CALIFORNIA COMPENSATION AND FIRE COMPANY, Petitioner, v. INDUSTRIAL ACCIDENT COMMISSION of the State of California, and Joy N. Mello, and Joy N. Mello as Guardian ad Litem and Trustee of Minors Garnett Ellen Mello, Anett Fay Mello, Hermeen Lynn Burch and Michael Richard Burch, Gail J. Jones, and Gail J. Jones as Guardian ad Litem and Trustee of Minor James Edward Moe, Lois A. Badger as Guardian ad Litem and Trustee of Minors Anita Mary Jones and Diana Lee Jones, Respondents.
The sole question for decision here is whether a policy of workmen's compensation insurance wherein the employer is identified as the members of a three-man partnership ‘jointly and not severally’ covers a liability which arose after the partnership had admitted a fourth member. The policy expressly excludes any liability arising out of the operations of the named employer with any other person. Our conclusion is that the policy, by its terms, does not cover, and that the award must be annulled.
The background facts are simple, though unique. The insurance policy, issued as of August 21, 1961, states in Item 1 of the declarations the name of the employer in the following language: ‘RICHARD JONES, EDWARD MELLO AND WESLEY JOHNSON, JOINTLY AND NOT SEVERALLY D.B.A. SOUTH BAY INSULATION COMPANY.’
Under the heading ‘Agreements Limiting and Restricting this Insurance’ appears the following:
‘4. The insurance under this Policy is limited as follows: Liability Not Insured: It is AGREED that, anything in this Policy to the contrary notwithstanding, this Policy DOES NOT INSURE: Any liability which the named Employer may have arising out of operations conducted jointly by said named Employer with any other person, firm or corporation, except as specifically set forth in Item (1) of the Declarations or by Endorsement attached to this Policy.
‘5. If this Policy is issued to a Partnership the insurance under this Policy is limited as follows: Liability Not Insured: It is AGREED that, anything in this Policy to the contrary notwithstanding, this Policy DOES NOT INSURE: Any liability the named Employer may have or acquire other than as a partnership, ‘jointly and not severally.”
One of the conditions set forth in the policy is this:
‘Assignment: The interest of this Employer in this Policy cannot be assigned to any other person or organization.’
By a special endorsement it was agreed that the benefits of the policy would apply to the copartners, Richard Jones, Edward Mello and Wesley Johnson, as employees.
About January 1962 Joseph Ambriz became a member of the partnership. It does not appear that the nature of the business changed in any other respect.
A dispute arose between Johnson and the others concerning some partnership matters. On April 13, 1962, Johnson came to the partnership office where the others were at work, and shot to death Jones and Mello. The widows and dependent children of Jones and Mello then applied for workmen's compensation benefits. The findings of fact made by the Industrial Accident Commission with respect to each claim include the following:
‘2. Said employee [Jones/Mello] was a working member of Richard Jones, Edward Mello, Wesley Johnson and Joseph J. Ambriz, co-partners, dba South Bay Insulation Company, receiving wages irrespective of a share of the profits.
‘3. Said co-partnership was the employer herein.
‘4. The employer was on said date insured by California Compensation & Fire Company, a corporation, whose compensation insurance coverage included the decedent as a partner.’
Upon these findings the commission made an award in favor of the claimants and against the insurer, who has petitioned this court for a review. The petitioner does not now question the standing of the claimants to receive compensation. The sole issue is whether this insurer is liable.
Both the referee and the commission panel expressed the opinion that the change in the composition of the partnership was not a material fact. The wording of the policy compels the opposite conclusion. The agreement of the parties—the insurer and the insured employer—was that the employer whose liability was to be covered was Jones, Mello and Johnson, jointly and not severally, and it excluded liability arising out of operations conducted jointly by this group with any other person. As of the date when the claims arose, Jones, Mello and Johnson were conducting business jointly with the fourth partner, Ambriz. The opinion of the referee suggests that the phrase ‘operations conducted jointly by said named Employer with any other person’ should be limited to business enterprises which are separate and apart from the partnership business. To read that qualification into the policy would do violence to plain and simple English. The draftsman could not have chosen more appropriate language to declare that a partnership containing a new partner would not be covered. There is no reason to doubt that the policy was drafted precisely, in the light of applicable statutes and decisional law, to relieve the insurer in the event that the three named partners brought in an additional partner without the insurer's knowledge and consent.
A pertinent analogy is found in National Auto. Ins. Co. v. Industrial Acc. Com., 11 Cal.2d 689, 81 P.2d 926, where a policy issued to an individual employer and expressly limited to his liability as an individual was held not to apply after the named insured had taken in his sister as a partner. The Supreme Court said (at p. 691, 81 P.2d at p. 927):
‘The fact that the assured's liability to employees of the copartnership was no greater than that which would have attached to him had he retained the status of ‘individual employer’ contemplated by the policy, is of no moment in our determination of the coverage thereunder. A contract of insurance, like any other contract, is to be construed so as to effectuate the intention of the parties. Of course, if any ambiguity exists in its terms it is to be interpreted against the insurer and in favor of the assured. But where, as here, the provisions of the policy are definite and certain there is no room for interpretation and the courts will not indulge in a forced construction in order to cast a liability upon the insurer which it has not assumed. Maryland Cas. Co. v. Industrial Acc. Comm., 209 Cal. 394, 397, 287 P. 468.
