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Court of Appeal, First District, Division 5, California.

Bertha COLOKATHIS, Plaintiff and Appellant, v. HARTFORD ACCIDENT AND INDEMNITY COMPANY, Defendant and Respondent.


Decided: March 04, 1988

Richard J. Idell, San Francisco, for plaintiff and appellant. Larry D. Langley, Langley & Haigh, Palo Alto, for defendant and respondent.

In this declaratory relief action, we decide whether the president and sole shareholder of a company can recover for injuries under the uninsured motorists provision of a commercial automobile insurance policy which designates only the company as the named insured.   The trial court found that the policy did not cover the plaintiff.   Plaintiff appeals, contending, inter alia, her reasonable expectation requires that she be provided coverage.   We conclude that since the corporation paid a premium for total uninsured motorist coverage, and under certain instances it cannot hope to collect, public policy requires that coverage be provided to plaintiff as the most likely beneficiary under the policy.   We reverse the judgment.

Plaintiff Bertha Colokathis, a Massachusetts resident, was injured in a head-on collision with another vehicle on the Golden Gate Bridge.   Plaintiff is founder, president and sole stockholder of Chem-o-matic, Inc., a Massachusetts corporation.   The company had three full-time employees, including plaintiff, and several part-time employees.   In addition, she owns a small metal-plating concern called Exotic Plating.   Both of these entities are run from a laboratory in plaintiff's house.   At the time of the accident she was in San Francisco for a combined business and pleasure trip.   The business purpose was the convention of the National Federation of Business Women's Club.

The day of the accident she was touring the wine country with friends and did not attend the convention.   She was driving a rental car.   The driver of the other car involved in the accident was underinsured and plaintiff made a claim against the uninsured motorists endorsement of the company's automobile policy, issued by defendant Hartford Accident and Indemnity Company (Hartford).1

The policy was issued to a 1979 Oldsmobile Cutlass, title to which was in the name of the company.   The “named insured” designated on the policy was Chem-o-matic, Inc.   Plaintiff was noted to be the principal driver of the vehicle in defendant's records.   The policy is a standard comprehensive policy available in Massachusetts which contains both compulsory and optional coverages.   The uninsured motorists coverage (Coverage U), upon which plaintiff's claim is based, is compulsory in that state.   Coverage U provides that Hartford will pay “such sums as the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile or underinsured automobile because of bodily injury․”

“Insured” is defined as:  “(1) the named insured as stated in Item 1 of the declarations (herein also referred to as the ‘principal named insured’) and, while residents of the same household, the spouse of any such named insured and relatives of either;  [¶] (2) any other person while occupying an insured automobile;  and․”

“Insured Automobile” means:  “(1) an automobile for which a specific coverage U (uninsured motorists) premium has been charged under this policy, and includes any newly acquired motor vehicle with respect to which the bodily injury liability insurance of this policy applies;  or [¶] (2) an automobile while temporarily used as a substitute for an insured automobile as described in subparagraph (1) above, when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction;  or [¶] (3) an automobile, other than an insured automobile as described in subparagraph (1) above, while being operated by the named insured, or by his spouse if a resident of the same household․”

Hartford denied coverage on the ground that plaintiff had not purchased any “hired auto” insurance and that she was not a named insured under the policy.   Plaintiff sued for declaratory relief, and at trial she argued that the agent who sold her the policy led her to believe she was covered.   Alternatively, she claimed the rental car was a substitute for the Oldsmobile listed under the policy as defined in subparagraph (2) above.   The trial court rejected all her claims and entered judgment for Hartford.

At the outset, we note that the parties have indicated this case presents a choice of law problem and they have agreed that Massachusetts law should apply.   Simply because two states are involved does not present a “conflict of laws” or a “choice of law” problem.  “There is obviously no problem where the laws of the two states are identical.  [Citations.]”  (Hurtado v. Superior Court (1974) 11 Cal.3d 574, 580, 114 Cal.Rptr. 106, 522 P.2d 666.)   Here, the laws of California and Massachusetts concerning the interpretation of insurance contracts are the same.  (See Cody v. Connecticut General Life Ins. Co. (1982) 387 Mass. 142, 439 N.E.2d 234, 237.)   The parties concede as much.   As the forum state, we will apply California law.

Plaintiff contends that as president, sole stockholder and principal user of the insured vehicle, she should be considered a “named insured” under the policy.   The argument goes that a corporation cannot sustain bodily injury, and that unless she can recover under these provisions the contract would be a nullity.   In support of this interpretation, she points to the family coverage provision which insures spouses and other relatives of the named insured who reside in the same household.   She reasons that the inclusion of a “spouse” indicates the intent to insure others than simply the “named insured” as designated on the declarations page.

