Pacific Indemnity Co. v. Liberty Mutual Insurance

question and all defendants to the Richardson action as named or additional insureds.^[1]

Pacific Indemnity caused Messrs. Ball, Hunt and Hart to appear for all three defendants. About 10 months later it notified Liberty Mutual of its contention that the Pacific Indemnity policy was excess over a Liberty Mutual policy issued to Carr and demanded that Liberty Mutual assume the defense of the action. This being refused, Pacific Indemnity continued to defend the action and the Richardson case went to trial on March 21, 1961. At the trial Richardson dismissed against Carr and Halloran and a stipulated judgment against Refiners in the sum of $35,000 was entered and satisfied by Pacific Indemnity. Before the settlement, demand was made on Liberty Mutual that it agree to pay the $35,000 settlement offer which Richardson had then made, but the demand was refused.

The finding of the trial court that the sum of $35,000 was a fair and reasonable figure in compromise and settlement of the suit is not attacked on appeal.

The present action was filed shortly after the payment to Richardson. Standing to pursue Refiners' right under the Liberty Mutual policy is claimed by reason of paragraph 15 of the Pacific Indemnity policy which provides in effect that if the insurer makes any payment under the policy, it is subrogated to all of Refiners’ rights of recovery against any other person or organization.

The piece de resistance of the litigation is the Liberty Mutual policy. The basic issue with respect to that policy is the question whether or not the forklift involved in the accident was a vehicle insured thereby.

The Liberty Mutual policy consists of two parts. The first part, called “Automobile Policy” is an automobile policy in the usual form providing insurance to Carr, the named insured, to any driver driving an automobile with Carr’s permission (Halloran) and to any organization legally responsible for the use thereof (Refiners). The standard insuring clause obligates Liberty Mutual to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sus

tained by any person, caused by accident and arising out of the ownership, maintenance or use of any automobile.

Assuming that the forklift in question was an automobile, it is obvious that the accident and the defendants in the Richardson litigation are covered by the policy unless Liberty Mutual can pull quite a rabbit out of the hat.

This is supposed to be it: the first part of the policy, which we have partially described, provides that certain declarations are made a part thereof. These declarations are a document of some 30 pages. Item 3, appearing on the front page, reads in part as follows: “The insurance afforded is only with respect to such and so many of the following coverages and hazards thereunder as are indicated by specific premium charge or charges.” The same page also shows that an “advance premium” was charged for all the coverages listed.^[2] Made a part of the declarations is a schedule listing 41 vehicles. The first 36 among those are all trucks, tractors, trailers and forklifts, the one in question being number 36. Vehicles 37 through 41 are automobiles whose purpose of use is described as “pleasure and business.” This schedule further shows premium charges in varying amounts for coverage B (collision) for some of the vehicles, but not all. No such charge is shown for the forklift in question, but that fact is not relevant to any issue on the appeal. A summary sheet has the somewhat cryptic notation that premiums for coverages A and B are “included in gross receipts.” A schedule which is part of the declarations indicates that the premium rates for bodily injury and property damage liability are $1.66 and .71 per $100 of gross receipts respectively. The declarations further contain a definition of the word “premium,” the pertinent portion of which we quote in the footnote.^[3] It is thus apparent that Liberty Mutual adopted

Defendant’s entire argument is based on a fallacy. As already noted, item 3 of the declarations reads as follows: “The insurance afforded is only with respect to such and so many of the following coverages and hazards thereunder as are indicated by specific premium charge or charges.” (Our italics.) There is, of course, a specific premium charge indicated for coverages A and B, namely $1.66 and .71 per $100 of gross receipts. Liberty Mutual not only reads the policy as if the word “automobiles” were used instead of “coverages and hazards”—it also argues that failure to include the revenue realized by Carr from a particular vehicle in the premium base, means that it is not covered because there was no “specific premium charge” for that vehicle. The fact is that there was no “specific” premium charged for any vehicle, since the premiums for coverages A and B were two lump sums.

The most that can possibly be said for Liberty Mutual’s position is that their auditor, when calculating the premium after the end of the policy year, erroneously allowed Carr a credit of $59 for the rental receipts from renting pallets and forklifts, possibly from the forklift in question. This, of course, cannot affect the insurance which was in force at the time of the subject accident. As we read the definition of gross receipts which includes “the total amount received from the rental of equipment, with or without drivers,” rentals for forklifts were clearly part of gross receipts.

