complaint.

Hartford appeals and we affirm. On independent review, we agree with the trial court that Dixs release of defendants from any and all claims relating to the fire bars Hartfords subrogation claim. Furthermore, it is undisputed that Hartford did not notify defendants of its subrogation claim or that it had paid its insureds for any losses to the fire until March 2003, several months after defendants and Dix signed the settlement agreement and release on November 22, 2002. Finally, there is no triable issue of fact concerning whether defendants knew of Hartfords subrogation claim, or that Hartford had indemnified its insureds for any losses resulting from the fire, at the time defendants and Dix signed the settlement agreement and release.

II. BACKGROUND

A. The August 2002 Fire

On August 3, 2002, two model year 1995 Peterbilt trucks were parked on the premises of All American in Irwindale, California. The engine of one of the trucks caught fire and spread to the second truck. Both trucks were deemed a total loss. The trucks had been used to haul sheetrock and gravel.

B. The Parties

At the time of the fire, All-American was leasing the trucks from Dix. Dix and All American shared common ownership, and Dan Sisemore was the president and chief executive officer of both companies. Both companies were named as insureds on a policy of business personal property insurance issued by Hartford.

Peterbilt Motors Company is an unincorporated division of PACCAR. Peterbilt or PACCAR manufactured the Peterbilt trucks damaged in the August 2002 fire. Rush is a retail seller of Peterbilt trucks and sold the trucks to Dix. There was a franchise or dealer agreement between PACCAR and Rush.

C. PACCAR Investigates the Cause of the August 2002 Fire

Following the August 2002 fire, PACCAR sent a fire investigator from FTI/SEA Consulting to inspect the damaged trucks. The investigator concluded that there was insufficient evidence to indicate that a manufacturing or design defect was the cause of the fire. Based on the investigators findings, PACCAR verbally rejected responsibility for the fire. Dix disputed the investigators findings and insisted that PACCAR or Rush compensate it for its loss.

D. Defendants Settle With Dix

On November 22, 2002, defendants and Dix entered into a written settlement agreement and release of claims. The agreement provided that PACCAR would pay Dix $85,000. In exchange, Dix released PACCAR and Rush from any and all claims related to the August 2002 fire, and conveyed title to the two trucks to PACCAR free and clear of all liens. The agreement was signed by David Rose on behalf of PACCAR, Dennis Wares on behalf of Rush, and Dan Sisemore on behalf of Dix.

E. Hartford Indemnifies Its Insureds and Advises PACCAR of Its Subrogation Claim

On November 13, and 19, 2002, several days before defendants and Dix entered into the settlement agreement and release of claims on November 22, Hartford paid All American a total of $156,518.40 for property losses to the two trucks that were damaged in the August 2002 fire.

Several months later, on March 21, 2003, Hartford sent PACCAR a letter advising PACCAR of Hartfords subrogation claim, and that Hartford had paid All American $156,518.40 for property loss to the two trucks damaged in the August 2002 fire. Hartfords letter stated that [t]here were no business interruption losses reported or paid as a result of the 2002 fire. The letter was the first time Hartford advised PACCAR or Rush that it had indemnified its insureds for any damages related to the August 2002 fire.^[1]

F. Hartfords Complaint for Equitable Subrogation

In July 2003, Hartford filed a complaint against PACCAR and later added Rush as a Doe defendant. The complaint alleged that Hartford had paid its insured [All American ] for the loss of business personal property as a result of the August 3, 2002 fire and Hartford was therefore entitled to seek reimbursement from [d]efendants for the liability and damages suffered by [its] insured and for the losses that were paid thereto.

The complaint specifically alleged causes of action for design, manufacture, and assembly defect, negligent design, manufacture, and assembly, and failure to warn of danger in use. The complaint further alleged that each defendant was the agent of the other defendants. PACCAR assumed the defense of Rush.

