STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Petitioner and Respondent, v. Maria OCHOA, Fernando Ochoa, Ana Maria Calzada Peralta, Mario Benci, Appellants.
This is an appeal by Maria Ochoa and others (appellants) from a dismissal of an Uninsured Motorist Arbitration Hearing granted in favor of petitioner, State Farm Mutual Automobile Insurance Company (respondent).
Prior to May 20, 1985, respondent issued to appellant Maria Ochoa a policy of uninsured motorist insurance. On May 20th while the policy was in force, appellants were involved in an automobile accident with an uninsured motorist. Medical expenses totalled $9,410.
On June 10, 1985, within one month of the accident, appellants notified respondent of their claims. Respondent replied that it was investigating the matter. No further claim or demand was made by appellants for arbitration after this first exchange between the two. The insurance policy issued to appellants provided that, in the event of disagreement between the insured and insurer concerning the amount of damages, the disagreement would be resolved by arbitration.
Appellants' complaint against the uninsured motorist was filed on April 2, 1986. Notice of the filing was not sent to respondent. On June 11, 1986, one year and one day after the first claim asserted by appellants, respondent requested information on whether appellants had “protected” the statute of limitations. In response to this letter, appellants sent respondent a copy of the summons and complaint on July 1, 1986.
Respondent filed a motion to dismiss the claims of appellants for uninsured motorist benefits pursuant to Code of Civil Procedure section 1281.2 and Insurance Code section 11580.2.1
It is respondent's contention on appeal that section 11580.2(i) acts as a form of statute of limitations and noncompliance by the insured requires the court to dismiss the action. Appellants, on the other hand, contend that the action cannot be dismissed unless the insurer proves prejudice, which it did not do.
Interestingly, two divisions of the Second District, Court of Appeal, have interpreted the intent of the legislature in enacting and amending section 11580.2(i) in a contrary manner. Division Two in State Farm Mutual Auto. Ins. Co. v. Patton (1987) 194 Cal.App.3d 626, 239 Cal.Rptr. 750, states that the section should be construed as a statute of limitations; therefore, if the section is not complied with, the court must dismiss the action. We quote pertinent portions of the opinion: “Significantly, the statute is written in the conjunctive, not the disjunctive. That is, it clearly states that in order for the insured to preserve his/her claim against the insurer, the insured must, (1) file suit against the uninsured motorist; and (2) give notice to the insurer of such suit. Moreover, the language in regard to giving notice is in the past tense, e.g., ‘․ notice of such suit has been given the insurer.’ (Italics added.) Hence, given the policy considerations outlined in Aetna Cas. & Surety Co. v. Superior Court  supra, 233 Cal.App.2d 333 [43 Cal.Rptr. 476] as to why the statutory provision should be construed as a statute of limitations, a reasonable interpretation of the new provision is that the insured must give notice to his/her insurer within one year of the accident that a lawsuit has been filed against the uninsured motorist if the insured wishes to preserve the right to recover from the insurer pursuant to the uninsured motorist provisions of the issued policy. [¶] To reach a contrary conclusion would potentially extend beyond one year the financial responsibility of the insurer which, after all, is only derivatively liable for the fault of another, to wit, the uninsured motorist. This would then potentially create a supplemental liability of greater duration than the original liability, as the insured must file suit against the tortfeasor/uninsured motorist within one year of the accident. (Code Civ.Proc. § 340.) We do not believe the Legislature intended to erect a statutory scheme by which the entity secondarily responsible could be held to a longer period of accountability than the person primarily responsible․” (194 Cal.App.3d at p. 631, 239 Cal.Rptr. 750.)
