RAMIREZ v. St. Paul Fire and Marine Insurance Company, Defendant, Cross–Defendant, Cross–Complainant and Respondent.

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Court of Appeal, Fifth District, California.

Ricardo RAMIREZ, Plaintiff and Respondent, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant, Cross–Complainant, Cross–Defendant and Appellant; St. Paul Fire and Marine Insurance Company, Defendant, Cross–Defendant, Cross–Complainant and Respondent.

No. F015517.

Decided: July 08, 1993

McCormick, Barstow, Sheppard, Wayte, & Carruth, James P. Wagoner, Todd W. Baxter, Fresno, CA, for defendant, cross-complainant, cross-defendant and appellant. Parichan, Renberg, Crossman & Harvey, Charles L. Renberg, Fresno, CA, for defendant, cross-defendant, cross-complainant and respondent. Nicholas John Paul Wagner, Fresno, CA, for plaintiff and respondent.


Defendant, State Farm Mutual Automobile Insurance Company (State Farm), appeals from a judgment awarding plaintiff, Ricardo Ramirez, $48,809.59 in damages for insurance bad faith.   State Farm's primary contention on appeal is that its automobile policy did not cover Ramirez's claim against its insured.

Because we will agree with this contention, we do not address the other issues raised by the parties.   Accordingly, the following history is limited to that necessary to an understanding of the coverage question.


Ramirez was injured on November 22, 1985, when a vehicle in which he was a passenger was struck by a truck near the intersection of Fresno and O Streets in Fresno.   The truck was registered to Valley Truck Rental, dba Avis Truck Rental (Avis).   Avis had rented the truck two days earlier to “The Boxyard,” a business owned solely by George Shore.   Lowell Landin, a Boxyard employee, had used the truck to make a delivery and was returning to Fresno when the accident occurred.

At the time of the accident, Shore and his wife were insured under policies issued by State Farm for their three personal automobiles.   Each vehicle was covered by a separate policy.   Each policy provided bodily injury liability coverage of $25,000 for each person and $50,000 for each accident.   The policies extended this coverage under certain circumstances to other vehicles, including “non-owned cars.”

Avis was insured at the time of the accident under a policy issued by St. Paul Fire and Marine Insurance Company (St. Paul).

On September 22, 1986, Ramirez filed suit against Shore individually and as owner of The Boxyard, as well as against Landin and Avis (Ramirez v. Shore ).   Shore tendered his defense to St. Paul, which filed an appearance on behalf of both Shore and Landin.

In February 1987, Shore notified State Farm of the accident and the lawsuit.   State Farm denied Shore's request for coverage under its automobile policies, citing an exclusion in the policies applying to non-owned cars used by persons in the car business or by persons other than Shore, his wife or their relatives in “any other business or occupation.”   State Farm also rejected demands that it pay its policy limit of $25,000 to Ramirez in order to settle his claim.

Ramirez and Shore eventually agreed to settle the case.   In January 1985, they executed an “Assignment of Action in Exchange for Covenant Not to Execute” and a “Settlement Agreement” by which Shore agreed to settle the lawsuit for $77,000 and assign his rights against State Farm to Ramirez in exchange for Ramirez's agreement not to execute against Shore's personal assets.   The settlement documents were later amended to provide for dismissal of the action against Landin and a stipulated judgment against Shore.

In June 1988, Ramirez filed the present action against State Farm, seeking damages for insurance bad faith, breach of statutory duties, negligent infliction of emotional distress, and intentional infliction of emotional distress, and also seeking declaratory relief as to the issue of coverage.   The complaint was subsequently amended to join St. Paul.   There followed cross-complaints between St. Paul and State Farm raising numerous coverage and indemnity questions.   In view of our decision that State Farm's policy affords no coverage to Shore, we need not further discuss the issues raised by these pleadings.

In the first phase of a two-part trial, the court found the “non-owned car” exclusion in State Farm's policy was ambiguous and resolved the ambiguity against State Farm, holding the State Farm policy covered Ramirez's claim.   In the second phase, the court found both State Farm and St. Paul liable to Ramirez in tort for bad faith.   Prior to entry of judgment, Ramirez and St. Paul reached a settlement.   The court determined the settlement was made in good faith and dismissed the cross-complaints by State Farm and St. Paul.   It then entered judgment against State Farm for the balance of the amount due Ramirez under the stipulated judgment in Ramirez v. Shore, plus interest.


