Capelletti v. Infinity Ins. Co.

















Filed 3/15/13 Capelletti v. Infinity Ins. Co. CA1/5















NOT TO BE
PUBLISHED IN OFFICIAL REPORTS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opinion has not been certified for publication or ordered published for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



FIRST APPELLATE
DISTRICT



DIVISION FIVE






>

CATHERINE CAPPELLETTI, Plaintiff and Appellant, v. INFINITY INSURANCE COMPANY, Defendant and Respondent.

A134338 (>Marin> County >Super.> >Ct.> No. CIV1101663)

Plaintiff
Catherine Cappelletti (appellant) appeals from the judgment entered following
the trial court’s order sustaining a demurrer filed by defendant Infinity
Insurance Company (respondent). Among
other things, appellant contends the court erred because respondent was required
to specifically draw her attention to a crime exclusion in a car insurance
policy it issued to appellant. We
affirm.

Backgroundhref="#_ftn1" name="_ftnref1" title="">[1]

In
May 2010, appellant’s parents, on her behalf, applied to respondent for an
automobile insurance policy. They
applied over the internet using Incorporated Insurance Services, which acted
both as respondent’s agent and as appellant’s “attorney-in-fact” in executing
the insurance application (Application) on her behalf.

The
Application required the acknowledgment of various disclosures. Among other things, the Application stated, “>If this policy is a physical damage only
policy I understand that:
[¶] 17. This policy WILL NOT SATISFY ANY FINANCIAL
RESPONSIBILITY LAW, AND DOES NOT PROVIDE ANY LIABILITY INSURANCE and has no
provision to indemnify loss sustained by third parties. [¶] 18. No coverage will be
provided for any loss while my insured vehicle is being operated by someone who
is using the vehicle in the commission of a crime, including driving under the
influence of alcohol or a controlled substance.” (Boldface in original.)

Respondent
issued a policy (Policy) to appellant.
By the terms of the Application, the Application became part of the
Policy. The Policy was not a physical
damage only policy; it provided liability coverage as well as coverage for
damage to appellant’s car. As relevant
in the present case, the Policy excluded coverage for damage to appellant’s car
“[w]hile the insured auto is being used in the commission of a crime.” (Boldface omitted.) The Policy defined “crime” as “any act, which
under the laws of California, is
a felony. Crime shall also include any
attempt to elude law enforcement personnel and driving under the influence of
alcohol or while intoxicated or under the use of any controlled substance.” (Boldface omitted.)

In
October 2010, appellant lost control of her car and struck a parked car. This resulted in damages exceeding the value
of appellant’s car. It is undisputed
that, at the time of the accident, appellant was driving under the influence of
alcohol, which was a misdemeanor.

Appellant
made a claim to respondent for the damage to her car. Respondent denied the claim on the ground
that driving under the influence of alcohol constituted a crime, as defined in
the Policy.

Appellant
filed the present action in April 2011.
She filed an amended complaint after the trial court sustained with
leave to amend respondent’s demurrer to the original complaint. The amended complaint alleged causes of
action for “Deceit/Negligent Misrepresentation,” href="http://www.mcmillanlaw.com/">reformation, breach of contract, and breach
of the covenant of good faith and fair dealing. Respondent filed another demurrer and the
trial court sustained the demurrer without leave to amend. Subsequently, the court entered judgment in
favor of respondent. This appeal
followed.

Discussion

Appellant
contends the trial court erred in sustaining respondent’s demurrer. Her arguments primarily turn on her assertion
that California case authority
required respondent to specifically draw her attention to the allegedly
“unusual” crime exclusion, in the Application or some other document other than
the Policy itself. We disagree.

