VOYAGER INDEMNITY INSURANCE COMPANY v. MENDOZA (2023)

Proceedings: (IN CHAMBERS) Order Re: Court Trial on the Briefs

I. INTRODUCTION

This is a case regarding the proper interpretation of an insurance policy. Voyager Indemnity Insurance Company (“Plaintiff”) issued a Fleet Auto Rental Insurance Policy (the “Policy”) to Ryde, Inc., a company that provides a peer-to-peer car sharing marketplace platform allowing private automobile owners to rent out their luxury or classic vehicles. In January 2019, through Ryde's platform, Irshaad Tarr (“Tarr”) rented his 2017 Porsche 718 to Rhonda Rothstein (“Rothstein”). Rothstein got into an accident seriously injuring Alfredo Mendoza (“Mendoza”). Mendoza presented a claim to Plaintiff for his injuries but they disputed the Policy's liability limits. Plaintiff insisted the limit was $250,000, whereas Mendoza insisted the limit was $750,000. After failing to reach a resolution, Mendoza filed suit against Tarr and Rothstein in state court. Meanwhile, Plaintiff filed the instant action against Mendoza and Rothstein seeking declaratory judgment that the Policy limit is $250,000. Rothstein never appeared in this action, thus the clerk entered default against her on March 8, 2023.

Presently before the Court is Plaintiff and Mendoza's Court Trial on the Briefs. After considering the briefs and the relevant evidence, the Court ENTERS JUDGMENT in favor of Plaintiff.

II. FINDINGS OF FACT

In 2018, Plaintiff issued the Policy to Ryde. (Rios Decl. ¶ 6, ECF No. 31-1.) The Policy provided liability coverage of up to $1,000,000 to Ryde and the owners of vehicles rented through Ryde's platform. (Rios Decl., Ex. 1 at 4, ECF No. 31-2.) The Policy also contained a Peer to Peer Auto Sharing Endorsement (the “Endorsement”), which set forth a sub-limit for renters like Rothstein, based on the personal coverage maintained by owners like Tarr. (Id. at 15.) The Endorsement states:

The Liability sub-limit of insurance for a renter operating an auto used for peer to peer auto sharing will be the dollar amount equal to three times the state's required minimum limits for private passenger autos or the limit of Liability insurance maintained by the registered owner of the auto used for peer to peer auto sharing, whichever is greater. This limit will reduce the Liability limit of insurance for all other insureds.

(Id. (emphasis in original).)

Plaintiff drafted this provision of the Endorsement with the intent to conform with the minimum insurance coverage limits set forth by California Insurance Code section 11580.24(c)(1). (Rios Decl. ¶ 8.) Section 11580.24(c)(1) states:

A personal vehicle sharing program shall ․ provide insurance coverages for the vehicle and operator of the vehicle that are equal to or greater than the insurance coverages maintained by the vehicle owner and reported to the personal vehicle sharing program. However, the personal vehicle sharing program shall not provide liability coverage less than three times the minimum insurance requirements for private passenger vehicles.

Cal. Ins. Code § 11580.24(c)(1). And under California Vehicle Code section 16056(a), a private passenger vehicle must maintain a minimum $15,000 of insurance for bodily injury of one person.

At the time of the accident, Tarr held a personal, individual policy from State Farm that provided bodily injury liability coverage of up to $250.000 on a per person basis. (Rios Decl., Ex. 5, ECF No. 31-7.)

III. CONCLUSIONS OF LAW

Plaintiff and Mendoza dispute the proper interpretation of the liability limit set forth in the Endorsement. Specifically, they dispute the proper application of the “three times” multiplier. Plaintiff argues that the multiplier applies only to the state's required minimum limits. In other words, it argues that the liability limit is the greater of (1) three times the state's required minimum limits, or (2) the limit of liability insurance maintained by the owner. Given that the state's required minimum limit is $15,000, and Tarr, the registered owner, maintains insurance with a $250,000 limit, the limit would therefore be the greater of $45,000 or $250,000. And because $250,000 is greater than $45,000, the limit would be $250,000.

In contrast, Mendoza argues that the multiplier applies to both the state's required minimum limits and the limit of liability insurance maintained by the owner. In other words, he argues that the liability limit is the greater of (1) three times the state's required minimum limits, or (2) three times the limit of liability insurance maintained by the owner. Plugging in the numbers above, the limit would then be the greater of $45,000 or $750,000. And because $750,000 is greater than $45,000, the limit would be $750,000 ¹

In support of their respective interpretations, Plaintiff and Mendoza submit various arguments. On balance, the Court finds for Plaintiff. Plaintiff's interpretation is most sound because the contracting parties (Plaintiff and Ryde)² intended to comply with the minimum coverage requirements set forth by statute, and under that statute, the three times multiplier applies only to the state's required minimum limits. The Court first analyzes the contracting parties’ intent.

