Opinion
NOT TO BE PUBLISHED
Alameda County Super. Ct. No. RG05207155
McGuiness, P.J.
This appeal arises from a direct action suit against an insurer for collection of a judgment against its insured. (See Ins. Code, § 11580, subd. (b)(2).) Appellants Margaret Profeta, Ernest Batayola, and Mark Batayola were injured in an auto accident allegedly caused by Victor Marr. In a previous lawsuit, appellants sued Marr, who sought insurance coverage from respondent Vesta Fire Insurance Corporation (Vesta). Marr claimed the vehicle he was driving was a newly acquired vehicle covered under his Vesta policy. Vesta denied coverage, asserting that the car driven by Marr was not listed in the Vesta policy and that there was other valid and collectible insurance available to Marr. After appellants settled with Marr, they brought this direct action against Vesta seeking to recover the amount of their judgment against Marr. Appellants claim Vesta became liable for the resulting judgment against Marr as a result of its wrongful failure to defend its insured.
The trial court granted summary judgment in favor of Vesta, concluding that Vesta had not breached any duty to its insured. We affirm the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
On March 16, 2003, Victor Marr was driving a 1993 Toyota Camry that collided with Margaret Profeta’s vehicle, injuring Profeta and her sons, Ernest and Mark Batayola. Victor Marr’s sister, Erica Marr, was the registered owner of the Camry. Erica Marr had the Camry listed as a covered vehicle on her automobile policy issued by 21st Century Insurance (21st Century). The 21st Century policy provided bodily injury liability coverage up to $15,000 per person and $30,000 per occurrence.
At the time of the accident, Victor Marr was the named insured on an automobile policy issued by Vesta, with a policy period from June 15, 2002, to June 15, 2003. The Vesta policy did not list the 1993 Camry in the declarations but instead listed a 1991 Chevrolet Corsica as the vehicle insured under the policy. The Vesta policy had bodily injury liability limits of $100,000 per person and $300,000 per occurrence. The Vesta policy provided, in relevant part, that “[w]ith respect to an owned automobile ownership of which is newly acquired by the named insured during the policy period and not described in the declarations, this insurance shall not apply if any other valid and collectible insurance is available to the named insured.”
On August 19, 2003, appellants filed a personal injury suit against Victor and Erica Marr. 21st Century retained attorney James Hazard to defend Victor and Erica Marr in connection with the personal injury lawsuit. 21st Century authorized attorney Hazard to offer the available $30,000 of insurance coverage through the 21st Century policy on behalf of both of its insureds, Erica and Victor Marr, in exchange for a complete release and dismissal with prejudice of all the claims against Erica and Victor Marr. Hazard extended the settlement offer to appellants on March 26, 2004.
On April 1, 2004, Vesta declined to defend or indemnify Victor Marr with respect to appellants’ personal injury lawsuit. Vesta had apparently been asked to reconsider a previous decision denying coverage in light of new deposition testimony indicating that Victor Marr had purchased his sister’s 1993 Camry just before the accident. Victor Marr claimed the Camry was a newly acquired vehicle covered under the Vesta policy. In the April 1, 2004, letter denying coverage, Vesta’s coverage counsel explained that the Vesta policy could not be used as additional or alternative coverage for newly acquired vehicles that are insured under another policy and not described in the declarations of the Vesta policy. According to Vesta, the Camry was never described in the declarations of the Vesta policy. The letter stated, “At the time of the incident, the Marrs insured the Camry through 21st Century Insurance. 21st Century is defending Victor Marr and Erica Marr, and it has offered its policy limits to settle the plaintiffs’ claims against them.” The letter also explained at great length that the available evidence cast doubt on Victor Marr’s claim that he had purchased his sister’s Camry just before the accident.
The letter dated April 1, 2004, declining coverage refers to an earlier, “August 2003” declination of coverage. The record on appeal does not contain the August 2003 letter denying coverage.