The rules on interpretation of insurance contracts are familiar.   Each clause of the insurance contract must be interpreted together with the other clauses to which it is related and they must be construed together to determine the intent of the contracting parties.  (Jarrett v. Allstate Ins. Co. (1962) 209 Cal.App.2d 804, 809, 26 Cal.Rptr. 231.)   The words used in an insurance policy are to be interpreted according to the meaning which an insured would reasonably expect.   Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists.  (Reserve Insurance Co. v. Pisciotta (1982) 30 Cal.3d 800, 807, 180 Cal.Rptr. 628, 640 P.2d 764;  Gray v. Zurich Insurance Co. (1966) 65 Cal.2d 263, 270–271, 54 Cal.Rptr. 104, 419 P.2d 168.)   If by applying these principles we find an ambiguity to exist, the insurance policy is construed strictly against the insurer and most liberally in favor of the insured.  (Reserve Insurance Co. v. Pisciotta, supra, 30 Cal.3d at pp. 807–808, 180 Cal.Rptr. 628, 640 P.2d 764;  California State Auto. Assn. Inter–Ins. Bureau v. Antonelli (1979) 94 Cal.App.3d 113, 118, 156 Cal.Rptr. 369.)   But where no ambiguity exists and the terms of the policy are clear, the courts will not indulge in a forced construction to fasten liability on the insurance company where none has been assumed.  (Jarrett v. Allstate Ins. Co., supra, 209 Cal.App.2d at p. 810, 26 Cal.Rptr. 231.)

The language of the policy limiting uninsured motorists coverage to the “named insured,” i.e., Chem-o-matic, is clear and unambiguous and is not susceptible to the broad interpretation advanced by plaintiff.   This is a commercial policy issued in the name of the corporation.   Only the corporation is the named insured.   Compare Nelson v. United States Fire Ins. Co. (1968) 259 Cal.App.2d 248, 66 Cal.Rptr. 115, cited by Hartford.   The corporate policy in that case specifically listed the organization's board of directors as additional named insureds;  but see, Polzin v. Phoenix of Hartford Insurance Companies (1972) 5 Ill.App.3d 84, 283 N.E.2d 324, 327;  Boling v. State Farm Mutual Automobile Ins. Co. (Mo.1971) 466 S.W.2d 696, 699;  Guarantee Ins. Co. v. Anderson (E.D.Pa.1984) 585 F.Supp. 408, 411;  O'Hanlon v. Hartford Acc. & Indem. Co. (D.Del.1977) 439 F.Supp. 377, 387–388.   But this does not end our inquiry.

In response to questioning by the court at oral argument, defendant conceded that paragraph (3) in the definition of “Insured Automobile” has no effect when the named insured is a corporation.   An insured is entitled to no more than what he paid for (Oakland Stad. v. Underwriters at Lloyd's (1957) 152 Cal.App.2d 292, 296, 313 P.2d 602), but he should not receive less.   Here, the corporation paid for coverage under which it could never hope to collect.   It is a violation of public policy to collect a premium for coverage which turns out to be nonexistent.   Accordingly, we cannot enforce an interpretation which renders the coverage illusory.   Instead, it is our duty to interpret that provision in a manner consistent with public policy.   It has long been the public policy of this state that where it is semantically permissible the contract will be interpreted to effect coverage for losses to which the insurance relates.  (See State Farm Mut. Auto. Ins. Co. v. Johnston (1973) 9 Cal.3d 270, 273–274, 107 Cal.Rptr. 149, 507 P.2d 1357;  Otter v. General Ins. Co. (1973) 34 Cal.App.3d 940, 949, 109 Cal.Rptr. 831.)   This is especially true for uninsured motorist claims.  (See State Farm Mut. Auto. Ins. Co. v. Crockett (1980) 103 Cal.App.3d 652, 655, 163 Cal.Rptr. 206.)

Colokathis is the principal officer and employee of the company and also she is the primary user of the insured vehicle.   This provision is designed to protect an insured from the misery and hardship experienced when injured by an uninsured or financially irresponsible motorist.  (See Waite v. Godfrey (1980) 106 Cal.App.3d 760, 770–771, 163 Cal.Rptr. 881.)   Since the corporation cannot collect for personal injuries, the most likely person that should benefit from the paid-for coverage is plaintiff.   Accordingly, we conclude that this clause should be interpreted to provide uninsured motorist coverage to plaintiff.

Hartford could have avoided this result simply by modifying the boilerplate language to eliminate this clause in corporate policies and to reduce the premium charged for uninsured motorist coverage proportionally.   This would have the dual effect of removing the underlying ambiguity and alerting plaintiff, as the insured, that she must decide whether she wants to pay an additional premium for personal coverage.

The declaratory judgment is reversed.   The trial court is directed to enter judgment for plaintiff declaring coverage and is further directed to determine the extent of her recovery under the policy.


1.   The policy coverage applies to claims against uninsured and underinsured motorists.Hartford also insured plaintiff's 1972 Ford Galaxy for which she was the registered owner.   Plaintiff was the named insured under that policy.   Hartford paid plaintiff the policy limits under the uninsured motorists provision of this policy.   Plaintiff's rights under this policy were not at issue in the court below and are not implicated on appeal.

LOW, Presiding Justice.

KING and HANING, JJ., concur.

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