ARGONAUT INSURANCE COMPANY, a corporation, Plaintiff and Appellant, v. TRANSPORT INDEMNITY COMPANY, a corporation, Balboa Insurance Company, a corporation, Defendants and Respondents.
Argonaut Insurance Company sought declaratory relief delineating the respective rights and obligations of three insurance companies whose policies provided concurrent coverage for an accident which occurred during the unloading of a truck and which resulted in injuries to the driver. The trial court prorated liability between plaintiff Argonaut and defendant Transport Indemnity Company. Defendant Balboa Insurance Company was held liable for excess coverage only in the event that Argonaut's and Transport's coverage be deemed invalid and noncollectible. Argonaut has appealed.
The case was submitted below upon an agreed statement of facts with attached exhibits which included copies of the pertinent insurance policies.
Said agreed statement is as follows:
‘On December 21, 1964, RICHARD NANCE was an employee of WILLIG FREIGHT LINES and acting in the scope of his employment as a truck driver when he sustained an injury giving rise to the litigation referred to herein.
‘STEELFORM CONTRACTING COMPANY was engaged in a construction project for a shopping center in the vicinity of Firestone Boulevard and Woodruff Avenue, in Los Angeles County. STEELFORM engaged WILLIG FREIGHT LINES to transport a quantity of steel pan shaped forms from Steelform's plant in San Leandro, California, to the jobsite in Downey. Sometime prior to December 21, 1964, Willig's tractor and semi-trailer unit was brought to Steelform's plant in San Leandro and there loaded with pan shaped forms. Subsequently, an employee of Willig brought the tractor and loaded semi-trailer to Willig's Los Angeles yard. There, on the day of the accident Nance, in response to his employer's instructions hooked another of his employer's tractor units to the semi-trailer and took it to the jobsite.
‘At the jobsite the tractor and semi-trailer were located on the premises of Steelform, and KENNETH B. CURRIER, an employee of Steelform, was directed to unload the semi-trailer. In the process of unloading the semi-trailer Currier was furnished by his employer with a forklift which Steelform had rented from, and which was owned by, ASSOCIATED TRUCK RENTALS, INC. Nance was assisting in the process of unloading when a portion of the load fell from the semi-trailer onto Nance and injured him.
‘WILLIG FREIGHT LINES was on the date of the accident a highway common carrier and a petroleum irregular route carrier, operating under permits issued by the Public Utilities Commission of the State of California and the United States Interstate Commerce Commission.
‘As a result of the accident and his injuries Nance has brought an action for damages in the Superior Court in Los Angeles County. The action bears # SE C 3171–C and is entitled RICHARD NANCE, plaintiff v. STEELFORM CONTRACTING COMPANY (and various fictitiously named defendants). In plaintiff's complaint, * * * plaintiff's Nance refers to the tractor and semi-trailer as a ‘flat bed truck’, and alleges he sustained damages as a result of negligence of defendants in (1) loading the truck; (2) inspecting, testing, and fastening the load on the truck; and (3) operating the forklift while unloading the truck.
‘At the time of the injury in question there were in effect four liability insurance policies:
‘1. A policy issued by ARGONAUT INSURANCE COMPANY to STEELFORM as named insured.
‘2. Two policies issued by TRANSPORT INDEMNITY COMPANY to WILLIG as named insured.
‘3. A policy issued by BALBOA INSURANCE COMPANY to ASSOCIATED TRUCK RENTALS as named insured.’
The following additional pertinent facts are disclosed by the record and exhibits.
Both Transport's policy No. 4100551 and Argonaut's policy contained ‘excess coverage’ or ‘other insurance’ clauses, which if given full application would result in no coverage whatsoever. Transport's policy No. 410551–X also contained such an excess coverage clause, the operative effect of which was to limit its coverage to any excess liability owed after payment on all other applicable policies.
Balboa's policy contained an ‘escape clause’ which if valid, as the trial court found, served to insulate Balboa from any liability so long as Transport's and Argonaut's policies were valid and collectible.