I. Breach
of Contract

Where,
as here, the material facts are not in dispute, interpretation of an insurance
policy presents solely a question of law.
(Haynes v. Farmers Ins. Exchange
(2004) 32 Cal.4th 1198, 1204 (Haynes);
accord, Dominguez v. Financial Indemnity
Co. (2010) 183 Cal.App.4th 388, 395 (Dominguez).) “ ‘ “While insurance contracts have
special features, they are still contracts to which the ordinary rules of
contractual interpretation apply.” ’
[Citation.] Accordingly, in
interpreting an insurance policy, we seek to discern the mutual intention of
the parties and, where possible, to infer this intent from the terms of the
policy. [Citations.] When interpreting a policy provision, we give
its words their ordinary and popular sense except where they are used by the
parties in a technical or other special sense.
[Citation.]” (>Haynes, at p. 1204; see also >Dominguez, at pp. 395-396.) “ ‘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.]’ [Citation.]”
(Dominguez, at p. 396.) “ ‘ “A policy provision will be
considered ambiguous when it is capable of two or more constructions, both of
which are reasonable.”
[Citation.]’ ” (>Ibid.)

Appellant
relies upon the “fundamental principle,” as described in Haynes, “ ‘that an insurer cannot escape its basic duty to
insure by means of an exclusionary clause that is unclear. As we have declared time and again “any
exception to the performance of the basic underlying obligation must be so
stated as clearly to apprise the insured of its effect.” ’ [Citation.]
. . . But to be enforceable,
any provision that takes away or limits coverage reasonably expected by an
insured must be ‘conspicuous, plain and clear.’
[Citation.] Thus, any such
limitation must be placed and printed so that it will attract the reader’s
attention. Such a provision also must be
stated precisely and understandably, in words that are part of the working
vocabulary of the average layperson.
[Citations.] The burden of making
coverage exceptions and limitations conspicuous, plain and clear rests with the
insurer. [Citations.]” (Haynes,
supra, 32 Cal.4th at p. 1204; see
also Hervey v. Mercury Casualty Co.
(2010) 185 Cal.App.4th 954, 966 [“ ‘To be enforceable, a policy provision
limiting coverage otherwise reasonably expected under the policy must be so
drafted that a reasonable purchaser of insurance would have both noticed it and
understood it.’ [Citation.]”].)

Appellant
contends that, under Haynes,
respondent was required to “specifically draw[]” the crime exclusion to
appellant’s attention because the exclusion is “an unusual limitation on
coverage.”href="#_ftn2" name="_ftnref2" title="">[2] In Haynes,
the Supreme Court held that an insurer was not entitled to summary judgment in
a declaratory relief action. There, an
endorsement in a car insurance policy limited permissive user coverage to a
minimal amount. The court concluded the
limitation in the endorsement did not control over the larger amounts of
coverage listed on a declarations page, because the limitation was not
sufficiently clear, plain, and conspicuous.
(Haynes, supra, 32 Cal.4th at pp. 1202-1205.) Appellant points to a portion of >Haynes in which the Supreme Court
recognized authority that “ ‘an insured has a duty to read his [or her]
policy’ ” but emphasized, “the duty to read ‘is insufficient to bind a
party to unusual or unfair language unless it is brought to the attention of
the party and explained.’
[Citation.]” (>Id. at p. 1210.) The court continued, “[f]or nearly a hundred
years we have recognized that ‘ “the rule [presuming parties are familiar
with contract terms] should not be strictly applied to insurance policies. It is a matter almost of common knowledge
that a very small percentage of policy-holders are actually cognizant of the
provisions of their policies . . . . The insured usually confides implicitly in
the agent securing the insurance, and it is only just and equitable that the
company should be required to call specifically to the attention of the
policy-holder such provisions as the one before us.” ’ [Citation.]
Thus, an insurer’s direction to the subscriber to read the entire policy
‘is not a substitute for notice to the subscriber of a loss of benefit.’ [Citation.]”
(Haynes, at pp. 1210-1211.)