After Vesta denied coverage in April, appellants’ attorney wrote to Hazard on June 8, 2004, with a settlement proposal designed to protect Victor and Erica Marr from personal liability and to protect 21st Century from incurring further fees and costs. Appellants’ attorney proposed that 21st Century pay its policy limits of $30,000 to appellants in exchange for a release and dismissal with prejudice as to Erica Marr only. Appellants’ attorney further proposed that Victor Marr would not contest liability or damages and would stipulate to the appointment of a judge pro tem to conduct a trial. Appellants would receive an assignment of Victor Marr’s legal claims against Vesta and would stipulate to enforce any resulting judgment against Vesta but not against Victor Marr.
Following a June 10, 2004, settlement conference, appellants and the Marrs agreed to a settlement along the lines that appellants’ counsel had proposed. In exchange for the payment of the 21st Century policy limits of $30,000, appellants agreed to execute a covenant not to enforce any judgment against Victor Marr personally. Appellants agreed to execute a dismissal and general release as to Erica Marr only. Victor Marr stipulated to the appointment of a judge pro tem to conduct a trial, and he promised to “allow without objection for plaintiffs to introduce evidence at the trial to establish their claims of liability and damages.” It was specified that “[t]he trial will proceed as if it were a default hearing.” Victor Marr agreed to assign his breach of contract and bad faith claims against Vesta to appellants. To the extent appellants recovered from Vesta on any of the assigned breach of contract or bad faith claims, appellants agreed to pay Victor Marr the first $15,000 of their recovery.
Appellants subsequently signed a covenant not to execute the judgment against the personal assets of Victor Marr. The document containing the covenant not to execute also contains a general release of Victor Marr, as follows: “This is a full and final release as to Victor Marr only applying to all unknown and unanticipated injuries, deaths or damages arising out of said accident, as well as to those now known or disclosed, and the undersigned waive all rights or benefits which the undersigned now has or in the future may have under the terms of Section 1542 of the Civil Code of the State of California, which said section reads as follows: [¶] ‘A general release does not extend to the claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected his settlement with the debtor.’ ” The covenant not to execute and release was signed by Margaret Profeta and Ernest Batayola on July 22, 2004, and by Mark Batayola on September 15, 2004.
Appellants’ personal injury suit against Victor Marr proceeded to trial before a pro tem judge on December 23, 2004. Judgment was rendered against Victor Marr and in favor of appellants in the amount of $721,867.
On April 8, 2005, appellants filed the lawsuit giving rise to this appeal. Appellants sued Vesta alleging they were entitled to enforce their judgment against Victor Marr by way of a direct action against Vesta pursuant to Insurance Code section 11580, subdivision (b)(2). Appellants alleged that by reason of Vesta’s failure to defend its insured, Victor Marr, Vesta became liable for any resulting judgment against Victor Marr without regard to the stated limits of the policy. The record contains no indication Vesta received notice of the settlement negotiations between appellants and the Marrs, the settlement, or the judgment against Victor Marr until appellants filed their suit against Vesta to recover the judgment.
Insurance Code section 11580, subdivision (b)(2) provides that certain liability policies issued in the State of California must contain “[a] provision that whenever judgment is secured against the insured or the executor or administrator of a deceased insured in an action based upon bodily injury, death, or property damage, then an action may be brought against the insurer on the policy and subject to its terms and limitations, by such judgment creditor to recover on the judgment.”
Vesta moved for summary judgment, claiming Vesta’s policy did not cover the accident, Vesta was at most an excess insurer, and 21st Century obtained Victor Marr’s full release before the trial that resulted in the judgment against Victor Marr. Vesta also argued that the judgment was a sham and had been collusively obtained. In their opposition to the motion, appellants did not affirmatively claim the accident was covered by the Vesta policy. Instead, they asserted that, whether or not the Vesta policy actually covered the accident, Vesta had a duty to defend its insured because there was a potential for coverage. And, because, according to appellants, Vesta had wrongfully refused to provide a defense, it was liable for any resulting default or stipulated judgment. Appellants also asserted that there was no full release of Victor Marr, stating that the release “by its terms applies only to Erica Marr.” Appellant did not explain why the trial court should disregard the plain language of the release, which specifies that it applies to Victor Marr.