The conclusion of the trial court was that ‘Transport has coverage for Willig, Currier and Steelform to the extent of $100,000.00; Argonaut has coverage for Steelform, Currier and Willig to the sum of $500,000.00; said companies shall prorate liability in the proportion their coverage bears, to wit, 1/6 Transport, 5/6 Argonaut, to the total sum of $600,000.00. Liability of said insureds in excess of $600,000.00 is supplied by Transport under its specific excess policy No. 4100551–X.’
Plaintiff seeks reversal of the judgment on three grounds: First, plaintiff asserts that the coverage of defendant Transport should be declared to be primary for the reason that its policies contained ‘P.U.C.’ endorsement. Secondly, plaintiff urges that the ‘other insurance’ clause in Balboa's policy did not represent a valid ‘escape clause.’ Thirdly, plaintiff complains of the trial court's failure to specify in the judgment the specific obligations of the three insurers in respect to the duty to defend.
It is well settled that where no extrinsic evidence is introduced at trial to aid in the construction of a contract, such construction presents a question of law. (United States Leasing Corp. v. DuPont, 69 Cal.2d 275, 284, 70 Cal.Rptr. 393, 444 P.2d 65; Continental Cas. Co. v. Hartford Acc. & Indem. Co., 213 Cal.App.2d 78, 28 Cal.Rptr. 606.) Accordingly, on review of the judgment we are free to make independent determination of the policies' meanings as deduced from the pertinent provisions of the policies. (Continental Cas. Co. v. Phoenix Constr. Co., 46 Cal.2d 423, 430, 296 P.2d 801.)
As a highway common carrier and petroleum irregular route carrier, Willing was required by state law to obtain minimum liability insurance as a precondition to doing business in California.
Section 3631 of the Public Utilities Code instructs the Public Utilities Commission ‘in granting permits pursuant to this chapter, [to] require the highway carrier to procure, and continue in effect during the life of the permit, adequate protection * * * against liability imposed by law upon the highway carrier for the payment of damages for personal bodily injuries, including death resulting therefrom * * *.’ The P.U.C. retains the authority to deny its certificate of convenience and necessity to any highway carrier who fails to abide by its rules and regulations concerning the procurement of liability insurance. (See Stats.1935, ch. 223, p. 879; Stats.1951, ch. 764; §§ '1061, 1062, 1063 of the Public Utilties Code.)
In exercising its jurisdiction the P.U.C. ‘by general order or otherwise, may prescribe rules applicable to any and all highway common carriers, cement carriers and petroleum irregular route carriers.’ (Section 1062 of the Public Utilities Code.)
The P.U.C. regulations concerning liability insurance are contained in P.U.C. General Order No. 100B, effective July 1, 1961, and supplemental modifications of that order.
P.U.C. Endorsement No. 111, which was attached to Transport's policy, brought said policy into compliance with General Order No. 100B. Endorsement No. 111 extended Transport's coverage of Willig to the required $100,000.00 minimum for bodily injury to one person.
Endorsement No. 111 reads in pertinent part: ‘* * * [Transport] hereby agrees to pay, within the limits of liability hereinafter provided, [$100,000.00 per person] any final judgment rendered against the insured for bodily injury to or death of any person, or loss of or damage to property of others (excluding injury to or death of the insured's employees while engage in the course of their employment, * * *) resulting from the operation, maintenance, or use of motor vehicles for which a certificate of public convenience and necessity or permit is required or has been issued to the insured by the Public Utilities Commission of the State of California, regardless of whether such motor vehicles are specifically described in the policy or not.
‘Within the limits of liability hereinafter provided it is further understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, or any other endorsement thereon or violation thereof, or of this endorsement, by the insured, shall relieve [Transport] from liability hereunder or from the payment of any such final judgment, irrespective of the financial responsibility or lack thereof or insolvency or bankruptcy of the insured. However, all terms, conditions, and limitations in the policy to which this endorsement is attached are to remain in full force and effect as binding between the insured and [Transport], and the insured agrees to reimburse [Transport] for any payment made by [Transport] on account of any accident, claim, or suit involving a breach of the terms of the policy, and for any payment that [Transport] would not have been obligated to make under the provisions of the policy except for the agreement contained in this endorsement.’