If State Farm's policies did not cover Ramirez's claim, State Farm did not breach any duty to Shore and therefore could not have acted in bad faith.   (Love v. Fire Insurance Exchange (1990) 221 Cal.App.3d 1136, 1151–1152, 271 Cal.Rptr. 246;  Murray v. State Farm Fire & Casualty Co. (1990) 219 Cal.App.3d 58, 268 Cal.Rptr. 33.)   We therefore turn to the central coverage issue in this case.

During the relevant period, State Farm's policies provided liability coverage to George R. and Ardyce Shore of $25,000 for each person and $50,000 for each accident.   Under the terms of the policies,1 State Farm agreed to “pay damages which an insured becomes legally liable to pay because of:  [¶] a. bodily injury to others, and [¶] b. damage to or destruction of property including loss of its use, caused by accident resulting from the ownership, maintenance or use of your car;  ․”2  In a portion of the policies entitled “Declarations Continued,” the insured agrees the vehicle described on the preceding Declarations page is used for “pleasure and business.”   In addition, the policies provide:

“Coverage for the Use of Other Cars

“The liability coverage extends to the use, by an insured, of a newly acquired car, a temporary substitute car or a non-owned car. 3

“Who is an Insured ”


“When we refer to a non-owned car, insured means:

“1. the first person named in the declarations;

“2. his or her spouse;

“3. their relatives;  and

“4. any person or organization which does not own or hire the car but is liable for its use by one of the above persons.



“2. WHILE:


“b. USED IN ANY OTHER BUSINESS OR OCCUPATION.   This does not apply to a private passenger car driven or occupied by the first person named in the declarations, his or her spouse or their relatives.”

In this case, under the terms of the policy and according to the facts, the Avis cargo van rented to Shore (dba the Boxyard) was a non-owned vehicle;  at the time of the accident the cargo van was being used in Shore's business and was being operated by someone other than Shore, his wife or their relatives.   There is no contention to the contrary.

Further, the court expressly found:  “For the purposes of the issues presented in this case, the Court finds from the evidence that Landin was in the course and scope of his employment at the time of the collision.”

 Since there was no evidence extrinsic to the policy itself, the question of whether the language in the contract of insurance is ambiguous is a question of law (Producers Dairy Delivery Co. v. Sentry Insurance Co. (1986) 41 Cal.3d 903, 912, 226 Cal.Rptr. 558, 718 P.2d 920;  Loyola Marymont University v. Hartford Accident & Indem. Co. (1990) 219 Cal.App.3d 1217, 1221–1222, 271 Cal.Rptr. 528).   Accordingly, this court must make its own independent determination of the meaning of the language used in the policies.  (Parsons v. Bristol Development Co. (1965) 62 Cal.2d 861, 44 Cal.Rptr. 767, 402 P.2d 839;  Hackenthal v. National Casualty Co. (1987) 189 Cal.App.3d 1102, 234 Cal.Rptr. 853.)

Our Supreme Court has recently surveyed the principles of interpretation applicable to insurance policies.   In AIU Insurance Company v. Superior Court (1990) 51 Cal.3d 807, 821–822, 274 Cal.Rptr. 820, 799 P.2d 1253, the Supreme Court instructed:

“Under statutory rules of contract interpretation, the mutual intention of the parties at the time the contract is formed governs interpretation.   (Civ.Code, § 1636.)   Such intent is to be inferred, if possible, solely from the written provisions of the contract.  (Id., § 1639.)   The ‘clear and explicit’ meaning of these provisions, interpreted in their ‘ordinary and popular sense,’ unless ‘used by the parties in a technical sense or a special meaning is given to them by usage’ (id., 1644), controls judicial interpretation.  (Id., § 1638.)   Thus, if the meaning a layperson would ascribe to contract language is not ambiguous, we apply that meaning.   [Citations.]

“If there is ambiguity, however, it is resolved by interpreting the ambiguous provisions in the sense the promisor (i.e., the insurer) believed the promisee understood them at the time of formation.  (Civ.Code, § 1649.)   If application of this rule does not eliminate the ambiguity, ambiguous language is construed against the party who caused the uncertainty to exist.  (Id., § 1654.)   In the insurance context, we generally resolve ambiguities in favor of coverage.  [Citations.]  Similarly, we generally interpret the coverage clauses of insurance policies broadly, protecting the objectively reasonable expectations of the insured.”  (Fn. omitted;  see also Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264–1265, 10 Cal.Rptr.2d 538, 833 P.2d 545;  Producers Dairy Delivery Co. v. Sentry Insurance Co., supra, 41 Cal.3d at p. at p. 912, 226 Cal.Rptr. 558, 718 P.2d 920.)