After Patton was decided, Division Seven of this district decided Garibay v. Aetna Casualty & Surety Co. (1987) 197 Cal.App.3d 219, 242 Cal.Rptr. 723. The court acknowledged the Patton case, but respectfully disagreed with it. Its reasoning, in pertinent part, is as follows: “In view of the public policy in favor of uninsured motorist coverage (State Farm Mut. Auto. Ins. Co. v. Lykouresis  supra, 72 Cal.App.3d  at p. 61 [139 Cal.Rptr. 827] ), we construe the ambiguous language of the statute liberally in favor of coverage in the situation where, as here, notice of the timely filed suit is given to the insurer in a reasonable period of time after appellants' attorney discovered the uninsured status of the driver, Hilton, even though such notice was given about 17 months after the underlying accident. Such construction of the statute is consistent with the rule that modifying phrases are to be applied to the words immediately preceding them and are not to be construed as extending to more remote language. (Tri–County Elevator Co. v. Superior Court (1982) 135 Cal.App.3d 271, 275 [185 Cal.Rptr. 208].) It is interesting that there is no comma after the modifying phrase “in a court of competent jurisdiction.” Rather, the entire clause modifying the word “suit” reads as follows: “․ in a court of competent jurisdiction and notice of such suit has been given the insurer․” The lack of the comma suggests that the Legislature intended the notice provision not to be parallel or conjunctive to the filing suit provision, but part of the modifying clause. As part of a modifying clause, it is not subject to the more remote language pertaining to the one-year requirement. [¶] We can find in the legislative history provided in the record on appeal no suggestion that the insurance industry was suffering any prejudice by lack of timely notice of a pending suit in cases where a timely suit against the uninsured motorist had been filed by the insured․ [¶] The more reasonable interpretation of the statute is that the Legislature only intended that suit be filed within one year of the accident, which will adequately preserve any subrogation rights. The purpose of the requirement that the insured give notice of such suit is so that the insurer will be able to investigate and act on the insured's uninsured motorist claim in a proper fashion in those cases where the insurer otherwise has not had any prior opportunity to do so. [¶] To read this statute to deny coverage under the policy simply because notice of the underlying suit came after one year of the accident, but when no showing of prejudice due to the delay is made, is to ascribe to the Legislature a hidden motive or object resulting in an exclusion or exception to coverage which does not appear on the face of the statute or in the legislative history provided in our record. Moreover, because the construction of the statute urged by respondent could lead to absurd or unjust consequences, we do not believe the Legislature intended to make the notice provision subject to the one year requirement.” (Id. at pp. 223–225, 242 Cal.Rptr. 723.)
We agree with Garibay that section 11580.2(i) is unclear as to whether notice of the filing of the lawsuit must be given to the insurer during the first year. As we read Garibay this ambiguity brings into play the public policy factors that favor coverage to the insured provided notice has been given to the insurer within a reasonable time and the insurer has not been prejudiced by the delay. This concept should apply to our present case, because it is clear there was no prejudice to respondent who was quite knowledgeable about the time factors involved. Respondent soon after the accident was notified of appellants' claims so that there was ample time for discovery and preservation of evidence. Respondent replied that it was investigating the accident. Appellants complied with the clear mandatory provision of the section by filing their lawsuit within one year from the date of the accident, thus preserving respondent's subrogation rights. Respondent was very aware of appellants' claim because one day after the one-year period had expired it contacted appellants to ask if they had “protected” the statute of limitations. Of course, it had this right to so act, but a notice to its insureds warning them of the code section in question would have been the more responsible action in view of respondent's intent to immediately seek avoidance of coverage if the section as it interpreted it was not complied with. We agree with Garibay that the public policy factors favoring the insured in such a situation should prevail here where no prejudice has been incurred by the insurer. If we are wrong, it can easily be resolved by the Legislature through an amendment clarifying its intent on when notice of the lawsuit's filing must be given to the insurer.
The judgment of dismissal is reversed. Costs are awarded to appellants.
1. Insurance Code section 11580.2(i), provides: “No cause of action shall accrue to the insured under any policy or endorsement provision issued pursuant to this section unless within one year from the date of the accident: [¶] 1. Suit for bodily injury has been filed against the uninsured motorist, in a court of competent jurisdiction and notice of such suit has been given the insurer, or [¶] 2. Agreement as to the amount due under the policy has been concluded, or [¶] 3. The insured has formally instituted arbitration proceedings.”
HASTINGS, Associate Justice.* FN* Retired Associate Justice of the Court of Appeal serving as a senior judge by order of the Chairperson of the Judicial Council.
ASHBY, Acting P.J., and BOREN, J., concur.