The policy as so endorsed does not lend itself to an interpretation that the carrier intended to establish its coverage as primary vis-a-vis other available coverage.
An analysis of the language of General Order No. 100B, the progenitor of Endorsement 111, in the light of the reported P.U.C. investigations, orders and decisions available to us, compels the conclusion that neither the Legislature by enactment of section 3631 of the Public Utilities Code nor the P.U.C. by promulgation of General Order No. 100B intended to dictate which of two otherwise equally applicable insurance policies should be designated as primary.
The legislative purposes of section 3631 and General Order No. 100B are ‘to protect the public against reckless operation of such vehicles by financially irresponsible owners, and to provide a means of recovery for those injured in their person or property by such operation.’ (Insurance Law and Practice, Appleman, Vol. 7, § 4463, p. 510; Paul Masson Co., Inc. v. Colonial Insurance Co., Cal.App., 92 Cal.Rptr. 463; Boulter v. Commercial Standard Ins., 9 Cir., 175 F.2d 763, 767.)
A P.U.C. investigation which lead to the amendment of General Order 100B and the imposition of the $100,000.00 minimum concluded ‘* * * that the public health and safety require that the minimun requirements for protection of the public against loss and damage due to injury or death of persons and damage to property inflicted by for-hire carriers of petroleum products * * *, should be [$100,000.00 for bodily injuries to or death of one person].’ (Emphasis added.) (58 Cal. P.U.C. 711, 712.)
The P.U.C.'s opinion which established General Order No. 100B declares: ‘The policy of the Legislature is clear that vehicles should not be on the highway without insurance. The paramount right of the public to protection must, at all times, be considered by the Commission.’ (58 Cal. P.U.C. 706, 707.)
However protective of a third party claimant are such pronouncements, there is nothing in General Order No. 100B to indicate that such coverage is to be primary over otherwise equally applicable insurance. To the contrary General Order No. 100B seems to indicate that as long as the public is secured in the prescribed minimum coverage the insured and his insurer and by implication the insurer and other insurers are free to adjust and limit their various roles by contract. Thus, Endorsement No. 111 provides that ‘all terms, conditions, and limitations in the policy to which this endorsement is attached are to remain in full force and effect as binding between the insured and the [insurance] Company * * *.’
Finally, it is significant to note that factors considered in the periodic investigations conducted by the P.U.C. to determine the minimum level of required insurance did not include the necessity of imposing primary liability for applicable occurrences on the P.U.C. endorsed policies. (See: 58 Cal. P.U.C. 706; 58 Cal. P.U.C. 711; 55 Cal. P.U.C. 731, 732–733.) Nor do we think that such a consideration would be an appropriate factor. Given available, adequate coverage equal to the P.U.C. minimums, there is no apparent common sense reason to suppose that the attainment of the P.U.C.'s general objective would be enhanced by imposing primary coverage on one insurance policy over another.
‘When, as we have assumed here, dual coverage is provided for the same risk, public policy plays a minor role in the determination of which coverage is primary, for to the public it makes little difference which of two insurers is ultimately held responsible for a particular loss.’ (Pacific Indem. Co. v. Liberty Mut. Ins. Co., 269 Cal.App.2d 793, 796, 75 Cal.Rptr. 559, 561.)
The power of the P.U.C. to exercise the police powers of the state for the protection of the public by requiring highway carriers to carry minimum public liability insurance may indeed include the ability to predetermine which policy's coverage is, in a given occurrence, to be primary. The P.U.C., however, has not yet chosen to do so.
Plaintiff relied in the trial court and relies here on Travelers Indem. Co. v. Colonial Ins. Co., 242 Cal.App.2d 227, 51 Cal.Rptr. 724. It is true that that case appears to reach the conclusion advanced by plaintiff concerning the effect of a P.U.C. endorsement.
The court therein at page 241, 51 Cal.Rptr. at page 733, was apparently persuaded that when the endorsement explicitly states “* * * no condition, provision, stipulation, or limitation contained in the policy * * * shall relieve the [insurance company] from liability hereunder * * *” it necessarily precludes the insurer from relying on its ‘excess coverage’ clause to force proration. We do not interpret this language as having such effect.