The trial court granted Vesta’s summary judgment motion, finding that Vesta had not breached any duty owed to its insured. The court further found that it must conclusively presume pursuant to Insurance Code section 11580.9, subdivision (d) that 21st Century was the primary insurer and Vesta was the excess insurer. The court denied Vesta’s motion with respect to the claim the judgment was a sham and the product of collusion, finding “triable issues of material fact surrounding the good faith nature of the parties’ settlement of their lawsuit and the adversarial nature of the December 23, 2004 trial.” The court’s order does not discuss the release of Victor Marr.
On November 7, 2006, appellants filed a notice of appeal from the trial court’s September 15, 2006, order granting Vesta’s summary judgment motion. The notice of appeal was premature in that an order granting summary judgment is not appealable. (Saben, Earlix & Associates v. Fillet (2005) 134 Cal.App.4th 1024, 1030.) For the sake of avoiding further needless litigation, we will exercise our discretion to treat the appeal as having been taken from the subsequently entered summary judgment. (Ibid.)
On the court’s own motion, we take judicial notice of the trial court’s register of actions, which reflects that judgment was entered in favor of Vesta on February 8, 2007. (Evid. Code, §§ 452, subd. (d), 459.)
Discussion
1. Standard of Review
“In reviewing an order granting summary judgment, we must assume the role of the trial court and redetermine the merits of the motion. In doing so, we must strictly scrutinize the moving party’s papers. The declarations of the party opposing summary judgment, however, are liberally construed to determine the existence of triable issues of fact. All doubts as to whether any material, triable, issues of fact exist are to be resolved in favor of the party opposing summary judgment. While the appellate court must review a summary judgment motion by the same standards as the trial court, it must independently determine as a matter of law the construction and effect of the facts presented. [Citation.]” (Cochran v. Cochran (2001) 89 Cal.App.4th 283, 287.)
Although the trial court may grant summary judgment on one ground, this court may affirm the judgment on any another ground that was presented to the trial court. (London Market Insurers v. Superior Court (2007) 146 Cal.App.4th 648, 668.) We review the ruling and not the trial court’s rationale for that ruling. (Ibid.)
2. Duty to defend
Appellants seek to recover their judgment against Victor Marr from Vesta on the theory they are third-party beneficiaries of the insurance contract between Marr and Vesta under Insurance Code section 11580, subdivision (b)(2). (See Murphy v. Allstate Ins. Co. (1976) 17 Cal.3d 937, 943.) Appellants’ claim, of course, is subject to the terms and limitations of the Vesta policy. (Ins. Code, § 11580, subd. (b)(2).) If Vesta had no duty to defend or indemnify its insured, it likewise has no obligation to pay a third-party claimant who has reduced a claim against its insured to judgment.
Appellants make no attempt to establish there is actual coverage under the Vesta policy for their suit against Victor Marr. Instead, appellants argue that Vesta had a duty to defend Victor Marr because there was a potential for coverage. And, according to appellants, because Vesta breached its duty to defend, it is liable for the resulting judgment regardless of whether actual coverage existed.
As support for their position, appellants rely on Pruyn v. Agricultural Ins. Co. (1995) 36 Cal.App.4th 500, 509, in which the court held that “when . . . a liability insurer wrongfully denies coverage or refuses to provide a defense, then the insured is free to negotiate the best possible settlement consistent with his or her interests, including a stipulated judgment accompanied by a covenant not to execute.” Appellants also cite Amato v. Mercury Casualty Co. (1997) 53 Cal.App.4th 825, 829, for the proposition that when an insurer tortiously breaches its duty to defend and the insured suffers a default judgment as a consequence, the insurer is liable for the resulting default judgment.
Appellants’ claim, therefore, turns upon whether Vesta breached a duty to defend. For the reasons that follow, we conclude the claim fails because Vesta had no duty to defend Victor Marr.
The Vesta policy provides that “[w]ith respect to an owned automobile ownership of which is newly acquired by the named insured during the policy period and not described in the declarations, this insurance shall not apply if any other valid and collectible insurance is available to the named insured.” Thus, under the terms of the policy, even if the Camry were a newly acquired vehicle owned by Victor Marr, there would be no coverage if the Camry was not described in the policy’s declarations and Marr had other valid and collectible insurance available to him. It is undisputed the Camry was not described in the Vesta policy’s declarations, and it also undisputed that, at the time Vesta denied coverage in April 2004, Victor Marr had other valid and collectible insurance available to him through his sister’s 21st Century policy. Vesta therefore had no duty to defend because there was no potential for coverage under the Vesta policy.
