INDUSTRIAL INDEMNITY CO v. INDUSTRIAL ACC COMMISSION (1948)

District Court of Appeal, Second District, Division 2, California.

INDUSTRIAL INDEMNITY CO. v. INDUSTRIAL ACC. COMMISSION et al.

Civ. 16508.

Decided: October 21, 1948

Herlihy & Herlihy, by E. H. Herlihy, all of Los Angeles, for petitioner. T. Groezinger and John A. Rowe, Jr., both of San Francisco, for Industrial Acc. Commission.

This petition is for an order directing the annulment of an award of the Industrial Accident Commission granting certain death benefits to the surviving widow and minor children of Vernon G. Spidle, who died as a result of injuries arising out of and occurring during the course of his employment on December 10, 1946.

The record discloses these facts:

On December 10, 1946, Vernon Spidle was employed as an oiler and truck driver by R. C. Cornish. Mr. Spidle was the son-in-law of Mr. Cornish, and on the date mentioned Mr. Spidle sustained injuries arising out of and occurring in the course of his employment which resulted in his death the same day. Previously to the time of the accident petitioner had issued a policy of insurance covering the employees of Mr. Cornish, which contained this provision:

‘It is agreed that, anything in this policy to the contrary notwithstanding, this policy does not insure: As respects injuries (or death resulting therefrom) sustained by any of the following relatives of the employer and/or his or her spouse, i.e. * * * son-in-law * * *, unless such relative is specifically named in item (III) of the Declarations or specifically insured by Endorsement attached to this policy.’

It is conceded that Mr. Spidle was not specifically named in item (III) of the declarations or specifically insured by endorsement attached to the policy.

The Industrial Accident Commission made a finding endeavoring to reform the policy which read as follows: ‘By changing the effective date of the Extended coverage Endorsement of said policy from January 17, 1947 to August 1, 1946, and by adding to said Extended Coverage Endorsement the name of Vernon G. Spidle.’

Questions Presented for Determination.

First: Was there any evidence to sustain the Industrial Accident Commission's finding providing for a reformation of the insurance policy issued by petitioner?

This question must be answered in the negative. A contract may be reformed only when there is evidence that through (a) fraud, (b) mutual mistake of the parties, or (c) a mistake of one party which the other at the time knew or suspected, a written contract does not truly express the intention of the parties. Sec. 3399, Civil Code; National Auto. Ins. Co. v. Indus. Acc. Comm., 27 Cal.App.2d 225, 227, 80 P.2d 1024.

In the instant case the record is devoid of any evidence of (a) fraud, (b) mutual mistake of the parties, or (c) a mistake of one party which the other at the time knew or suspected. Hence, under the rule above stated there is no evidence to support the findings necessary to authorize the Industrial Accident Commission to reform the contract of insurance which petitioner had issued.

It is immaterial that the insured intended to have the decedent covered by the policy of insurance in the absence of any evidence of petitioner's intention to insure the decedent. There being an absence of any intention of the parties. The Industrial Accident Commission thus clearly exceeded its powers in attempting to reform mation of the contract to express the true intention of the parties. The industrial accident commission thus clearly had exceeded its powers in attempting to reform the policy of insurance to extend coverage to decedent as of August 1, 1946.

Second: Did the fact that petitioner received a premium computed on the basis of the employer's pay roll statement, which included the decedent employee, establish liability upon the part of petitioner?

This question must likewise be answered in the negative for the reason that as a matter of fact petitioner was not paid the premium to which it would have been entitled if the decedent had been covered by the insurance policy. Under the terms of the policy and under the rules of the California Inspection Rating Bureau, a son-in-law of an employer who is living with the employer and who is covered by a workmen's compensation insurance policy is presumed to have received a minimum consideration of $1500.00 per year or $30.00 per week for premium purposes. The premium rate is based on the greatest hazard to which the employee is at any time exposed in his employment, payable on the basis of all his remuneration (considered not less than $30.00 per week), even though he may not be exposed to the hazard in all of his employment.

The wages reported by the employer for his son-in-law in the present case were less than the minimum amount specified, and the premium payed was less than would be required if computed in accordance with the terms of the policy for a son-in-law of the insured. Therefore respondents are in error when they contend that petitioner received the same premium that it would have received had decedent in fact been covered by the policy of insurance.

Third: Was knowledge of the insurance broker that insured intended to cover all his employees, including his son-in-law, imputable to petitioner?

This question must be answered in the negative. The record discloses that Mr. Haugen, the broker who handled insured's insurance, was not an agent of petitioner either general or special, but was an independent insurance broker and as such the agent of the insured. (Solomon v. Federal Ins. Co., 176 Cal. 133, 138, 167 P. 859; New Amsterdam Cas. Co. v. Indus. Acc. Comm., 137 Cal.App. 719, 722, 31 P.2d 245.)

In view of the facts of the present case, and of the foregoing rule, knowledge communicated by the insured to Mr. Haugen was not imputable to petitioner and was therefore not binding upon petitioner.

Since the record fails to disclose any evidence to sustain the findings upon which the Industrial Accident Commission ordered a reformation of the contract, and the additional fact that the policy issued by petitioner did not cover the decedent, the commission exceeded its authority in making the order reforming the contract and predicating thereon an award to decedent's dependents.

The award is annulled.

McCOMB, Justice.

MOORE, P. J., and WILSON, J., concur.