To
the extent appellant contends Haynes
required respondent to draw her attention to the crime exclusion in the
Application or some other document other than the Policy itself, we
disagree. The decision does not create a
bright-line rule that unusual provisions must be specifically drawn to the
attention of the insured outside the language of the policy. Instead, the touchstone in >Haynes is the fundamental principle that
exclusions contrary to the insured’s reasonable expectations must be
“ ‘conspicuous, plain and clear.’ ”
(Haynes, supra, 32 Cal.4th at p. 1204; see also id. at p. 1210 [referring to the “general requirement
. . . a that coverage reduction . . . must be
conspicuous”].) Although the
declarations page in Haynes failed to
alert the insured to the limitation in coverage for permissive users, that
failure did not by itself render the
provision unenforceable. (>Haynes, at p. 1206.) The Supreme Court stated, “no reason appears
why the actual dollar coverages for permissive users could not have been placed
with the policy coverages on the declarations page, where one would expect an
insured to look to determine the policy limits,” but it also clarified, “[t]he
deficiencies in [the insured’s] approach do not, however, depend on the lack of
such placement per se.” (>Ibid.)
The court then proceeded to detail several problems with the particular
placement of the provision within the
policy, including, for example, that the text of the provision was not
highlighted, the provision was surrounded by other provisions unrelated to
exclusions or limitations on coverage, the title “PERMISSIVE USER” was
unhelpful because the term was not defined, and an earlier definition of
“insured” suggested permissive drivers would be covered equally. (Id.
at pp. 1207-1208.) Based on those and
other considerations, the Supreme Court concluded the provision was
“ ‘hid[den] . . . in an inconspicuous portion of the
policy.’ ” (Id. at p. 1211.)
Furthermore, the failure to define the term “permissive user,”
cross-references to other insurance policies, and the need for the insurer to
insert the permissive user language in other portions of the policy led the
Supreme Court to conclude the provision was not plain and clear. (Id.
at pp. 1211-1212.)

In
a footnote, Haynes made clear it was
not suggesting the insurer “necessarily must correct all of the identified
deficiencies in order to render a permissive user limitation enforceable in
future cases. . . . There
may be a number of ways for [the insurer] to correct the problem.” (Haynes,
supra, 32 Cal.4th at p. 1212, fn.
9.) As we understand >Haynes, an “unusual” exclusion is
enforceable if, viewing the policy as a whole, the provision is conspicuous and
clear. This was the conclusion reached
in Mission Viejo Emergency Medical
Associates v. Beta Healthcare Group (2011) 197 Cal.App.4th 1146 (>Mission Viejo), which considered a
challenge to an arbitration provision.
The court stated, “even if we assume that an arbitration provision does
qualify as unusual or unfair language, it is enforceable if it is ‘conspicuous,
plain and clear’ in the policy itself.
[Citation.] [Haynes] does not hold that disclosure outside the policy is
required.” (Mission Viejo, at p. 1157.)

Proceeding
to an analysis of the challenged provision in the present case, an exclusion is
conspicuous when it is “ ‘positioned and printed in a form which
adequately attracts the reader’s attention to the limitation.’ ” (Mission
Viejo, supra, 197 Cal.App.4th at p. 1154.)
Appellant does not argue that the crime exclusion was inconspicuous; any
such contention has been forfeited. (>Badie v. Bank of America (1998) 67
Cal.App.4th 779, 784-785 (Badie).)

A
policy exclusion is plain and clear when “ ‘couched in words which are
part of the working vocabulary of average lay persons.’ ” (Jauregui
v. Mid-Century Ins. Co. (1991) 1 Cal.App.4th 1544, 1550.) “ ‘This means more than the traditional
requirement that contract terms be “unambiguous.” Precision is not enough. Understandability is also required. To be effective in this context, the
exclusion must be couched in words which are part of the working vocabulary of
average lay persons.’ [Citations.]” (Ibid.;
accord, Haynes, supra, 32 Cal.4th at p. 1211.)
As noted previously, the Policy defines “crime” as “any act, which under
the laws of California, is a felony.
Crime shall also include any attempt to elude law enforcement personnel
and driving under the influence of alcohol or while intoxicated or under the
use of any controlled substance.”

