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TRANSAMERICA INSURANCE COMPANY, Plaintiff and Appellant, v. TAB TRANSPORTATION, INC., Defendant and Appellant.
I.
FACTUAL AND PROCEDURAL BACKGROUND
Appellant Transamerica Insurance Company (Transamerica) brought the underlying action against Tab Transportation, Inc. (Tab), for declaratory relief. Tab had purchased a liability insurance policy from Transamerica for the policy period February 1, 1980, through February 1, 1981. The policy expired at the end of the policy period, and Tab chose to obtain insurance coverage from another carrier with stated effective dates of February 1, 1981, to February 1, 1982. Transamerica sought a declaration that it had no obligation to defend or indemnify Tab for claims arising out of a collision between Tab's truck and an Amtrak train on December 19, 1989, and alternatively, that Tab must reimburse it if it was required to pay any amounts in indemnity. Tab filed a cross-complaint against Transamerica, seeking a declaration that Transamerica was obligated to defend and indemnify it in regard to the collision, and that there was no right of reimbursement. Tab also sought declarations establishing the amount of Transamerica's policy limit and that its rejection of a settlement demand within its policy limit was in bad faith.
Transamerica filed a motion for summary judgment on its complaint and Tab's cross-complaint, or, in the alternative, summary adjudication. Transamerica also sought a continuance in order to conduct further discovery. Tab moved for summary adjudication on each cause of action in its cross-complaint and in Transamerica's first amended complaint, and on most of Transamerica's affirmative defenses to the cross-complaint. The court, granting Tab's motion in part, held that Transamerica had a duty to indemnify and defend Tab in the underlying claims. The court ruled that, because Transamerica did not cancel its certificate of insurance filed with the Public Utilities Commission (PUC) regarding the policy in question, that the policy provided coverage. The court also denied Transamerica's request for a continuance. Following trial on the remaining issues, the court held that the Transamerica policy limit was $600,000, but that Transamerica had a right of reimbursement and/or indemnity against Tab.
Transamerica appeals from the judgment with respect to the issues established by the summary adjudication order in favor of Tab. Tab appeals from the judgment insofar as it held that Transamerica had a right of indemnity or reimbursement from Tab.
II.
DISCUSSION
Tab successfully argued in the trial court that Transamerica's policy provided coverage because Transamerica failed to file a notice of cancellation of the policy with the PUC, as required by Public Utilities Code section 3634. Transamerica urges that, because the policy expired at the end of its term rather than being cancelled, it was not required to file a notice of cancellation with the PUC. We find Transamerica's position meritorious.
Highway carriers such as Tab are subject to regulation pursuant to Public Utilities Code sections 3631 et seq. Section 3631 provides that, in granting permits to highway carriers, the PUC “shall ․ require the highway carrier to procure, and continue in effect during the life of the permit, adequate protection, as provided in Section 3632, against liability imposed by law upon the highway carrier for the payment of damages for personal bodily injuries ․ [and for] damage or destruction of property․” The protection required by section 3631 must be evidenced by either “the deposit with the commission, covering each vehicle used or to be used under the permit applied for, [¶] (1) Of a policy of insurance, ․ [¶] (2) Of a bond of a surety company ․ or [¶] (3) Of such evidence of qualification of the carrier as a self-insurer as may be authorized by the commission.” (Pub.Util.Code, § 3632.) A certificate of insurance issued by the insurance company issuing the policy may be filed, with the consent of the PUC, in lieu of the policy. (Pub.Util.Code, § 3633.) Transamerica filed such a certificate for the policy issued to Tab. The section at issue here, Public Utilities Code section 3634, provides in part that: “The policy of insurance or surety bond shall not be cancelable on less than 30 days' written notice to the commission, except in the event of cessation of operations as a highway carrier as approved by the commission.”
Tab contends that, because Transamerica gave no notice to the PUC, the policy continued to provide coverage.1 Tab urges that Fireman's Fund Ins. Co. v. Allstate Ins. Co. (1991) 234 Cal.App.3d 1154, 286 Cal.Rptr. 146 requires this result.2 In Fireman's Fund, the insured secured coverage from Fireman's Fund for two policy periods, from July 1, 1983, through July 1, 1985. The insured 3 cancelled the Fireman's Fund policy and replaced it with another policy, effective November 1, 1984. Fireman's Fund did not provide the PUC with written notice of cancellation. A dispute arose regarding coverage following an accident on May 29, 1985. The court found that, because Fireman's Fund had failed to notify the PUC of the policy's cancellation, the policy provided coverage. (Id., at p. 1166, 286 Cal.Rptr. 146.)
Fireman's Fund addressed a notably different situation than that presented here. First, though the accident giving rise to the coverage dispute occurred six months after the policy was terminated, it occurred within the original policy period. More importantly, the issue addressed in Fireman's Fund was whether the insurer was required to provide notice to the PUC of the policy's cancellation, not its expiration.