G. Defendants Motion for Summary Judgment

In their motion for summary judgment, defendants argued that Hartford could not establish a necessary element of its equitable subrogation claimspecifically, that Dix had an existing, assignable cause of action against defendants for property loss damages resulting from the firebecause Dix had released defendants from all claims relating to the fire. Defendants also claimed they had no knowledge of Hartfords subrogation rights, or that Hartford had made any payments to its insureds for losses resulting from the August 2002 fire, at the time they entered into the settlement agreement with Dix on November 22, 2002, and Dix released defendants from all claims relating to the fire.

In support of their motion and separate statement of material facts, defendants submitted the declarations of Redmond David, the field service manager of PACCAR, and Robert McCoy, Rushs former vice-president of operations. David and McCoy both participated in the negotiations with Dix that preceded the November 22, 2002, settlement agreement with Dix. They claimed that PACCAR agreed to pay Dix $85,000, because Dix was a valued customer and not because defendants were responsible for any of Dixs losses related to the fire.

David said that the first time PACCAR or Rush became aware of Hartfords subrogation claim was March 2003, when PACCAR received a demand letter from Hartfords counsel. McCoy confirmed that Rush first learned of Hartfords subrogation claim when PACCAR informed Rush of Hartfords demand letter.

David and McCoy both claimed it was their understanding that Dix was self-insured for the property losses resulting from the fire, and that no one at Dix or All American ever told them there was any insurance covering any part of the losses they incurred as a result of the fire. They also claimed there was no discussion of insured as opposed to uninsured losses during the settlement negotiations with Dix. McCoy said Dix had always paid cash for its trucks and financing was not an issue.

H. Hartfords Opposition

In its opposition to the motion, Hartford admitted that its March 21, 2003, demand letter represented the first notification to PACCAR or Rush of its subrogation claim. Hartford maintained, however, that there was a triable issue of fact concerning whether PACCAR and Rush had actual or constructive knowledge of Hartfords subrogation rights at the time they entered into the settlement agreement with Dix. Hartford argued that defendants either knew or reasonably should have known that Dix had insurance covering the two trucks at the time defendants and Dix entered into the settlement agreement on November 22, 2002.

In support of its opposition, Hartford submitted the declarations of Dan Sisemore, Michael Farkas, and Ken McGuire. Sisemore said he never told McCoy or any other representative of Rush that Dix was self-insured for any part of the losses related to the fires.

McGuire, the former vice-president of operations at All American, was primarily responsible for communicating with and arranging for the purchase of Peterbilt trucks from Rush. McGuires primary contact at Rush was Dennis Wares, the salesman who handled the Dix account on a daily basis. McGuire never told Wares or McCoy that Dix or All American was self-insured for any part of the fire losses to the two trucks.

Farkas, the controller of All American, was responsible for obtaining all necessary insurance for Dixs and All Americans operations. According to Farkas and McGuire, All American had in the past faxed documents called Certificates of Insurance to Rush, identifying the type of insurance covering the vehicles that Dix purchased and the specific vehicles covered. Rush required the certificates as a condition of Dix taking possession of trucks and removing them from Rushs lot. Hartford was identified as the insurer on all of the certificates.

Hartford did not claim that All American or Dix had provided Rush (or PACCAR) with certificates of insurance or other documents indicating that the two fire-damaged trucks were covered by any insurance. No certificates of insurance were included in Harfords opposition papers.

Hartford also submitted portions of the deposition of McCoy, in which McCoy said it had occurred to him that Dix or All American had insurance on the two trucks because the value of the two trucks was significantly higher than the $85,000 PACCAR agreed to pay Dix pursuant to the settlement agreement. It was also McCoys understanding that self-insured did not necessarily mean that someone had no insurance. Instead, they could be self-insured up to a certain point, then the insurance kick[s] in.

