Republic Indemnity Co. v. Employers Liability Assurance Corp.

This action for declaratory relief was instituted to determine the primary liability as between the

The case was submitted to the trial court on an agreed statement of facts which may be summarized as follows: Torrente ’s automobile was being repaired in Lech’s automobile repair shop. Lech loaned Torrente his own automobile to use during the time the repairs were being made, and on May 12, 1963, Torrente was involved in a collision causing damage to Thomas Manjoras. The litigation commenced by Manjoras against both Torrente and Lech was settled for $5.500. This sum was paid by Republic which had issued the garage owner’s liability policy to Lech.

Republic claimed that its policy of garage owner’s liability insurance specifically excluded coverage when Lech’s automobile was on loan to a customer of the garage. The trial court agreed with Republic’s contention and Employers appeals.

The garage policy issued by Republic to Lech contained the following endorsement: “It is agreed that such insurance as is afforded by this policy does not apply to any automobile used by the insured for the purpose of loaning to customers.” (Italics added.)

Employers contends that this endorsement to the policy of garage insurance is not effective because it is opposed to public policy. Appellant argues that Wildman v. Government Emp. Ins. Co., 48 Cal.2d 31 [ 307 P.2d 359 ] and subsequent cases supports its view. In Wildman the court held: “We are of the opinion that for an insurer to issue a policy of insurance which does not cover an accident which occurs when a person, other than the insured, is driving with the permission and consent of the insured is a violation of the public policy of this state as set forth in sections 402 [now §§ 17150-17157] and 415 [now § 16451] of the Vehicle Code.” (Italics added.) (P.39.)

The rule stated in Wildman has been consistently affirmed. In Bohrn v. State Farm etc. Ins. Co., 226 Cal.App.2d 497 , 503 [ 38 Cal.Rptr. 77 ], the court summarized the eases subsequent to Wildman as follows: “The holding in Wildman was, of course, binding upon subsequent decisions in trial and appellate courts (Estate of Maguire, 14 Cal.App.2d 388 , 390 [ 50 P.2d 209 ]; Auto Equity Sales, Inc. v. Superior Court, 57

The court in Bohrn specifically refers to a number of eases decided subsequent to Wildman in which certain types of attempted exclusions had been nullified.

In Exchange Cas. & Surety Co. v. Scott, 56 Cal.2d 613 [ 15 Cal.Rptr. 897 , 364 P.2d 833 ], it was contended that Scott, an employee of Quick Way Car Wash, who was driving the automobile, was not included in the coverage because the policy did not insure Sebastian, the owner, for accidents arising out of the operation of an automobile in a repair shop, service station, storage garage, and like areas, by the employees of such enterprise. The court held that the term 11 permission ’ ’ was deemed to include express or implied permission. The court further stated that the application of the attempted exclusion would be contrary to public policy of this state as expressed in the then section 415 of the Vehicle Code and as interpreted in Wildman v. Government Emp. Ins. Co., supra, 48 Cal.2d 31 . In American Auto. Ins. Co. v. Republic Indem. Co., 52 Cal.2d 507 [ 341 P.2d 675 ], the policy provided by a special endorsement on insurance issued to an automobile dealer and garage owner that “ ‘It is agreed that, with respect to any automobile used with the permission of the named insured by a customer of the named insured, such insurance as is provided by the policy applies only to the named insured.’ ” (P. 509; Italics added.) The court quoted Wildman, supra, and held that the attempted exclusion was contrary to public policy. In Bonfils v. Pacific Auto. Ins. Co., 165 Cal.App.2d 152 [ 331 P.2d 766 ], the policy excluded other than the named insured. The court held that the exclusion was contrary to public policy. In Cassin v. Financial Indem. Co., 160 Cal.App.2d 631 [ 325 P.2d 228 ], the policy excluded coverage to drivers over 60 years of age. The court also following