Appellants assert that this policy provision is invalid because it is does not appear in the exclusion section of the policy and is not plain, conspicuous, and clear. Appellants cite no authority to support their argument that the provision is invalid. The policy provision at issue is an “other insurance” clause. There are several types of “other insurance” provisions commonly included in insurance polices. (Olympic Ins. Co. v. Employers Surplus Lines Ins. Co. (1981) 126 Cal.App.3d 593, 598.) Pro rata clauses state that if other insurance exists, the carrier will only be responsible for its pro rata share of the loss. Excess clauses limit the carrier’s liability to the amount of the loss not covered by the other policy. Finally, escape clauses completely extinguish liability if any other insurance covers the loss. (Ibid.) For public policy reasons, escape clauses are disfavored, and to a lesser extent, so are excess clauses. (CSE Ins. Group v. Northbrook Property & Casualty Co. (1994) 23 Cal.App.4th 1839, 1845.) Appellants have made no argument that the provision here is unenforceable as either an escape or excess clause. However, even if we were to conclude the provision is unenforceable for public policy reasons, we would still conclude that Vesta had no duty to defend as a consequence of its status, by operation of law, as an excess insurer.
Insurance Code section 11580.9 establishes certain conclusive presumptions when two or more automobile liability policies apply to the same motor vehicle. As relevant here, subdivision (d) of Insurance Code section 11580.9 provides that “where two or more policies affording valid and collectible liability insurance apply to the same motor vehicle or vehicles in an occurrence out of which a liability loss shall arise, it shall be conclusively presumed that the insurance afforded by that policy in which the motor vehicle is described or rated as an owned automobile shall be primary and the insurance afforded by any other policy or policies shall be excess.” It is undisputed the 21st Century policy described the Camry as an owned automobile, whereas the Vesta policy did not. It is of no consequence that the Camry might have been considered a newly acquired vehicle under the Vesta policy, because the statute plainly requires a specific identification of the particular vehicle in order to be considered “described or rated” under that policy. (See Ohio Cas. Ins. Co. v. Aetna Ins. Co. (1978) 85 Cal.App.3d 521, 524 [commonsense understanding of statute requires specification of insured vehicle, not just that it falls within some general class of insured vehicles].) Applying the conclusive statutory presumption to the undisputed facts, the 21st Century policy provided primary coverage while the Vesta policy provided excess coverage.
Under California law, an excess carrier has no duty to defend until the primary insurer has exhausted its available coverage. (Diamond Heights Homeowners Assn. v. National American Ins. Co. (1991) 227 Cal.App.3d 563, 577.) The primary insurer alone owes a duty to provide and bear all the costs of the defense until its primary policy limits are exhausted. (Ibid.) Indeed, an excess carrier has no duty to defend even when the claims are large enough to potentially reach any applicable excess coverage. (Signal Companies, Inc. v. Harbor Ins. Co. (1980) 27 Cal.3d 359, 366-367.)
At the time Vesta denied coverage in April 2004, 21st Century had not exhausted its available coverage. Vesta therefore had no duty to defend, and appellants cannot claim that Vesta wrongfully denied coverage or breached its duty to defend before they proceeded to reduce their claim against Victor Marr to judgment. Accordingly, because the undisputed facts establish that Vesta did not wrongfully deny a defense to Victor Marr, appellants’ claim fails and Vesta is entitled to judgment as a matter of law.
It is irrelevant that 21st Century subsequently exhausted its coverage in the settlement between appellants and the Marrs. The duty to defend is measured by the facts known at the time of the tender. (We Do Graphics, Inc. v. Mercury Casualty Co. (2004) 124 Cal.App.4th 131, 136.)
3. Release of Victor Marr
Appellants’ claim fails for a separate but sufficient reason—the judgment against Victor Marr is unenforceable because appellants fully released Victor Marr before the trial that resulted in the judgment against him. The release is unequivocal and final, and it applies to all claims known or unknown arising out of the accident.