In the case at bar the trial court noted, we think correctly, that the court in Travelers was influenced by the failure of the insurer (1) to urge the operative effect of its excess coverage clause in its trial brief; and (2) deny the assertion that the P.U.C. endorsement rendered its liability primary. We are of the opinion that Travelers is safely distinguished from the instant case, and in any event we must simply decline, respectfully, to follow it.
Carrying Argonaut's contention and the result reached in Travelers to a logical extreme would have the effect of saddling the trucker with primary liability in all cases simply because the trucking industry is more highly regulated than the business of the user or shipper. Except for its use of the highways there is nothing so unique about a truck that should in logic require this extra responsibility where the incident which is the focal point of liability is unrelated to the use of the highways.
We now direct attention to the proration adopted by the trial court.
In International Business Machines Corp. v. Truck Ins. Exch., 2 Cal.3d 1026, 89 Cal.Rptr. 615, 474 P.2d 431, our Supreme Court excluded from coverage under a trucker's policy the negligent maintenance of a loading dock on the basis that such maintenance was not embraced within the meaning of the concept of ‘use’ of the truck.
Significant to our case is the following passage which gives insight to some of the reasoning underlying the decision.
‘Furthermore, the obligation for the proper maintenance of the loading dock rests with its owner. A holding that IBM is a ‘user’ of the truck and that the trucker's carrier should meet the loss would free the dock owner from responsibility for the maintenance of its own premises, and fasten liability upon the insurance carrier whose insured was the least culpable. Almost all of the cases presenting the issue of ‘use’ of the vehicle by the shipper involve disputes between two insurance companies, as does this case, and a holding that the shipper constitutes a ‘user’ of the vehicle generally results in a transfer of all or part of the ultimate liability from the insurer for the negligent entity to the insurer of an innocent entity. Such a ruling secures for the shipper an insurance rate disproportionately low relative to the hazards of his business and may ultimately tend to discourage the shipper from exerting due care in the maintenance of the premises. Moreover, the injured person in these cases is almost always an employee of the trucker, action within the course of his employment, and thus entitled to workmen's compensation for his injuries as will as to his tort action against the negligent shipper. So far as we have discovered, the combination of injury to a third party and a possible financially irresponsible shipper has occurred in only one reported case, American Auto Ins. Co. v. Transport Indem. Co. (1962) 200 Cal.App.2d 543, 19 Cal.Rptr. 558.' (At page 1032, 89 Cal.Rptr. at page 619–620, 474 P.2d at pages 435–436.)
This very logical and pragmatic analysis, in our opinion, points in the exact opposite direction than the one for which Argonaut here contends.
The case at bar is just such a case as the court describes in the above quoted passage.
Since Transport's insured covered Nance in any claim for workmen's compensation and since the negligence which gave rise to Nance's injuries was necessarily attributable solely to Argonaut's insured, a denial of Transport's resort to its ‘excess coverage’ clause would permit an inequitable shifting of liability from a negligent entity to an innocent one. Is not the effect of such a shift to discourage the ‘user’ from exercising due care in the loading and unloading and shouldn't we seek to avoid that consequence in the same manner that the Supreme Court sought to avoid discouraging the proper maintenance of a loading dock?
In Camay Drilling Co. v. Travelers Indem. Co., 12 Cal.App.3d 237, 240, 90 Cal.Rptr. 710, 712, this court spoke of the ‘unrealistic and unjust effects of * * * [transferring] liability from the negligent entity to the insurer for the innocent entity—especially in cases in which the motor vehicle was only a peripheral, inactive or incidental factor.’ (Emphasis added.)
Further, “* * * ‘The intent and meaning of the parties is far more important than the strict and literal sense of the words used in the contract. For that reason it is equally important to consider the subject matter of insurance and the purpose or object which the parties had in view at that time; and in addition to these matters, it is often considered proper to consider the business of the parties, the circumstances surrounding the making of the contract, the situation of the property, and all other conditions which have a legitimate bearing upon the intention of the parties.’ * * *' [Citation.]' (Pacific Indem. Co. v. Liberty Mut. Ins. Co., 269 Cal.App.2d 793, 799, 75 Cal.Rptr. 559, 563.)