In Producers Dairy Delivery Co., supra, the court further explained:

“It is a basic principle of insurance contract interpretation that doubts, uncertainties and ambiguities arising out of policy language ordinarily should be resolved in favor of the insured in order to protect his reasonable expectation of coverage.  [Citations.]  It is also well established, however, that this rule of construction is applicable only when the policy language is found to be unclear.  [Citations.]  ‘ “A policy provision is ambiguous when it is capable of two or more constructions, both of which are reasonable.”   [Citation.]’  [Citation.]   Whether language in a contract is ambiguous is a question of law.  (Id. [Delgado v. Heritage Life Ins. Co. (1984) 157 Cal.App.3d 262] at p. 270 [203 Cal.Rptr. 672].)   We are also guided by the principle that words in an insurance policy must be read in their ordinary sense, and any ambiguity cannot be based on a strained interpretation of the policy language.  [Citation.]”  (41 Cal.3d at p. 912, 226 Cal.Rptr. 558, 718 P.2d 920.)

 Further, insurance policies must be read as a whole with each part considered in conjunction with the other.  (Hartford Accident & Indemnity Co. v. Sequoia Ins. Co. (1989) 211 Cal.App.3d 1285, 1298, 260 Cal.Rptr. 190.)

The trial court found an ambiguity in the non-owned car provision, stating in its notice of intended decision:

“If State Farm intended to exclude use of a nonowned vehicle in the business of the named insured, George Shore, it need only have provided in simple, plain, clear, ordinary language that the use of nonowned vehicles in the business of the named insured was not covered.   But the wording of the insuring agreement is ambiguous in that it is uncertain as to the extent of coverage if the declarations state no defined use or any restrictions on use;  (2) the meaning and effect of a nonowned vehicle being ‘Used In Any Other Business or Occupation’ and (3) whether use of a nonowned vehicle by an employee of George Shore in the course and scope of employment is ‘use’ by the named insured.   The court has read this insuring agreement 25 to 30 times, and concludes the intent of the insurer with respect to limitations on business use is not clear, reasonably certain and is ambiguous.   An ordinary person insured under this policy would not be placed on notice in plain, clear, language that any restrictions or [sic ] coverage was intended by the casual, incidental use of a rented truck in the insured's business.”

In the course of a hearing on objections to the statement of intended decision, the court elaborated:

“We conclude that the insuring agreements and definitional limitations in the State Farm policy with respect to the use of a non-owned vehicle in ‘any other business or occupation’ is not set forth in a reasonably plain, clear and conspicuous manner with respect to a use of a non-owned [sic ] in the business of the named insured in contrast to car or other businesses.   Paragraphs 1 and 2 which exclude coverage for certain non-owned cars are neither plain nor clear as to whether ‘any other business or occupation’ was intended to refer to the named insured's own business, any business other than that of the named insured, the car business and any other business other than the car business, or excluded the business of the named insured except when a private passenger car was driven or occupied by the named insured ‘his or her spouse or their relatives.’ ”

Applying the principles of construction to the facts of this case, we are of the opinion the trial court has read an ambiguity into the plain language of the non-owned car exclusion where no ambiguity exists.

By the terms of the policy, the insured agrees the vehicle described on the Declarations page is used for pleasure and business.   One policy, for example, identifies the covered vehicle as “Chev 74 Van.”   Under the heading “Coverage for Use of Other Cars,” the policy extends liability coverage “to the use, by an insured, of a ․ non-owned car.”  Other than the non-owned car exclusion, the policy does not limit coverage for the named insured's use of vehicles for business.   Thus, someone reading the policy up to the point the non-owned car exclusion appears could reasonably understand it covers cars used by Shore for both business (whether the insured's business or any other business) and non-business purposes.   This interpretation is reinforced by part 1 of the non-owned car exclusion which excludes coverage for non-owned cars “IF THE DECLARATIONS STATE THE ‘USE’ OF YOUR CAR IS OTHER THAN ‘PLEASURE AND BUSINESS';  ․”   As mentioned, the policy declarations expressly state the use of “your car” is for “pleasure and business.”