Hartford also argued that David of PACCAR and McCoy of Rush lacked personal knowledge of what Dixs representatives told Rush regarding Dixs insurance coverage. In earlier deposition testimony, David admitted he had never personally spoken with anyone at Dix regarding the settlement agreement. Instead, his communications with Dix were made through other representatives of PACCAR and representatives of Rush. McCoy also admitted in his deposition testimony that he had no regular involvement or communication with individuals at Dix concerning the sale of the trucks and required financing. Thus, Hartford argued, McCoy had absolutely no personal knowledge regarding the day-to-day communications between [Rush] and All American/Dix regarding the existence of insurance for the subject loss.

Hartford further argued that Rushs knowledge of Dixs insurance was chargeable to PACCAR because Rush was PACCARs agent based on PACCARs and Rushs course of conduct in dealing with Dix. In this regard, Hartford noted that McGuire had discussed Dixs loss of use of the two vehicles with Wares, the sales agent at Rush responsible for Dixs account. According to McGuire, Wares indicated he would communicate with [Rush] and with [PACCAR] to see what could be done. And, according to Sisemore, Rush advised All American that PACCAR was prepared to pay $85,000 to compensate us for the loss of the use of the vehicles.

I. Defendants Reply

In reply, defendants maintained there was no evidence that either of them had actual or constructive knowledge that Hartford had paid its insureds any sums for losses resulting from the fires, at the time the settlement agreement was signed. They also argued that any knowledge they may have had that the two trucks were insured was insufficient to void Dixs release of Hartfords subrogation claim.

Defendants also argued that the settlement agreement was unambiguous. Thus, Hartfords claim or suggestion that Dixs release covered only uninsured or loss of use damages, as opposed to property damages, was based on inadmissible parol evidence. Finally, defendants claimed that Rush was not PACCARs agent for purposes of the settlement agreement or otherwise, and that Rushs knowledge and actions could not be imputed to PACCAR.

J. The Trial Courts Ruling on the Motion

In granting defendants motion for summary judgment, the trial court observed that a third partys settlement with an insured does not bar a later subrogation claim by the insurer, provided the third party settles with knowledge that the insureds insurer had indemnified the insured for the claims the insured released in connection with the settlement. And here, Hartford admitted there was no evidence PACCAR or Rush were aware that Hartford had indemnified Dix or All American at the time Dix entered into the settlement agreement with PACCAR and Rush.

The court drew a distinction between the knowledge exception to the rule that an insureds release of claims against a third party bars the insurers subrogation claim against the third party, and the rule Harford was advancingthat is, that a third partys knowledge, actual or constructive, of the existence of insurance is sufficient to satisfy the knowledge exception and void the insureds release vis--vis the third party. It was unreasonable, the court said, to expect a third party to inquire about the existence, type, or extent of an insureds insurance, before settling with the insured in good faith.

The court said that the third party had no obligation to worry about the relationship between the insured and its insurer, whether they had settled, or whether the insurer had any intention of pursuing a subrogation claim. Instead, the third partys only responsibility is not to accept an insureds release of claims once it has been advised that the insureds insurer has indemnified the insured for its losses. Furthermore, it is the insurers responsibility upon indemnifying its insured to advise its insured (or potentially responsible third parties) that the insured wishes to exercise its subrogation rights.

K. The Trial Courts Ruling on Defendants Evidentiary Objections

At the close of the hearing on defendants motion, the court ruled on defendants evidentiary objections to the declarations Hartford submitted in support of its opposition. The trial court sustained defendants objections to statements by McGuire and Sisemore to the effect that Rush was the agent of PACCAR, on the ground these statements constituted improper conclusions. The court noted, however, that it was irrelevant whether Rush was PACCARs agent for purposes of the courts ruling.

The court also observed that PACCAR and Rush had asserted for the first time in their reply brief that they should be treated differently for purposes of the settlement agreement. In any event, the court said it was not granting summary judgment based on the absence of any agency relationship between PACCAR and Rush. Still, the court noted that PACCAR and Rush were equally involved with this settlement and both had benefited from the settlement agreement and release.