‘In our opinion, it is obvious from the above-quoted provision of the policy that it was the intention of the insurer and the assured to limit the coverage of the policy to such liability only as was imposed upon the assured as an ‘individual employer’ as distinguished from that which would arise by reason of being a ‘member of a copartnership’. The right of an insurer to limit its contract of coverage may not be questioned.'
Another case, National Auto. Ins. Co. v. Industrial Acc. Com., 11 Cal.2d 694, 81 P.2d 928, involved a policy in which the named insured was five named men ‘jointly and not severally, a copartnership doing business as Red Top Cab Co. and Airline Taxi Co.’ The claimant was driving a taxi operated by one of the named men in partnership with a sixth man under the name of ‘Air Line Taxi.’ The award of the commission against the insurer was annulled.
Certain other fact situations must be distinguished. Where the policy is issued to a partnership and thereafter one partner withdraws, coverage continues by reason of the provisions of Insurance Code, section 304 (formerly Civ.Code, § 2557) that ‘In the case of partners * * * a transfer of interest by one to another thereof does not avoid insurance * * *.’ (First Nat. T. & S. Bank of San Diego v. Industrial Acc. Com., 213 Cal. 322, 332, 2 P.2d 347, 78 A.L.R. 1324; National Auto. Ins. Co. v. Industrial Acc. Com., 29 Cal.App.2d 336, 84 P.2d 201.)
But the Insurance Code contains no similar provision with respect to the transfer of interest by one or more partners to an outsider.
In Reed v. Industrial Acc. Com., 10 Cal.2d 191, 73 P.2d 1212, 114 A.L.R. 720, the policy covered Mellott as an individual. Subsequently he became a member of a partnership, which was the employer at the time of the injury. The Supreme Court held that the policy covered Mellott's liability as a member of the partnership. (Zimmerman v. Industrial Acc. Com. 119 Cal.App. 253, 6 P.2d 291, is to the same effect.) But the reasoning of these cases cannot be applied where the policy expressly excludes coverage for liability arising out of operations conducted jointly with another.
In National Auto. Ins. Co. v. Industrial Acc. Com., 19 Cal.2d 540, 122 P.2d 1, where the policy named three partners jointly and not severally, the insurer was held liable on the claim of the employee of one of the named insureds individually upon a theory of estoppel. But in the present case there is no finding of estoppel and no suggestion by anyone that such a theory would apply.
The attorneys for the commission assert that the evidence that Ambriz had become a partner prior to the shooting is inconclusive. They then call attention to the provision of Labor Code, section 5952, that ‘The review by the court shall not be extended further than to determine, based upon the entire record * * * whether * * * (d) The * * * award was not supported by substantial evidence.’ (Emphasis added.) Counsel then ask this court to examine the evidence and ascertain that there is some substantial evidence to support a finding that Ambriz was not a partner. The argument seems to be that if the court can find in the record some evidence to support a finding which, though contrary to the commission's finding, would support the award, then the court must conclude that the award is supported by substantial evidence. The commission's finding that the employer was a four-man partnership then would be disregarded either as surplusage or as an immaterial aberration in the reasoning process of the commission.
It is not the function of this court to make a new finding contrary to the commission's finding, upon conflicting evidence, for the sake of affirming an award. This is not a case where the findings of the commission are ambiguous or uncertain. The ‘entire record’ makes it clear that the commission determined from the evidence that the employer was a four-man partnership, and rested the award upon its conclusion of law that the insurance policy covered the employees of that partnership. For this court to inquire whether the evidence might also support a contrary finding would be to invade the exclusive power of the commission to resolve conflicts in the evidence and to draw permissible inferences from the facts in evidence.
The clear and unambiguous findings made by the commission do not support the award. This is a statutory ground for annulment. (Lab.Code, § 5952, subd. (e). Cf. Mercer-Fraser Co. v. Industrial Acc. Com., 40 Cal.2d 102, 124, 251 P.2d 955.)
Since the families of the deceased men are eligible for compensation and the insurance company is the only financially responsible party in sight, there is a strong temptation to find a way to make the insurance cover the claim. To do so would be to decide that the language of the contract which restricts the insurance must be disregarded for reasons of public policy. The Legislature has made no such declaration of policy, although it has done so with respect to transfers between partners. (Ins. Code, § 304.) It is not the function of this court to make such a determination of policy, particularly when the Legislature and the administrative agencies concerned appear to have approved the type of limitation which applies here.
The Legislature has provided that a workman's compensation policy shall not be issued by any insurer unless it is previously approved as to substance and form by the Insurance Commissioner who, before approving, must consult with the Industrial Accident Commission. (Ins. Code, § 11658.) The published regulations of the Insurance Commissioner show that he has approved endorsement forms restricting coverage in the exact language found in the policy involved here. (Cal.Admin.Code, tit. 10, §§ 2269.13, 2269.14.)
The award is annulled.
SHINN, P. J., concurs. FORD, J., concurs in the judgment.