A. The Contracting Parties’ Intent

Insurance policies are interpreted according to the ordinary rules of contract interpretation. Bank of the W. v. Super. Ct., 2 Cal. 4th 1254, 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545 (1992). “[T]he mutual intention of the parties at the time the contract is formed governs interpretation. Such intent is to be inferred, if possible, solely from the written provisions of the contract.” AIU Ins. Co. v. Super. Ct., 51 Cal. 3d 807, 821–22, 274 Cal.Rptr. 820, 799 P.2d 1253 (1990) (citing Cal. Civ. Code §§ 1636, 1639). “If contractual language is clear and explicit, it governs.” Bank of the W., 2 Cal. 4th at 1264, 10 Cal.Rptr.2d 538, 833 P.2d 545. Statutory and regulatory definitions may inform the meaning of contractual language. Baldwin Acad., Inc. v. Markel Ins. Co., 2021 WL 5989969, at *5 (S.D. Cal. Dec. 17, 2021); see Lick Mill Creek Apts. v. Chi. Title Ins. Co., 231 Cal. App. 3d 1654, 1659, 283 Cal.Rptr. 231 (1991) (referring to statute to define terms of insurance policy); AIU, 51 Cal. 3d at 825–26, 274 Cal.Rptr. 820, 799 P.2d 1253 (same). But if the contract language is ambiguous, it must be interpreted how “the promisor believed the promisee understood [it] at the time of formation.” AIU, 51 Cal. 3d at 822, 274 Cal.Rptr. 820, 799 P.2d 1253. “If application of this rule does not eliminate the ambiguity, ambiguous language is construed against the party who caused the uncertainty to exist.” Id. Because insurers typically draft their contracts with little input from or negotiation with the insured, courts “generally resolve ambiguities in favor of coverage.” Id.

Here, the Court finds that the contracting parties intended for the Endorsement to be consistent with applicable California statute. As noted above, California Insurance Code section 11580.24(c)(1) imposes insurance requirements on vehicle sharing programs like Ryde. Plaintiff has stated that as an insurer, it drafted the Endorsement with the intent to comply with the minimum insurance coverage limits set forth by section 11580.24(c)(1). Mendoza does not dispute this. And while neither Plaintiff nor Mendoza submit any evidence regarding Ryde's intent, Ryde presumably intended to comply with the minimum set forth by statute as well. After all, section 11580.24(c)(1) imposes insurance requirements on vehicle sharing programs themselves, not on the insurers that issue the policies. Nothing on the face of the Endorsement, Policy, or any part of the record suggests that Ryde or Plaintiff intended otherwise. The statute thereby informs the proper interpretation of the Endorsement. See id. at 825–26, 274 Cal.Rptr. 820, 799 P.2d 1253. Thus, the Court proceeds to analyze the statute.

B. Section 1158.24(c)(1)

Section 1158.24(c)(1) requires vehicle sharing programs to provide insurance coverage “equal to or greater than the insurance coverages maintained by the vehicle owner ․ However, ․ the personal vehicle sharing program shall not provide liability coverage less than three times the minimum insurance requirements for private passenger vehicles.” The language of this section is unambiguous. The three times multiplier applies only to the state's required minimum limits. It could not apply to the owner's liability insurance, as the multiplier is contained within a separate sentence and makes no reference to the previous sentence. Mendoza does not dispute this plain reading.

Because the contracting parties’ intended for the Endorsement to comply with the minimum coverage required by statute, the contracting parties therefore intended for the three times multiplier in the Endorsement to function the same way as in the statute. Thus, the contracting parties intended for the three times multiplier to apply only to the state's required minimum limits. Accordingly, the Endorsement's liability limit is the greater of (1) three times the state's required minimum limits, or (2) the limit of liability insurance maintained by the owner. Given the state's $15,000 minimum limit and Tarr's $250,000 limit, the Endorsement's liability limit would therefore be the greater of $45,000 or $250,000. And because $250,000 is greater than $45,000, the liability limit would be $250,000, as Plaintiff argues. Thus, the Court ENTERS JUDGMENT in favor of Plaintiff.

IV. CONCLUSION

For the foregoing reasons, the Court finds that the liability limit is $250,000 and thereby ENTERS JUDGMENT in favor of Plaintiff. As noted above, Rothstein, while a party to this action, was not a party to the Court Trial due to her default. Now that the Court Trial has concluded, Plaintiff shall have twenty-one (21) days from the issuance of this Order to file a motion for default judgment against Rothstein. Failure to do so shall result in Rothstein's dismissal and the Court's entry of final judgment as to Mendoza only.

IT IS SO ORDERED.

FOOTNOTES

1.   Mendoza also argues that because the limit was $750,000, the Court should find that Plaintiff failed to engage in good-faith settlement negotiations, subjecting Plaintiff to even greater liability. The Court need not address this argument, however, because Mendoza failed to properly request declaratory relief in a pleading. Arizona v. City of Tucson, 761 F.3d 1005, 1010 (9th Cir. 2014) (“Requests for declaratory judgment are not properly before the court if raised only in passing, or by motion.”).

2.   The contracting parties should not be confused with the parties to this action. The Policy was issued by Plaintiff to Ryde. Mendoza, whose injuries may be covered by the Policy, was not involved in negotiating the Policy. Thus, contrary to Mendoza's arguments, Mendoza's expectations or understanding of the Policy are immaterial.

R. GARY KLAUSNER, UNITED STATES DISTRICT JUDGE