STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. WESTON (1975)

On July 2, 1972, Weston was injured in an automobile collision while riding as a passenger in an automobile owned by him and driven, with his permission, by Strauch. Weston was insured by State Farm under a policy of automobile liability insurance, the pertinent terms of which are hereinafter discussed. By a complaint and cross-complaint, the parties litigated the issue of whether, under that policy, State Farm is obligated to provide a defense to Strauch in an action against him brought by Weston and to pay to Weston any judgment that Weston may recover against Strauch in that action. The trial court decided that issue in favor of State Farm and against Weston and Strauch. Weston and Strauch have appealed; we reverse.

The policy herein involved contained the following definition: ‘the unqualified word ‘insured’ includes:'

‘(1) the named insured, and

‘(2) if the named insured is a person or persons, also includes his or their spouse(s), if a resident of the same household, and

‘(3) if residents of the same household, the relatives of the first person named in the declarations, or of his spouse, and

‘(4) any other person while using the owned motor vehicle, PROVIDED THE OPERATION AND THE ACTUAL USE OF SUCH VEHICLE ARE WITH THE PERMISSION OF THE NAMED INSURED OR SUCH SPOUSE AND ARE WITHIN THE SCOPE OF SUCH PERMISSION, and

‘(5) under coverages A and B any other person or organization, but only with respect to his or its liability for the use of such owned motor vehicle by an insured as defined in the four subsections above.’

The Exclusion section of the policy contained the following provision:

‘THIS INSURANCE DOES NOT APPLY UNDER:

‘* * *

‘(h) COVERAGE A. TO BODOLY INJURY TO ANY INSURED OR TO ANY MEMBER OF THE FAMILY OF AN INSURED RESIDING IN THE SAME HOUSEHOLD AS THE INSURED.’ (Capitalization and emphasis in original.)

We agree with State Farm that the validity of that exclusion clause is governed by the terms of section 11580.1 of the Insurance Code as that section read on the date of the accident, and that, by the express terms of section 11580.5 neither the requirements set forth in Article 2 (commencing with section 16450) of Chapter 3 of Division 7 of the Vehicle Code, nor the requirements set forth in Article 4 (commencing with section 11620) of Chapter 1 of Part 3 of Division 2 of the Insurance Code, are applicable to the policy herein involved.

We also agree with State Farm that decisions construing statutes in force prior to the adoption of section 11580.1 in 1970, nor policies issued under those statutes, are not directly applicable to the issue now before us. However, we do not agree that the language and reasoning of those decisions is not helpful in determining the present issue.

Section 11580.1 of the Insurance Code, as it read on July 2, 1972 (the date of the accident), provided as follows:

‘(a) No policy of automobile liability insurance described in Section 16057 of the Vehicle Code covering liability arising out of the ownership, maintenance, or use of any motor vehicle shall be issued or delivered in this state on or after the effective date of this section unless it contains the provision set forth in subdivision (b). . . .

‘(b) Every policy of automobile liability insurance to which subdivision (a) applies shall contain all of the following provisions:

‘* * *

‘(3) Designation by explicit description of the purposes for which coverage for such motor vehicles is specifically excluded.

‘(4) Provision affording insurance to the named insured with respect to any motor vehicle covered by such policy, and to the same extent that insurance is afforded to the named insured, to any other person using, or legally responsible for the use of, such motor vehicle, provided such use is by the named insured or with his permission, express or implied, and within the scope of such permission . . ..

‘(c) In addition to any exclusion as provided in paragraph (3) of subdivision (b), the insurance afforded by any such policy of automobile liability insurance to which subdivision (a) applies may, by appropriate policy provision, be made inapplicable to any or all of the following:

‘(1) Liability assumed by the insured under contract.

‘(2) Liability for bodily injury or property damage caused intentionally by or at the direction of the insured.

‘(3) Liability imposed upon or assumed by the insured under any workmen's compensation law.

‘(4) Liability for bodily injury to any employee of the insured arising out of and in the course of his employment.

‘(5) Liability for bodily injury to an insured.

‘(6) Liability for damage to property owned, rented to, transported by, or in charge of, an insured.

‘(7) Liability for any bodily injury or property damage with respect to which insurance is or can be afforded under a nuclear energy liability policy.

‘(8) Any motor vehicle or class of motor vehicles, as described or designated in the policy, with respect to which coverage is explicitly excluded, in whole or in part.

‘The term ‘the insured’ as used in paragraphs (1), (2), (3), and (4) of this subdivision shall mean only that insured under the policy against whom the particular claim is made or suit brought. The term ‘an insured’ as used in paragraphs (5) and (6) of this subdivision shall mean any insured under the policy.'

As we understand them, Weston and Strauch contend that both the statute and the policy are ambiguous, in that the term ‘insured,’ as therein used, may mean either the ‘named insured’ (into which term Weston fell) or any of the other persons included within the definition of ‘insured’ as quoted.

Insofar as the statute is concerned we reject that contention. The definition of the term ‘insured,’ in section 11580.1 above quoted, seems to us, particularly in light of the distinction made in that section, adequately clear and to permit an insurer to exclude coverage for injuries to a named insured, under paragraph (c)(5). However, the exclusions from coverage permitted by section 11580.1 are permissive, only, and it does not necessarily follow that a particular policy contain exclusions as broad in their scope as the statute permits.

We disagree with Weston and Strauch in their contention that the exclusion permitted by section 11580.1 necessarily conflicts with the mandatory provision of paragraph (4) of subdivision (b) of that same section. The two provisions are readily construed as being in harmony. Paragraph (4) requires the insurer to provide coverage to all of the persons therein referred to, but only to the extent that the insurer is permitted by subdivison (c) to limit its coverage.

But, as pointed out in a case construing comparable language in section 16451 of the Vehicle Code and comparable language in an insurance policy, the term ‘insured’ in the policy is ambiguous in the manner herein contended for by Weston and Strauch. (State Farm Mut. Auto. Ins. Co. v. Jacober, 10 Cal.3d 193, 201, 110 Cal.Rptr. 1, 514 P.2d 953.) The policy herein involved does not contain the statutory definition of ‘insured’ appearing in section 11580.1. Lacking that definition in the policy (the only provision in the statute that makes it clear that the statute permits an insurer to exclude coverage to an unnamed insured for injuries suffered by a named insured who is a passenger), the use, alone, of the word ‘insured’ in the exclusion section of the policy before us is as ambiguous as was the same term involved in Jacober. Following the policy of interpretation of insurance policies used in that case (and in many other cases), the ambiguity must be construed against the insurer. Strauch is entitled, as an ‘insured,’ to have State Farm defend him in Weston's suit for Weston's injuries and to have State Farm pay (up to the policy limits) any judgment that Weston may recover in Weston's suit against Strauch.

The judgment appealed from is reversed, with directions to enter judgment against State Farm on its complaint and in favor of Weston on his cross-complaint.

KINGSLEY, Acting Presiding Justice.

DUNN and JEFFERSON, JJ., concur.