In the trial court, appellants’ counsel stated that the document at issue is merely a covenant not to execute against the personal assets of Victor Marr. Appellants argued: “It is in no way or wise a release of him, and the release attached thereto by its terms applies only to Erica Marr.” Notwithstanding appellants’ contention otherwise, the release by its plain terms applies to Victor Marr. In addition, Victor Marr’s trial counsel, James Hazard, stated in a declaration in this action that the document is a “release in favor of Victor Marr.”
On appeal, appellants do not mention, much less discuss, the release. Although Vesta relied on the release as grounds for affirming the judgment in its respondent’s brief, appellants did not file a reply brief and consequently failed to address the issue.
We note that the release of Victor Marr appears to be inconsistent with earlier settlement documents indicating that the release would apply only to Erica Marr. Still, appellants have never argued the release is invalid because of some mistake as to who was supposed to be released. Because appellants have failed to offer any reason why the release of Victor Marr should be disregarded, we must conclude that the undisputed facts show appellants fully released Victor Marr in connection with the March 2003 accident before securing a judgment against him. As a matter of law, the ensuing judgment is unenforceable and Vesta is entitled to summary judgment in this action on that basis.
3. Insurance liquidation stay issued by Texas court
During the course of this appeal, Vesta’s counsel notified this court that Vesta was placed into liquidation in receivership proceedings in Texas. Vesta moved to stay this appeal based on provisions of the Texas Insurance Code as well as a stay order issued by a Texas court. We denied Vesta’s motion to stay based primarily upon Hawthorne Savings F.S.B. v. Reliance Ins. Co. of Illinois (9th Cir. 2005) 421 F.3d 835, 852, in which the Ninth Circuit Court of Appeals considered whether California courts must defer to insurance rehabilitation and liquidation proceedings in other states. Now, in its respondent’s brief, Vesta again asserts that this court should stay the appeal in light of the Texas proceedings.
In our order denying Vesta’s motion, we noted that Vesta appeared to be relying upon authority in which a court in a state that had adopted some form of the Uniform Insurers Liquidation Act (UILA) gave effect to a stay order issued in another state that had also enacted a version of the UILA. We observed that the line of cases establishing reciprocity among states that had adopted the UILA was in apposite in that California had adopted the UILA whereas Texas had not. We stated: “Because Vesta has not demonstrated or even claimed that Texas is a UILA reciprocal state, principles of reciprocity under the UILA do not oblige this court to give effect to the Texas stay order.”
Vesta now asserts that case law upon which we relied is no longer valid because Texas recently adopted the model UILA. Vesta does not cite any authority for its assertion other than to refer generally to Texas Insurance Code Chapter 21A. West’s Annotated California Codes includes a table listing jurisdictions that have adopted the UILA. (See Table of Adopting Jurisdictions, 42A West’s Ann. Ins. Code (2005) p. 347.) In the 2008 supplement to the West’s Annotated California Codes, Texas is still not listed as a state that has adopted the UILA. (See 42A West’s Ann. Ins. Code (2008 supp.) p. 33.) Vesta’s bare assertion that Texas has adopted the UILA in some form is simply inadequate to establish that a Texas stay order should be honored by a California court under UILA reciprocity principles.
We arrive at the same conclusion reached in our previous order denying Vesta’s motion to stay: “The lawsuit that gives rise to this appeal is an in personam action that turns upon issues of California state law. Vesta has not adequately demonstrated that permitting this appeal to proceed will interfere with the Texas liquidation proceeding or with the administration of the receivership estate.” Furthermore, as a practical matter, little purpose would be served by issuing a stay at this point in light of our disposition of the appeal. Vesta need not religitate appellants’ claim in the Texas receivership proceeding because the California judgment in favor of Vesta is entitled to full faith and credit in the Texas courts. (See Capital Trust, Inc. v. Tri-National Development Corp. (2002) 103 Cal.App.4th 824, 826.)
Disposition
The judgment is affirmed. Respondent shall recover its costs on appeal.
We concur: Pollak, J., Horner, J.
Judge of the Alameda County Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of the California Constitution.