Section 3634 states only that a policy is not cancelable without notice to the PUC. In construing a statute, we look first to the words of the statute itself. (J.C. Penney Casualty Ins. Co. v. M.K. (1991) 52 Cal.3d 1009, 1020, 278 Cal.Rptr. 64, 804 P.2d 689.) The word “cancel” has a specific meaning in the insurance context. “ ‘․ [W]ith respect to insurance, the word ‘cancellation’ means ‘the termination either by the insured or the insurer or by both of insurance in accordance with the terms of the cancellation clause of a policy.’ [Citation.]” (Ohran v. National Automobile Ins. Co. (1947) 82 Cal.App.2d 636, 642–643, 187 P.2d 66; quoting Otterbein v. Babor & Comeau Co. (1936) 272 N.Y. 149, 5 N.E.2d 71.) “In the ordinary sense of the terms, there is a difference between cancellation of a policy and its lapse by reason of the expiration of the term for which written. Cancellation implies a termination prior to the expiration of the term for which written.” (Farmers Ins. Exchange v. Vincent (1967) 248 Cal.App.2d 534, 541, 56 Cal.Rptr. 775.)
The Legislature certainly was aware of this usage in enacting the statute. “ ‘[T]he Legislature enacted section 7 of the Highway Carriers' Act with full contemplation of the practice and use of cancellation clauses generally as between insurer and insured and that it intended therein to limit this right of cancellation according to the strict terms of the statute․’ [Citation.]” (Fireman's Fund Ins. Co., supra, 234 Cal.App.3d at pp. 1163–1164, 286 Cal.Rptr. 146.) Had the Legislature intended to require notice to the PUC in situations where the policy was terminated by means other than cancellation, it could easily have done so. (See Brown v. Kelly Broadcasting Co. (1989) 48 Cal.3d 711, 724, 257 Cal.Rptr. 708, 771 P.2d 406.)
In interpreting a similar provision requiring notice of policy cancellation, the Ninth Circuit held that there was a difference between ‘non-renewal’ and ‘expiration’ of a policy, noting that those terms are technical and have precise meanings in the insurance context. In Aetna Cas. and Sur. Co. v. Merritt (9th Cir.1992) 974 F.2d 1196, the court considered a policy endorsement which provided: “Pursuant to Section 11.54 of the Los Angeles Administrative Code, the policy to which this endorsement is attached shall not be subject to cancellation, reduction in coverage or non-renewal except after written notice to the City Attorney of the City of Los Angeles․” (Id., at p. 1198.) In that case, the policy at issue had expired, but the insureds argued that it continued in effect because the insurer had failed to give notice to the city of the policy's “non-renewal.” The court noted that “ ‘non-renewal’ is a technical term, meaning a notice by the insurer that it is unwilling to renew the policy․ The 1984 policy's termination was not a non-renewal, but an expiration. Absence of a notice from [the insurer] to this effect did not extend it indefinitely and without payment of premiums.” (Id., at p. 1199.)
Likewise here, section 3634 does not require notice when a policy expires at the end of its term. The statute provides only that notice must be provided if the policy is cancelled. The policy at issue here expired at the end of the policy period, approximately eight years prior to the accident giving rise to the coverage dispute. In these circumstances, the insurer is not required by section 3634 to give notice to the PUC.4
III.
DISPOSITION
The judgment is reversed. The trial court is directed to enter judgment on the complaint and cross-complaint in favor of Transamerica and against Tab consistent with the views expressed herein. Transamerica is awarded costs on appeal.
FOOTNOTES
1. Tab also urges that Transamerica is estopped from arguing that it was not required to give notice to the PUC because Transamerica's certificate of insurance filed with the PUC stated that the policy was effective “2–1–80 Until Canceled.” A certificate of insurance, however, is not a contract of insurance. (See Cal. Insurance Law & Practice (Matthew Bender 1994) Liability Insurance in General, § 41.12[2], p. 41–31.)
2. The trial court stated that it granted summary adjudication to Tab on this issue in reliance on Fireman's Fund Ins. Co.
3. The Fireman's Fund policy was issued to “Independent Contractors of Better Home Deliveries, Inc.” Richardson Trucking, one of Better Home Deliveries' independent contractors, was covered under this policy. The policy was terminated by the risk manager for Leaseway Transportation Corporation, Better Home Deliveries' parent company. (Fireman's Fund Ins. Co., supra, 234 Cal.App.3d at pp. 1158–1159, 286 Cal.Rptr. 146.)
4. Given our holding that the Transamerica policy did not provide coverage because it was not in effect at the time of the accident, the remaining issues raised in the appeal and cross-appeal are rendered moot.
MERRILL, Associate Justice.
WHITE, P.J., and CHIN, J., concur.
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Docket No: No. A062176.
Decided: September 07, 1994
Court: Court of Appeal, First District, Division 3, California.
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