Appellant
argues the definition is not clear because it can be read to apply only where
the insured both eludes law
enforcement and drives under the influence at
the same time. We reject that
contention, both as it relates to appellant’s argument in support of her
construction of the policy and as it relates to appellant’s argument that the
exclusion is not plain and clear.
Although we interpret ambiguities in favor of the insured, we do not
consider the exclusion to be ambiguous unless it is susceptible to two >reasonable constructions. (Dominguez,
supra, 183 Cal.App.4th at p. 396; see
also Reserve Insurance Co. v. Pisciotta
(1982) 30 Cal.3d 800, 807 [“Words used in an insurance policy are to be
interpreted according to the plain meaning which a layman would ordinarily
attach to them,” and we must “not adopt a strained or absurd interpretation” of
the policy language].) Appellant’s construction
of the exclusion is not reasonable. As
respondent points out, appellant’s construction would make sense if the
exclusion referred to evading the police while
under the influence of drugs or alcohol.
Regardless of whether her construction is “semantically permissible”, a
reasonable layperson would not understand the exclusion to apply only where the
insured is both intoxicated and
evading the police. (See >Nissel v. Certain Underwriters at Lloyd’s of
London (1998) 62 Cal.App.4th 1103, 1111-1112 [semantically permissible
construction must, in context, be “objectively reasonable”].) As the trial court reasoned, “Both acts are
illegal, and highly dangerous to [the insured] and to others, and are voluntary
and deliberate. To conclude that a
reasonable insured would expect [to lose] coverage only in the rare instance
that these illegal activities occur simultaneously defies common sense.” “Courts will not strain to create an
ambiguity where none exists.
[Citation.]” (>Waller v. Truck Ins. Exchange, Inc.
(1995) 11 Cal.4th 1, 18-19.)

We
conclude the trial court properly sustained respondent’s demurrer to
appellant’s cause of action for breach of
contract.href="#_ftn3" name="_ftnref3"
title="">[3] The crime exclusion unambiguously excluded
coverage in the circumstances of the present case. And, because the crime exclusion was
conspicuous, plain, and clear in the Policy, respondent was not obligated to
separately draw appellant’s attention to it for it to be enforceable.href="#_ftn4" name="_ftnref4" title="">[4]

II. Deceit
and Negligent Misrepresentation Claim

The
elements that give rise to a tort action for deceit are: “ ‘(a) misrepresentation (false
representation, concealment, or nondisclosure); (b) knowledge of falsity
(or “scienter”); (c) intent to defraud, i.e. to induce reliance; (d) justifiable
reliance; and (e) resulting damage.’
[Citations.]” (>Lazar v. Superior Court (1996) 12
Cal.4th 631, 638; accord, Conroy v.
Regents of University of California (2009) 45 Cal.4th 1244, 1255 (>Conroy).) “The tort of negligent misrepresentation, a
species of the tort of deceit [citation], does not require intent to defraud
but only the assertion, as a fact, of that which is not true, by one who has no
reasonable ground for believing it to be true.
[Citation.]” (>Conroy, at p. 1255.)