Republic contends that the Wildman decision had “the effect of invalidating coverage restrictions which were designed to exclude certain persons or certain automobile uses for whom or for which a named insured was legally responsible” but that here “the Republic endorsement” clearly makes no effort to limit the coverage so as to exclude persons or automobile uses; that the endorsement relates to an automobile, i.e., a loan auto that is totally excluded from the coverage of the policy and cites Continental Cas. Co. v. Hartford Acc. & Indem. Co., 213 Cal.App.2d 78 [ 28 Cal.Rptr. 606 ], and Fullerton v. Houston Fire & Cas. Ins. Co., 234 Cal.App.2d 743 , 750 [ 44 Cal.Rptr. 711 ]. Neither case cited by respondent is controlling. In Continental, supra, the court construed the meaning of the terms “lend automobile” in an exclusion clause of a liability policy in a different factual situation than now before us. In Fullerton, supra, the policy specifically covered two ambulances and a Ford truck (p. 748) owned by one Disney and used in his ambulance business. The policy limited the area of operation of the two ambulances and the Ford to a 50-mile radius. Disney was involved in an accident while driving his personally owned Pontiac automobile on a pleasure trip. His Pontiac was not listed as one of the insured vehicles. The court held that the policy covering the two ambulances and truck did not include or cover Disney while driving his personal car on a pleasure ride. The court said: ‘ ‘ The basic question really reduces to

The policy before us provides: “Coverage A—Bodily Injury Liability; Coverage B—Property Damage Liability: The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of A. bodily injury or B. property damage to which Part I applies, caused by accident and arising out of the garage operations hazard, including only the automobile hazard for which insurance is afforded as indicated in the declarations; and the company shall have the right and duty to defend any suit against the insured seeking damages payable under the terms of this policy, even if any of the allegations of the suit are groundless, false or fraudulent; but the company may make such investigation and settlement of any claim or suit as it deems expedient. Garage Operations Hazard: The ownership, maintenance or use of the premises for the purposes of a garage, and all operations necessary or incidental thereto, hereinafter called ‘garage operations’.”

Automobile hazards are defined as follows: “1. All Automobiles: (a) The ownership, maintenance or use of any automobile for the purpose of garage operations, and the occasional use for other business purposes and the use for non-business purposes of any automobile owned by or in charge of the named insured and used principally in garage operations, and (b) The ownership, maintenance or use of any automobile owned by the named insured while furnished for the use of (i) the named insured, a partner therein, an executive officer thereof or, if a resident of the same household, the spouse of any of them, or (ii) any other person or organization to whom the named insured furnishes automobiles for their regular use. 2. Automobiles not Owned or Hired: The use in connection with garage operations of any automobile which is neither owned nor hired by the named insured, a partner therein or a member of the same household as any such person.” (Italics

The policy specifically provides coverage on “any automobile owned by . . . the named insured . . . or, . . . resident of the same household, the spouse ...” (Italics added.) The endorsement attempted to exclude coverage when Lech (the named insured) loaned his automobile to customers. The Pontiac was owned by Lech and, although the policy insuring it was labeled a garage owner’s policy, it provided him with bodily injury and property damage insurance. Whether the policy is termed a garage owner’s policy with the additional individual personal injury and property damage coverage for Lech and his family or is interpreted as a personal liability policy with additional coverage for garage owner’s hazards is unimportant. The policy insures Lech and the members of his household for injuries and property damage liability as effectively as if it were a policy not containing coverage for other garage operational hazards. It is clear that the endorsement (as construed by Wildman v. Government Emp. Ins. Co., supra, 48 Cal.2d 31 ) is in conflict with the express provisions of section 16451 of the Vehicle Code which provides: “An owner’s policy of liability insurance shall . . . (b) Insure the person named therein and any other person, as insured, using any described motor vehicle with the express or implied permission of said assured, ...” (See also Veh. Code, §§ 17150-17157.) The endorsement is a restriction against permissive users such as has been continually held to be violative of public policy. (Wildman v. Government Emp. Ins. Co., supra; Bohrn v. State Farm etc. Ins. Co., supra.) The Republic policy insuring Lech, therefore, is the primary insurance and the Employees policy applies to the excess, if any (none here). (See American Auto. Ins. Co. v. Republic Indem. Co., supra.)

The judgment is reversed and the trial court is directed to enter judgment for Employers in the amount of $1,148.05, the amount stipulated by the parties hereto as its investigation and litigation expenses.

Draper, P. J., and Salsman, J., concurred.