While the contracts of insurance here gives us no real clue as to intent, the business of the parties, the situation of the property, and the specific exclusion in Transport's policy as to employees of its insured, indicate that Argonaut's insured, Steelform, could not logically expect Transport's insured, Willig, to bear the burden of both its own liability for an industrial accident and a portion of Steelform's primary liability for the tort to the same injured party.
Thus, we hold that Argonaut's policy covering Steelform is primary and Transport's policy is excess.
Plaintiff nest contends that the trial court erroneously found a provision in defendant Balboa's policy to be a proper escape clause which by its terms reduced Balboa's coverage to a secondary status.
The provision in question, Endorsement 20, provides in relevant part: ‘The insurance afforded an insured other than the named insured, or his agent or employee action in the scope of such agency or employment, is not applicable if there is available to the insured any other valid and collectible automobile liability insurance, either primary or excess applicable to the same loss covering the insured as a named insured or as an agent or employee of a named insured, * * *; and in such event the two or more policies shall not be construes as providing cumulative or concurrent coverage, and only that policy which covers the liability of such person as a named insured, or as an employee or agent of a named insured, or as an insured, is applicable.’
Such escape clauses are generally disfavored in the law. (Peerless Cas. Co. v. Continental Cas. Co., 144 Cal.App.2d 617, 623, 301 P.2d 602.) However, ‘[t]he insurance company is entitled to write a policy which limits its coverage to certain persons unless the law expressly provides otherwise * * * and the limitations in the provisions of the policy must be respected.’ (Pacific Indem. Co. v. Truck Ins. Exch., 269 Cal.App.2d 420, 428–429, 74 Cal.Rptr. 793, 799.)
In the instant case defendant Balboa wrote its ‘escape clause’ so as to bring it directly under the language of subsection 11580.1(f) of the Insurance Code as it was in effect at the time this policy was issued.1 (See Stats.1963, ch. 1259, § 1, pp. 2780–2781.) This simply permitted the carrier for the bailer of the forklift to shift primary liability to the carrier for the bailee.
Plaintiff asserts that even if Balboa's Endorsement 20 otherwise qualifies as a valid escape clause, it is inapplicable here for the reason that a forklift is not an automobile as defined by the policy and the Vehicle Code. We do not agree. The trial court expressly found the forklift to be ‘an automobile of the commercial type.’ The forklift was registered with the Department of Motor Vehicles and was operated upon public highways within a radius of five miles. Forklifts have consistently been held to be automobiles under policies similar to those at issue here. (Pacific Employers Ins. Co. v. Maryland Casualty Co., 65 Cal.2d 318, 324, 54 Cal.Rptr. 385, 419 P.2d 641; Travelers Indem. Co. v. Colonial Ins. Co., suprai.)
Finally, it is true, as plaintiff points out, that the trial court apparently failed to prescribe in its judgment how the three insurers should provide for the costs of the defense of Steelform, Willig and Currier in the Nance action. In light of our holding the point is now moot. Accordingly, the judgment is modified to provide that Argonaut has primary coverage and the primary duty to defend.
The judgment as modified is affirmed.
1. Section 1158.1(f) was added to the Insurance Code in 1963 to read in pertinent part: ‘[A policy of liability insurance covering liability arising out of the ownership, maintenance or use of any motor vehicle] may contain a provision that the insurance coverage applicable to such motor vehicles afforded a person other than the named insured or his agent or employee shall not be applicable to the same loss covering sued person as a name insured or as an agent or employee of a named insured under a policy with limits at least equal to the financial responsibility requirements specified in Section 16059 of the Vehicle Code; and in such event, the two or more policies shall not be construed as providing cumulative or concurrent coverage and only that policy which covers the liability of such person as a named insured, or as an agent or employee of a named insured, shall apply.’
COMPTON, Associate Justice.
HERNDON, Acting P. J., and FLEMING, J., concur.