Finally, the court sustained an objection to Sisemores statement that All American was advised by [Rush] that [PACCAR] was prepared to pay us [$]85,000 . . . to compensate us for the loss of use of the vehicles. The court ruled that this statement regarding defendants intent in paying the $85,000 sum also constituted an improper conclusion.

III. STANDARD OF REVIEW

A trial court properly grants summary judgment where there are no triable issues of material fact and the moving party is entitled to judgment as a matter of law. (Code Civ. Proc.,  437c, subd. (c).) A moving party defendant is entitled to summary judgment if it establishes a complete defense to the plaintiffs causes of action, or shows that one or more elements of each cause of action cannot be established. The defendant must support its motion with affidavits, declarations, admissions, answers to interrogatories, depositions, and matters of which judicial notice shall or may be taken. (Code Civ. Proc.,  437c, subds. (b) & (o)(2); Aguilar v. Atlantic Richfield Co. (2001)25 Cal.4th 826, 849.)

The moving party defendant bears the initial burden of production to make a prima facie showing that no triable issue of material fact exists. Once the defendant has met this burden of production, he causes a shift. The burden shifts to the plaintiff to make a prima facie showing that a triable issue of material fact exists. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at pp. 850-851.) To meet its burden, the plaintiff may not rely upon the allegations of its complaint; it must set forth specific facts showing that a triable issue of fact exists. (Code Civ. Proc.,  437c, subd. (p)(2).)

From commencement to conclusion, the moving party defendant bears the burden of persuasion that no triable issue of fact exists. Where, as here, the plaintiff would have the burden of proving its claim at trial by a preponderance of the evidence, the defendant must present evidence that would require a reasonable trier of fact not to find any underlying material fact more likely than not. Otherwise, the defendant is not entitled to judgment as a matter of law, but must present his evidence to a trier of fact. (Aguilar v. Atlantic Richfield Co., supra, 25 Cal.4th at pp. 850-851.)

On appeal, we exercise an independent assessment of the correctness of the trial courts ruling, applying the same legal standard as the trial court in determining whether there are any genuine issues of material fact or whether the moving party is entitled to judgment as a matter of law. [Citation.] (Seo v. All-Makes Overhead Doors (2002) 97 Cal.App.4th 1193, 1201-1202.) For the reasons that follow, we conclude that the trial court properly found that there were no triable issues of material fact and that defendants were entitled to judgment as a matter of law.

IV. DISCUSSION

A. Applicable Law

Subrogation is the insurers right to be put in the position of the insured, in order to recover from third parties who are legally responsible to the insured for a loss paid by the insurer. [Citation.] (Plut v. Firemans Fund Ins. Co. (2000) 85 Cal.App.4th 98, 104.) Thus, when an insurer pays money to its insured for a loss caused by a third party, the insurer succeeds to its insureds rights against the third party in the amount the insurer paid. (Hodge v. Kirkpatrick Development, Inc. (2005) 130 Cal.App.4th 540, 548.) The insurer is also subject to all defenses that the responsible third party could have asserted against the insured. (Allstate Ins. Co. v. Mel Rapton, Inc. (2000) 77 Cal.App.4th 901, 908 (Mel Rapton).)

Accordingly, if an insured settles with and releases a third party from all claims related to the insureds loss, the insurer is barred from pursuing an action against the third party for any part of that loss. (See Griffin v. Calistro (1991) 229 Cal.Appp.3d 193, 196.) An exception to the rule exists in California, however, where the tortfeasor settles with the insured with knowledge that the insured has been indemnified by an insurer. (Ibid.; Conservatorship of Edwards (1988) 198 Cal.App.3d 1176, 1184.) In this event, the insurers subrogation claim persists and the insurer is not subject to the defense that the insureds release of all claims bars the insurers subrogation claim. (Griffin v. Calistro, supra, at p. 196.)