Thus, we come to the non-owned car exclusion.   It follows closely after the policy provision for “COVERAGE FOR USE OF OTHER CARS.”  Further, the exclusion is in bold-faced type and to repeat, states in relevant part:



“2. WHILE:



 The trial court determined paragraph 2b is ambiguous because it could be interpreted in effect to read “USED IN ANY OTHER BUSINESS OR OCCUPATION [other than the insured's business].”   Thus, the trial court added language to create an ambiguity where none exists.   The policy language plainly excludes coverage for non-owned cars, “WHILE:  [¶] a. BEING ․ USED ․ IN ANY CAR BUSINESS;  or [¶] b. USED IN ANY OTHER BUSINESS OR OCCUPATION․”  It seems clear to us that part 2b excludes use in any business or occupation including the business or occupation of the insured.   We perceive no semantically permissible way of reading into the exclusion the additional language suggested by the trial court.4  “[A] court should give the words used their plain and ordinary meaning, unless the policy clearly indicates to the contrary.   When the language is clear a court should not give it a strained construction to impose on the insurer a liability it has not assumed.”  (Suarez v. Life Ins. Co. of North America (1988) 206 Cal.App.3d 1396, 1402, 254 Cal.Rptr. 377.)

As was stated in Apparel City Sewing Machine Co., Inc. v. Transamerica Ins. Group (1982) 129 Cal.App.3d 400, 405–406, 181 Cal.Rptr. 64:

“The rules pertaining to the interpretation of ambiguous or uncertain language in insurance policies are only applicable when in fact a policy ‘actually presents some uncertainty or ambiguity.’  (Farmers Ins. Exch. v. Harmon (1974) 42 Cal.App.3d 805, 809 [117 Cal.Rptr. 117.] )   There is no question that an insurance company has the right to limit the coverage of a policy issued by it, and when it has done so, the plain language of the limitation must be respected.  [Citations.]  In other words, when a clause limiting coverage appears in clear and conspicuous terms in an insurance policy, it will be given effect.  [Citations.]  ‘The courts will not indulge in a forced construction so as to fasten a liability on the insurance company which it has not assumed.  [Citation.]  Absent circumstances indicating a contrary intention, words in an insurance policy are to be used in their plain, ordinary and popular sense.’  [Citations.]”

There are several additional problems with the trial court's analysis:  First, the business uses covered by the policy without reference to the non-owned car exclusion are not limited to uses in the business of the insured.   For example, in the declarations referring to the owned car, the use is described as “for pleasure and business” without limitation.   Under “Coverage for the Use of Other Cars,” “[t]he liability coverage extends to the use, by an insured of a ․ non-owned car.”  Thus, coverage can reasonably be interpreted only to extend to all personal and business uses.   To be consistent with prior provisions of the policy, part 2b of the non-owned car exclusion must be construed to refer to all businesses, not just those other than the insured's business.

Further, the format of the non-owned exclusion is such that the “ANY OTHER BUSINESS” language in part 2b can only be reasonably construed to refer to the “car business” expressly excluded in part 2a immediately preceding it.   Thus the exclusion plainly applies to the car business or any other business.

 Finally, the trial court's interpretation of the non-owned car exclusion creates a broad category of coverage not contemplated by the general terms of the policy.   The exclusion reflects an intent to deny or restrict coverage for the business uses of a non-owned car.   Interpreting part 2b to include the insured's business is consistent with this intent because the exclusion then deals with all possible business uses.   The interpretation urged by Ramirez, on the other hand, defeats the evident intent of the exclusion by leaving some business uses (i.e., uses in the insured's business) completely unaddressed by the policy.   More importantly, these unaddressed uses are clearly the most common and significant in terms of the risk assumed by State Farm.   It is therefore unreasonable to interpret the policy to put these uses beyond the scope of the non-owned car exclusion.   And it is unreasonable to believe an automobile policy covering an insured's personal vehicles also covers, without restriction, other, non-owned vehicles, including commercial vehicles, rented by the insured's business and operated by an employee.  (Allstate Insurance Company v. Hoffman (1959) 21 Ill.App.2d 314, 158 N.E.2d 428, 432.)

Counsel have not cited and we have not found a California case presenting the precise issue as that raised in this case.   However, cases from other jurisdictions are supportive of our conclusion that the non-owned car provision is not ambiguous.

In State Farm Mut. Auto. Ins. Co. v. Lewis (Ala.1987) 514 So.2d 863, the court considered policy language identical to that involved here and concluded “when the ‘non-owned car’ exclusion is read in its entirety, it cannot reasonably be said to be ambiguous.”  (Id. at p. 865.)   The particular issue in Lewis was not whether “other business[es]” included the insured's business, but whether a company pickup truck driven by the insured in the course of his employment was a “private passenger car” within the meaning of part 2b.  (Ibid.)  However, there would have been no need to interpret the “private passenger car” language in the first place if, as Ramirez urges, “any other business or occupation” did not include the insured's business, since in that case the vehicle would have been covered whether it was a private passenger car or not.   Likewise, in Craine v. Gee (Fla.App.1973) 276 So.2d 521, the court concluded a non-owned car exclusion containing similar language was not ambiguous.   The issue in Craine was whether the “private passenger automobile” exception, which appeared only in the “other business” part of the exclusion, also applied to the ‘automobile business' part.   The court concluded it did not.