Appellant
appears to contend her complaint states claims for deceit and negligent
misrepresentation simply because respondent failed to disclose the crime
exclusion in the Application. She relies
on Pastoria v. Nationwide Ins. (2003)
112 Cal.App.4th 1490, which concluded the trial court had erred in sustaining a
demurrer because, assuming the plaintiffs’ allegations were true, the defendant
insurer had a statutory duty to disclose information about impending policy
amendments before the plaintiffs bought the policies. Violation of that href="http://www.fearnotlaw.com/">statutory duty was the basis for the
plaintiffs’ fraud claim. (>Id. at p. 1499.) In the present case, accepting as true the
facts as alleged in the complaint, appellant has not shown that respondent was
obligated to disclose the crime exclusion in the Application or another
document outside the Policy. As
explained previously, Haynes did not
obligate respondent to make that disclosure, and appellant has not shown any
statute required the disclosure.
Appellant does reference Insurance Code section 332, which provides,
“Each party to a contract of insurance shall communicate to the other, in good
faith, all facts within his knowledge which are or which he believes to be
material to the contract and as to which he makes no warranty, and which the
other has not the means of ascertaining.”
However, she fails to provide reasoned argument or citations to
authority why that statute obligated respondent to disclose the crime exclusion
outside the Policy itself; the argument has been forfeited. (Badie,
supra, 67 Cal.App.4th at pp. 784-785; see also Levine v. Blue Shield of California (2010) 189 Cal.App.4th 1117,
1134 [in reference to Insurance Code section 332, pointing out the plaintiff’s
failure to cite supportive case authority and stating “We are loathe to
interpret a long-existing statute that does not expressly require such a
disclosure in a manner that would impose a broad new duty that is in derogation
of the common law.”].)

Appellant
also cites California Service Station
etc. Assn. v. American Home Assurance Co. (1998) 62 Cal.App.4th 1166, 1174,
for the proposition that an insurer has a duty to disclose information when its
agent “misrepresents the nature, extent or scope of the coverage being offered
or provided.” She also references Civil
Code section 1710, subdivision (3), which provides that deceit includes “[t]he
suppression of a fact, by one who is bound to disclose it, or who gives
information of other facts which are likely to mislead for want of
communication of that fact.” Although
appellant’s brief is not entirely clear, we understand her to argue that the
Application misrepresented the scope of the coverage because it required the
applicant to acknowledge that a crime exclusion would be applicable to “a
physical damage only policy.” In
particular, the Application required the applicant to acknowledge that, “[i]f
this policy is a physical damage only policy” (boldface omitted), the policy
would not indemnify any loss sustained by third parties and “[n]o coverage will
be provided for any loss while my insured vehicle is being operated by someone
who is using the vehicle in the commission of a crime, including driving under
the influence of alcohol or a controlled substance.” We understand appellant to argue the
Application misled her into believing that, because her Policy was >not only for physical damage, a crime
exclusion would not be part of her Policy.

On
the other hand, respondent cites Hackethal
v. National Casualty Co. (1987) 189 Cal.App.3d 1102 (Hackethal), in support of its argument that the conspicuous and
clear disclosure of the crime exclusion in the Policy precludes appellant’s
deceit and negligent misrepresentation claims, regardless of any alleged
misrepresentations in the Application.
In Hackethal, the plaintiff
alleged an insurance agent misrepresented the scope of coverage under a
policy. (Id. at p. 1111.) The court
affirmed a directed verdict in favor of the defendant insurer, concluding that
any reliance on the agent’s statement was “unjustifiable
as a matter of law” because the plaintiff had a duty to read the policy, which
made clear there was no coverage for the claim at issue. (Id.
at pp. 1111-1112.) Hackethal quoted Aetna
Casualty & Surety Co. v. Richmond (1977) 76 Cal.App.3d 645, 652, for
the proposition, “ ‘ “It is a general rule that the receipt of a
policy and its acceptance by the insured without an objection binds the insured
as well as the insurer and he cannot
thereafter complain that he did not read it or know its terms. It is a duty of the insured to read his
policy.” ’ [Citations.]” (See Hackethal,
at p. 1112.) Similarly, respondent cites
Hadland v. NN Investors Life Ins. Co.
(1994) 24 Cal.App.4th 1578 (Hadland),
which followed Hackethal. There, an agent allegedly told the plaintiffs
that a health insurance policy was “ ‘as good if not better’ ” than
their old policy; in fact, the policy did not cover certain medical bills that
plaintiffs thought would be covered. (>Id. at p. 1581.) Hadland
concluded the trial court properly granted the defendants’s motion for nonsuit,
stating that plaintiffs, “having failed to read the policy and having accepted
it without objection, cannot be heard to complain it was not what they
expected. Their reliance on
representations about what they were getting for their money was unjustified as
a matter of law.” (Id. at p. 1589, fn. omitted.)