Liberty Mutual introduced a great deal of evidence from three of its employees, the net effect of which was that under their interpretation of this insurance contract they did not think that the forklift in question was covered by the policy under consideration. We do not doubt their sincerity which was considerably buttressed by the existence of another policy issued to Carr which apparently covered the forklift without doubt, but on which Pacific Indemnity did not rely for reasons not apparent in the record.^[4] We do not have that particular policy before us because it was withdrawn by stipulation and order of court, but we do not see how it could affect what we believe to be the only possible interpretation of the policy sued upon.

Liberty Mutual’s second point is, if we understand it correctly, that since Pacific Indemnity appeared before the court as the subrogee of Refiners, its rights are subject to equitable principles (Meyers v. Bank of America etc. Assn., 11 Cal.2d 92 [ 77 P.2d 1084 ]); that the equities are all in Liberty Mutual’s favor and that therefore it is entitled either to a complete denial of subrogation or proration of coverage or at least an offset in the amount of Carr’s right of indemnity under section 17153 of the Vehicle Code.^[5] In particular it is argued that the leading case of American Auto. Ins. Co. v. Republic Indem. Co., 52 Cal.2d 507 [ 341 P.2d 675 ], which establishes that as between Pacific Indemnity’s and Liberty Mutual’s coverage the former is excess and the latter primary does not apply. Liberty Mutual’s appeal to the equities of the situation is heavily laced with reference to the fact that Pacific Indemnity had as its named insured the employer of the actual wrongdoer and there are passing references to the fact that Pacific Indemnity has collected a premium for the issuance of its policy—apparently something sinister. All this is completely beside the point. The purpose of indemnity insurance is to provide protection for “wrongdoers” and we can see no difference between the equities of an insurer whose named insured is the employer of the actual wrongdoer and another insurer whose named insured is the owner of the vehicle which the wrongdoer operates. As far as the premium is concerned, Liberty Mutual received $2,988.93 for coverage A and $1,278.40 for coverage B. We presume that insurance rates are determined, among other things, in the light of the applicable law concerning coverage. While it is true that American Auto. Ins. Co. v. Republic Indem. Co., supra, was not decided until July 8, 1959, the Supreme Court in that case gave no consideration to the fact that Republic, the loser, may not have correctly foreseen the law declared therein. In the insurance business decisions enlarging the exposure from what was anticipated are, we believe, known as the “judicial risk” and allowed for.

We cannot distinguish the last cited case from the one before us and declare on the basis of supposed equities that the two policies herein involved should prorate.^[6] As was said

At the trial there was an issue between the parties on whether or not the forklift was an automobile. This contention has been abandoned impliedly by Liberty Mutual by not raising it in its opening brief and expressly in its closing brief.^[7] We therefore need not decide that point, argued at some length and quite persuasively by Pacific Indemnity. Suffice it to say that the schedule attached to the declarations of the Liberty Mutual policy lists the forklift as an “Owned Automobile” and that it was repeatedly conceded at the trial that its policy provides protection to the forklift under certain of the “physical damage” coverages, all of which, as defined in the basic policy, refer to automobiles.

Much argument is devoted by Liberty Mutual to the proposition that Interinsurance Exchange v. Ohio Cas. Ins. Co., 58 Cal.2d 142 [ 23 Cal.Rptr. 592 , 373 P.2d 640 ] and Wildman v. Government Employees’ Ins. Co., 48 Cal.2d 31 [ 307 P.2d 359 ] do not, as a matter of public policy, compel it to insure all of Carr’s automobiles. We agree with that position the trouble with which is not that it is incorrect, but that it is inapplicable. Liberty Mutual insured Carr for liability arising out of the ownership, maintenance or use of any automobile. One of the agreements in the policy is that the insurance afforded by it for bodily injury and property damage liability applies with respect to all owned automobiles. While the word “automobile” is not defined as such, the trial court’s finding that the forklift was an automobile is not attacked on appeal. The distinction between the Wüdman and Interinsurance Exchange cases and the present one is therefore that the present case does not involve an effort by an insurer who insures a certain vehicle to limit the statutory omnibus clause, but rather an attempt, made in all good faith, to prove that a particular vehicle is not insured at all.

The judgment is affirmed.

Shinn, P. J., and Ford, J., concurred.