B. Analysis

Defendants argue, as they did in the trial court, that Dixs release of all claims in favor of defendants bars Hartfords subrogation for any sums Hartford paid its insureds, Dix and All American, for any damages to the two trucks. Defendants also claim it is undisputed that they did not know of Hartfords subrogation claim, or that Hartford had indemnified its insureds for any losses related to the August 2002 fire, until March 2003, several months after they signed the settlement agreement release with Dix on November 22, 2002. Defendants further argue, as they did in the trial court, that Hartford has failed to raise a triable issue of fact concerning whether defendants knew of Hartfords subrogation claim or that Hartford had paid its insureds any money for losses related to the August 2002 fire, at the time the settlement agreement and release was signed.

1. Dixs Release of All Claims Encompasses Hartfords Subrogation Claim

The settlement agreement and release between defendants and Dix states that, in exchange for PACCARs payment of $85,000 to Dix, Dix does hereby release, acquit and forever discharge [PACCAR] and [Rush], their agents, servants and assigns, officers and directors, affiliated companies and insureds, and any repairing Peterbilt dealer of and from any and all actions, causes of actions, claims, demands, damages, costs, loss of service, expenses and compensation, of any kind or character whasover [sic] including but not limited to lost profits, goodwill, or out-of-pocket expenses which Dix Leasing hereto may have or may accrue in the future, both known and unknown, on account of, or arising out of any matter of things which have happened, developed or occurred with regard to Vehicles . . . . The Vehicles are defined in the agreement as the two Peterbilt trucks damaged in the August 3, 2002, fire.

Hartfords complaint seeks reimbursement from defendants for the sums Hartford paid All American for its business personal property losses resulting from the August 2002 fire. Hartfords March 21, 2003, demand letter to PACCAR states that Hartford paid its insureds a total of $156,518.40 in property losses to the two damaged trucks, and [t]here were no business interruption losses reported or paid as a result of damage to these vehicles. Dixs release of claims encompasses any and all claims Dix may have had against defendants for damages related to the two trucks, whether property loss damages, business interruption losses, or other damages. Thus, Dixs release encompasses Hartfords subrogation claim for personal property losses resulting from the August 2002 fire.

2. The Knowledge Exception Does Not Apply

In support of their motion, defendants submitted evidence that neither of them knew Hartford had indemnified its insureds for any losses resulting from the August 2002 fire at the time defendants and Dix signed the settlement agreement and release on November 22, 2002. This evidence, coupled with the settlement agreement and release, was sufficient to make a prima facie showing that Hartford could not prove one of the essential elements of its subrogation claim, specifically that its insureds had an existing, assignable cause of action against defendants for the property losses for which Hartford indemnified its insureds. (Firemans Fund Ins. Co. v. Maryland Casualty Co. (1994) 21 Cal.App.4th 1586, 1596.)^[2]

Defendants lack of knowledge evidence consisted of the declarations of David of PACCAR and McCoy of Rush. They stated (1) they participated in the negotiations that preceded the settlement agreement with Dix; (2) no one at Dix or All American ever told them that Dix or All American had any insurance covering any part of the losses they incurred as a result of the August 2002 fire; (3) there was no discussion with Dix or All American concerning insured as opposed to uninsured losses; and (4) defendants first learned of Hartfords subrogation claim after Hartford sent a demand letter to PACCAR on March 21, 2003, seeking reimbursement for the $156,518.40 that Hartford paid its insureds on their property loss claim.

In its opposition papers and response to defendants separate statement of facts, Hartford did not dispute that it first informed defendants that it had paid its insured for the August 3, 2002 loss in a March 21, 2003 letter. Hartford also did not dispute that, pursuant to the November 22, 2002, settlement agreement, Dix settled any and all claims it had against defendants relating to the August 3, 2002, fire in exchange for PACCARs payment to Dix of $85,000. Hartford claimed, however, that Dixs release of all claims did not encompass Hartfords subrogation claim, because Rush knew or should have known that Dix or All American had insurance on the two trucks, and Rushs knowledge was chargeable to PACCAR because Rush was PACCARs agent.