Other
California decisions, which appear to be in some tension with >Hackethal and Hadland, have concluded that clear language in insurance policies
did not preclude claims based on misrepresentations made by insurance
agents. (See, e.g., Clement v. Smith (1993) 16 Cal.App.4th 39, 45 [“Absent some notice
or warning, an insured should be able to rely on an agent’s representations of
coverage without independently verifying the accuracy of those representations
by examining the relevant policy provisions.”]; see also, e.g., >Butcher v. Truck Ins. Exchange (2000) 77
Cal.App.4th 1442, 1463 [insured asked agent to duplicate his coverage and agent
allegedly misled the insured into believing he had done so]; >Paper Savers, Inc. v. Nacsa (1996) 51
Cal.App.4th 1090, 1101 [agent had duty to ensure adequate coverage “based on
alleged affirmative assertions made to induce the insured to purchase the
policy and additional endorsement”].)

We
need not resolve in the present case the apparent tension between the lines of
authority described above. Assuming that
a deceit or negligent misrepresentation claim may be based on a
misrepresentation contradicted by clear policy language, appellant has not
alleged any misrepresentation upon which she could justifiably rely. “ ‘[W]hether a party’s reliance was
justified may be decided as a matter of law if reasonable minds can come to
only one conclusion based on the facts.’
[Citation.]” (>Alliance Mortgage Co. v. Rothwell (1995)
10 Cal.4th 1226, 1239; see also Beckwith
v. Dahl (2012) 205 Cal.App.4th 1039, 1067 [“The complaint must contain
‘allegations of facts showing that the actual inducement of [the] plaintiffs
. . . was justifiable or reasonable.
[Citations.]’
[Citation.]”].) In this case, the
Application does not purport to list all the exclusions applicable to
appellant’s Policy, and, in particular, it makes no representations about
coverage for losses incurred during the commission of a crime. Rather, the Application makes two
representations regarding a type of policy that Appellant was >not applying for—specifically, that a
physical damage only policy would not indemnify losses sustained by third
parties or provide coverage for losses sustained during the commission of a
crime. Although those disclosures might
reasonably have led appellant to wonder whether and to what extent such
coverage would exist under her Policy, it would not, as a matter of law, have
been reasonable for appellant to make an indirect inference from those
disclosures that no crime exclusion
existed under her Policy and to rely
on that inference as a description of her coverage under the Policy. Appellant provides no authority to the
contrary. The cases she does cite are
distinguishable, because they involve direct and specific false representations
about coverage. (Clement v. Smith, supra,
16 Cal.App.4th at p. 45; Butcher v. Truck
Ins. Exchange, supra, 77
Cal.App.4th at p. 1463; Paper Savers,
Inc. v. Nacsa, supra, 51
Cal.App.4th at p. 1101.)

Accordingly,
the trial court properly sustained the demurrer as to the deceit/negligent
misrepresentation cause of action.

III. Reformation
Claim

Appellant
acknowledges that her request for reformation of the Policy is a remedy for
respondent’s alleged deceit. (See Civ.
Code, § 3399; Everett v. State Farm
General Ins. Co. (2008) 162 Cal.App.4th 649, 664.) Because the trial court properly sustained
the demurrer as to her deceit claim, it also properly sustained the demurrer as
to her reformation claim.

IV. Breach
of Covenant of Good Faith and Fair Dealing

Appellant
acknowledges that her claim for breach of
the covenant of good faith and fair dealing depends on her contentions that
the crime exclusion is unenforceable and that respondent committed fraud. Because the trial court properly sustained
the demurrer as to the breach of contract and deceit causes of action, it also
properly sustained the demurrer as to her bad faith claim.

Disposition

The trial
court’s judgment is affirmed. Costs on
appeal are awarded to respondent.









SIMONS,
J.







We concur.









JONES, P.J.









BRUINIERS, J.