SAMPSON v. CENTURY INDEMNITY CO (1936)

This is an appeal from a judgment entered against the plaintiff after the sustaining of a demurrer to plaintiff's amended complaint without leave to amend, and from an order sustaining a demurrer to the amended complaint without leave to amend. This order is not appealable. Section 963, Code Civ.Proc., as amended by St.1933, p. 2472.

On the 3d day of March, 1931, Gerda Hart recovered judgment for injuries suffered in an automobile accident. Robert Farris was the owner of the automobile causing the injury. He had a policy of public liability insurance in the defendant insurance company protecting him against any personal injury he might cause to others by the operation of his automobile. While this policy was in force, the accident occurred which caused the injury to Gerda Hart. The judgment which she recovered was for the sum of $20,000, with interest at 7 per cent. from the date of the entry of the judgment, until paid, and for costs. On July 11, 1933, the insurance company paid her the sum of $10,000, the principal or face amount of its policy, plus interest in the approximate sum of $1,874.55, and costs in the sum of $220.

On June 13, 1934, Robert Farris, the insured, filed a petition in bankruptcy, and on January 30, 1935, plaintiff was appointed trustee of the estate of the bankrupt. Gerda Hart filed her claim for the sum of $10,000, the unpaid balance of her judgment against the bankrupt, plus interest thereon. The plaintiff made due demand upon the defendant insurance company for payment of the interest upon the unpaid portion of the judgment in the case of Hart v. Farris; that is, the interest on the balance of $10,000 from the time of the entry of the judgment. The company refused to pay. Thereupon this action was filed, after order and permission of the referee in bankruptcy, for the purpose of compelling the insurance company to pay the interest into the bankrupt estate of the insured.

In its policy the company agreed to pay all sums for which the assured should be liable to pay by reason of liability imposed upon him by law for damages because of bodily injuries, etc., subject to the limits of liability stated in the declarations. The limit specified in the specification was “Liability for bodily injuries or death, Limit one person, $10,000.00. Limit on accident, $20,000.00.”

The policy also provided that defendant insurance company “further agrees * * * (c) to pay all costs taxed against the assured * * * also all interest accruing after entry of judgment until the company has paid, tendered, or deposited in court such part of such judgment as does not exceed the limit of the company's liability thereon.”

Appellant contends there is only one question of law involved in this appeal, and that is the interpretation of the language of the policy as to the payment of interest. He thus states the question: “Does the particular language used in an automobile insurance policy, insuring against public liability, wherein it is provided that the insurance company shall pay to the insured all interest that may accrue upon any judgment against the insured by an injured person, from the date of entry of the judgment until payment of the insurance, mean that such insurance company must pay all interest that may accrue upon the entire judgment during such period, notwithstanding that the said judgment may be for an amount greater than the principal sum to which the company's liability is limited by the terms of the policy?”

Appellant contends that “any uncertainty or ambiguity in a contract of insurance is to be interpreted most strongly against the insurer.” Everett v. Standard Accident Ins. Co., 45 Cal.App. 332, 187 P. 996, 1001. See, also, Coniglio v. Connecticut Fire Ins. Co., 180 Cal. 596, 182 P. 275, 5 A.L.R. 805; O'Connor v. Grand Lodge, etc., 146 Cal. 484–491, 80 P. 688, 691. This is no doubt true of such contracts provided the uncertainty is not removed by other rules of interpretation. Civ.Code, §§ 1654, 1648, 1639.

“The [insurance] company cannot justly complain of such a rule. Its officers prepared the policy for the purpose, we shall assume, both of protecting the company against fraud and of securing the just rights of the assured under a valid contract of insurance. It is its language which the court is invited to interpret, and it is both reasonable and just that its own words should be construed most strongly against itself.” O'Connor v. Grand Lodge, supra. If the company had desired, under its policy, to limit its liability for interest to the extent of its liability for damages, it could have easily provided such limitation without any ambiguity.

It would therefore seem reasonable that the respondent company intended by the language contained in its policy (1) to pay all sums which the assured should be liable to pay by reason of the liability imposed upon him by law for damages because of bodily injuries, subject to the limits of liability in item one of the policy, that is, $10,000 for bodily injuries of one person; (2) to pay all costs, etc., also all interest accruing on the entire judgment until the company has paid, tendered, or deposited in court such part of the judgment as does not exceed the limit of the company's liability thereon. Under this interpretation the insurance company, if it had so elected, could have terminated its liability to pay interest on the entire judgment by paying, tendering, or depositing in court that part of the judgment which did not exceed the limit of its liability. Under this construction of the contract of insurance, which does not seem unreasonable, and for lack of any other construction which seems reasonable, we conclude its reasonableness.

The reason for supplying this clause may have been the result of the decision in Tulare County Power Co. v. Pacific Surety Co., 43 Cal.App. 315, 185 P. 399. This was an action instituted by the assured against the insurer on a liability policy, limited to the sum of $5,000. Judgment was for the assured for the sum of $5,460, with interest and costs. The policy did not provide for interest, and the court held it could not extend the liability beyond the limited liability of the contract.

The appeal from the order sustaining defendant's demurrer without leave to amend is dismissed. The judgment is reversed.

GRIFFIN, Justice pro tem.

We concur: MARKS, Acting P. J.; JENNINGS, J.