In support of this argument, Hartford relied on the declarations of Sisemore and McGuire of Dix and All American. Both stated that, during the negotiations that preceded the November 22, 2002, settlement agreement, they told defendants that Dix was seeking to recover damages for loss of use of the two trucks. Hartford also relies on a portion of McCoys deposition testimony in which he stated he assumed that some part of the losses to the two trucks was covered by insurance because the value of the two trucks was substantially higher than the $85,000 sum PACCAR was paying Dix.

Hartford also notes that Farkas, the controller of All American, and McGuire, the person responsible for purchasing trucks for Dix, stated they had routinely provided Rush with certificates of insurance for each vehicle purchased from Rush and Rush required these documents as a condition of taking newly purchased trucks off Rushs premises. These certificates showed that Hartford was the companies insurer. Hartford also claimed that neither David of PACCAR nor McCoy of Rush had any personal knowledge to the contrary. Finally, Hartford claimed that Rushs knowledge of this insurance was chargeable to PACCAR because Rush was PACCARs agent.

None of Hartfords evidence raises a triable issue of fact on the critical question of whether defendants, or either of them, knew that Hartford had paid its insureds any sums for any losses resulting from the August 3, 2002, fire, at the time defendants entered into the November 22, 2002, settlement agreement with Dix. Indeed, Hartford did not dispute that it first informed defendants that it had paid its insured for the August 3, 2002 loss in a March 21, 2003 letter.^[3]

In view of our conclusion, it is irrelevant whether Rush was PACCARs agent, or whether PACCAR was chargeable with Rushs actual or constructive knowledge that Dix or All American had any insurance on the two trucks in question. Indeed, and as the trial court correctly observed, a third partys actual or constructive knowledge that an insured has insurance to cover a released claim is insufficient to void the insureds release of claims in favor of the third party.

Hartford relies on Mel Rapton, supra, 77 Cal.App.4th at page 912 for the proposition that a third partys actual or constructive knowledge of insurance is the same as actual or constructive knowledge of an insurers subrogation rights. Mel Rapton does not support Hartfords proposition, and Hartfords proposition is not the law in California.

The court in Mel Rapton observed that a voluntary settlement by and between a third party and an insured, effected with knowledge . . . of the insurers subrogation rights, constitutes a fraud on the insurer[]. (Mel Rapton, supra, 77 Cal.App.4th at p. 912, citing 16 Couch on Insurance (2d ed. 1983)  61:201, p. 265.) Nothing in Mel Rapton indicates that a third partys knowledge that the insured has insurance for any claims released in favor of the third party constitutes a fraud on the insurer, or voids the release of claims in favor of the third party.

Indeed, the court in Mel Rapton followed the rule enunciated in Griffin v. Calistro, supra, 229 Cal.App.3d at page 196, Conservatorship of Edwards, supra, 198 Cal.App.3d at page 1184, and 16 Couch on Insurance, supra, section 61:201, page 265: [W]here the tortfeasor obtains a release from the insured with knowledge that the latter has already been indemnified by the insurer, such release of the tortfeasor does not bar the right of subrogation of the insurer. (Mel Rapton, supra, 77 Cal.App.4th at p. 912.)

As the trial court observed in granting defendants motion, a third partys actual or constructive knowledge of insurance does not void a release of claims in favor of the third party. Indeed, it is unreasonable and unrealistic to expect a third party to inquire about the existence, type, or extent of an insureds insurance, before settling with an insured. Even if the third party knows that insurance covers a released claim, the third party, having no contractual relationship with the insured, should not have to worry about whether the insurer has paid the claim, disputes the claim, or will pursue a subrogation claim. Instead, the third partys only responsibility is not to accept an insureds release of claims once it has been advised that the insurer has actually paid or indemnified the insured for its losses.