Two other cases also support the interpretation that “any other business or occupation” includes the insured's business.  Rossman v. State Farm Ins. Companies (1990) 184 Mich.App. 618, 459 N.W.2d 72, and Reiter v. State Farm Mutual Automobile Insurance Co. (E.D.1973) 357 F.Supp. 1006, both involved a non-owned car exclusion similar to (or in Rossman identical to) the one in this case.   Again, the question in both cases was not whether “any other business or occupation” included the insured's business, but whether it included only the insured's principal business.   While the two courts reached different conclusions on this question, it is evident from their discussions that both read the exclusion to apply to any other business or occupation of the insured.   Thus, both courts, as well as both plaintiffs, apparently did not find the policy to be ambiguous in the way suggested by Ramirez in this case.

Other cases, which involve policies limiting coverage for use of a non-owned car in “any other business or occupation of the insured,” also support our conclusion.  (See, e.g., King v. Woodward (10th Cir.1972) 464 F.2d 625;  Home Indemnity Co. v. Northwestern National Ins. Co. (D.Mont.1968) 280 F.Supp. 446;  Security Ins. Group of Hartford v. Parker (1976) 289 N.C. 391, 222 S.E.2d 437;  Seaford v. Nationwide Mutual Insurance Company (1961) 253 N.C. 719, 117 S.E.2d 733.   See also 85 A.L.R.2d 502.)

 The trial court referred to two other alleged ambiguities which we quickly dispose of.   One, to quote the trial court, is “whether use of a nonowned vehicle by an employee of George Shore in the course and scope of employment is ‘use’ by the named insured.”   There is no ambiguity in this regard.   It is settled that use by an employee in the course of his employment in an insurance policy context is use by the employer.  (Ohio Farmers Indem. Co. v. Interinsurance Exchange (1968) 266 Cal.App.2d 772, 775, 72 Cal.Rptr. 269.)

The other alleged ambiguity is “[w]hether the incidental use of a rented vehicle while being driven by an employee on a casual basis in the named insured's business is covered.”   First, the statement is internally inconsistent.   The court found the employee was driving the rented truck in the course and scope of Shore's business at the time of the accident.   That seems inconsistent with the court's characterization as the use being “on a casual basis.”   As we have held, under the clear language of the exclusion, coverage is not provided in a situation where the non-owned vehicle is being “used” (driven by an employee) in the business of the employer and the vehicle is not a private passenger vehicle operated by the named insured, his or her spouse, or their relatives.

For the foregoing reasons we hold the State Farm policy provided no coverage to Shore or to Landin under the facts of this case.   It follows State Farm did not act in bad faith by denying coverage, by refusing to defend the Ramirez action, or by refusing to accept a settlement within its policy limits.   State Farm is the only appellant before the court and all issues raised by State Farm on its cross-complaint against St. Paul are predicated on the assumption State Farm provides coverage in the case.   Accordingly, reversal of the judgment in favor of Ramirez and against State Farm will dispose of all issues in this appeal.

The judgment in favor of Ramirez and against State Farm is reversed.   State Farm is entitled to its costs.



1.   The emphasized words in the quoted portions of the policy are those printed in bold face italics to identify them as terms which are specifically defined.

2.   “Your car” refers to “the car or the vehicle described on the declarations page.”

3.   A “non-owned car” is defined in the policy as follows:  “Non–Owned Car—means a car not:  [¶] 1. owned by, [¶] 2. registered in the name of, or [¶] 3. furnished or available for the regular or frequent use of:  [¶] you, your spouse, or any relatives.  [¶] The use has to be within the scope of consent of the owner or person in lawful possession of it.”A “car” is defined as “a land motor vehicle with four or more wheels, which is designed for use mainly on public roads.   It does not include:  [¶] 1. any vehicle while located for use as a dwelling or other premises;  or [¶] 2. a truck-tractor designed to pull a trailer or semitrailer.”

4.   While not directly involved in this case, we note the additional language of paragraph 2b qualifies the exclusion to extend coverage to the insured, his or her spouse or their relatives, if the non-owned car is a private passenger vehicle driven or occupied by one of these persons.

GEO. A. BROWN, Associate Justice (Assigned).* FN* Retired Presiding Justice of the Fifth District Court of Appeal, assigned by the Chairperson of the Judicial Council.

VARTABEDIAN, Acting P.J., and BUCKLEY, J., concur.