3. The Release Clause Encompasses Property Damage Claims

Hartford also argues that the settlement agreement and release is ambiguous and reasonably susceptible to an interpretation that the $85,000 sum was paid solely for loss of use or uninsured damages. Thus, Hartford argues, there is a triable issue of fact concerning whether the release was intended to cover only uninsured claims for loss of use damages, and exclude insured claims for property damages, including Hartfords subrogated claim for property damages.

Hartford relies on parol evidence, that is, evidence extrinsic to the terms of the settlement agreement and release, including the evidence that (1) Sisemore directed Farkas and McGuire to seek loss of use damages from PACCAR, (2) McGuire discussed loss of use damages with Wares of Rush, (3) Rush knew or reasonably should have known that the two trucks were insured, and (4) Rush was PACCARs agent for purposes of the settlement agreement, and Rushs knowledge that Dix was seeking to recover loss of use damages was therefore chargeable to PACCAR.

Hartford also relies on settled principles of contract interpretation applied in Winet v. Price (1992) 4 Cal.App.4th 1159, 1165. There, the court observed the oft-stated rule that parol evidence is properly admitted to construe a written instrument when its language is ambiguous. (Ibid.) Furthermore, [t]he test of whether parol evidence is admissible to construe an ambiguity is not whether the language appears to the court to be unambiguous, but whether the evidence presented is relevant to prove a meaning to which the language is reasonably susceptible. [Citation.] (Ibid.)

In addition, [t]he decision whether to admit parol evidence involves a two-step process. First, the court provisionally receives (without actually admitting) all credible evidence concerning the parties intentions to determine ambiguity, i.e., whether the language is reasonably susceptible to the interpretation urged by a party. If in light of the extrinsic evidence the court decides the language is reasonably susceptible to the interpretation urged, the extrinsic evidence is then admitted to aid in the second stepinterpreting the contract. [Citation.] (Winet v. Price, supra, 4 Cal.App.4th at p. 1165.)

As Hartford acknowledges, the threshold question of whether the settlement agreement and release is reasonably susceptible to Hartfords interpretation is a question of law, which this court reviews de novo. (Winet v. Price, supra, 4 Cal.App.4th at p. 1165.) On de novo review, we conclude that the settlement agreement and release is not reasonably susceptible to Hartfords interpretation that it is limited to claims for loss of use damages and excludes claims for property damages.

As Hartford points out, contract language cannot be found to be ambiguous in the abstract. (Legarra v. Federated Mutual Ins. Co. (1995) 35 Cal.App.4th 1472, 1485.) It must be construed in the context of that instrument as a whole, and in the circumstances of that case. (Ibid.) The language of the agreement as a whole and the circumstances of the case support our interpretation.

We begin by noting that the release clause of the agreement is comprehensive. It states that it encompasses any and all claims Dix may have had against defendants, including but not limited to lost profits, goodwill, or out of-pocket expenses . . . arising out of any matter of things . . . with regard to the [two trucks damaged in the August 2002 fire]. (Italics added.) No claims, including claims for property damages, are excluded from the release.

The agreement also states, It is understood and agreed that this settlement is a compromise of a doubtful and disputed claim. Thus, even if the value of the trucks lost in the fire was significantly higher than the $85,000 sum PACCAR agreed to pay, as McCoy indicated in his deposition testimony, and even if the $85,000 sum was intended to cover only loss of use damages, and even if defendants knew that Dix or All American had insurance to cover other losses, including property damages, it appears that the parties to the agreement intended that PACCAR would pay $85,000 in exchange for a full and comprehensive release of all claims.

Our objective in construing the language of a contract is to determine and effectuate the intention of the parties. (Pacific Gas & E. Co. v. G. W. Thomas Drayage etc. Co. (1968) 69 Cal.2d 33, 38.) It is the outward expression of the agreement, rather than a partys unexpressed intention, which the court will enforce. (Winet v. Price, supra, 4 Cal.App.4th at p. 1166.)

Viewed as a whole and in the circumstances in which it was made, the settlement agreement reflects a mutual intention on the part of its signatories that its release would encompass all claims, including property damage claims. Indeed, there is no evidence that any of the parties to the agreement intended that the release would exclude property damage claimseven if the $85,000 sum was solely for loss of use damages.

V. DISPOSITION

The judgment is affirmed. Respondents shall recover their costs on appeal.

NOT TO BE PUBLISHED IN OFFICIAL REPORTS

/s/ King

J.

We concur:

/s/ Ramirez

P.J.

/s/ Gaut

J.

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^[1] A third Peterbilt truck was damaged in a fire that occurred at All American on August 3, 2000, exactly two years before the August 3, 2002, fire that damaged the two trucks. Hartfords demand letter and complaint against PACCAR and Rush included an additional claim for sums Hartford paid All American for damages to the third truck.

Accordingly, at the time the trial court granted defendants motion for summary judgment on Hartfords complaint, the portion of Hartfords subrogation claim concerning the third truck was still unresolved. The judgment in favor of defendants was limited to plaintiffs causes of action relating to an August 3, 2002 fire.

The judgment thus suggested that there were other unresolved causes of action pending between Hartford and defendants at the time the judgment was entered. If so, the trial court should have issued an order granting summary adjudication in favor of defendants on the portion of Hartfords subrogation claim that related to the two trucks damaged in the August 2002 fire. (Code Civ. Proc.,  437c, subd. (f)(1).)

Shortly after the judgment was entered, however, Hartford and defendants settled Hartfords subrogation claim as it related to the third truck. Pursuant to this courts request, Hartford explained these events in a letter memorandum. The judgment is therefore ripe for appeal. (Morehart v. County of Santa Barbara (1994) 7 Cal.4th 725, 743.)

Defendants were unaware of the August 2000 fire at the time they entered into the settlement agreement with Dix, and the settlement agreement pertains only to the two trucks damaged in the August 3, 2002, fire.

^[2] An insurers cause of action based on subrogation consists of six elements: (1) [t]he insured has suffered a loss for which the party to be charged is liable, either because the latter is a wrongdoer whose act or omission caused the loss or because he is legally responsible to the insured for the loss caused by the wrongdoer; (2) the insurer, in whole or in part, has compensated the insured for the same loss for which the party to be charged is liable; (3) the insured has an existing, assignable cause of action against the party to be charged, which action the insured could have asserted for his own benefit had he not been compensated for his loss by the insurer; (4) the insurer has suffered damages caused by the act or omission upon which the liability of the party to be charged depends; (5) justice requires that the loss should be entirely shifted from the insurer to the party to be charged . . . ; and (6) the insurers damages are in a stated sum, usually the amount it has paid to its insured, assuming the payment was not voluntary and was reasonable. (Firemans Fund Ins. Co. v. Maryland Casualty Co, supra, 21 Cal.App.4th at p. 1596, citing Troost v. Estate of DeBoer (1984) 155 Cal.App.3d 289, 294, italics added.)

^[3] Hartford did not present any evidence that it provided Rush with any certificates of insurance covering the two trucks damaged in the August 3, 2002, fire. But even if defendants, or either of them, had been provided with certificates of insurance evidencing coverage for the two trucks in question, this would not constitute evidence that defendants knew, at the time they entered into the settlement agreement and release, that Hartford had indemnified its insureds for any losses related to the August 2002 fire. (Griffin v. Calisto, supra, 229 Cal.App.3d at p. 196; Conservatorship of Edwards, supra, 198 Cal.App.3d at p. 1184.)