Opinion
Rehearing Denied Jan. 15, 1971.
Opinion on pages 656 to 671 omitted
HEARING GRANTED
For Opinion on Hearing, see 106 Cal.Rptr. 779, 507 P.2d 83.
[92 Cal.Rptr. 139]Ball, Hunt, Hart, Brown & Baerwita, and Albert H. Ebright, Beverly Hills, for cross-defendant and appellant.
Olney, Levy, Kaplan, Ormes & Tenner, and Jact Tenner, Los Angeles, for cross-complainants and respondents.
WOOD, Presiding Justice.
This is a declaratory relief action to determine the respective obligations of plaintiff Reserve Insurance Company and defendants Universal Underwriters Inserance Company, Allstate Insurance Company, National Auto Leasing Corporation, Richard Metz, Elmo Meta, and Gomer Hamlin, with reference to a judgment obtained by Richard and Elmo Meta against Hamlin and National for $254,593.74. The judgment resulted from an accident wherein Richard Metz, who was riding a motorcycle, was struck by an automobile owned by National and operated by Hamlin, who had leased the automobile from National. In partial satisfaction of the judgment, Reserve paid $90,000, the limit of its policy of insurance issued to Hamlin and National, and Allstate paid $10,000, the limit of its policy of insurance issued to Hamlin and National. In the present action (for declaratory relief), defendants Metz filed a cross-complaint seeking $154,593.74 (balance of judgment after crediting partial payments) from Universal under a policy of insurance which it had issued to National. Cross-complainants' motion for summary judgment on the cross-complaint was granted, and judgment was entered in favor of cross-complainants and against Universal for $162,749.38 ($154,539.74 and interest thereon). Universal appeals from that judgment.
Appellant contends that its policy excluded coverage of vehicles leased by National, and therefore did not cover Hamlin's use of the vehicle which he leased from National; that if such exclusion violates public policy, them the coverage extended by Universal 'is only $10,000/$20,000, excess to the Allstate and Reserve policies'; and that the judgment herein incorrectly allows 'interest on interest.'
At the hearing of the motion for summary judgment, counsel for the parties to the cross-action stated that there was no triable issue of fact; and, in their briefs on appeal, they state that there is no dispute as to the facts.
Universal issued two policies of insurance, referred to as policy No. 528360 and policy No. 796184, to National. (No claim has been made herein with reference to policy No. 796184. ) The 'named' insureds in policy No. 528360 are Ogner Bros., Ltd., Danny McGroo, Inc., and National Auto Leasing Corp.; and the stated address of the insureds in 9966 West Washington Boulevard, Culver City, California. Said policy provides in part that the business of the 'named insured' is automobile sales and service, that coverage for bodily injury liability is $250,000 for each person and $500,000 for each accident; that coverage for property damage liability is $100,000 for each accident; and that Universal agrees to pay all sums which the insured shall be legally obligated to pay as damage for bodily injury (and for injury to property) 'caused by accident and arising out of the ownership, maintenance and use of any automobile.' (The policy does not describe any automobile or automobiles owned by the insured.) The policy also provides (in printed words) that 'there is no [92 Cal.Rptr. 140]liability or medical payments coverage applicable to any vehicle while rented to others by the named insured, * * *' The words 'Customer Rental' are typewritten after the aforementioned words. A 'Garage' endorsement (No. UU-3159, at page 28 of the policy), states that the insurance afforded by the policy for bodily injury liability and property damage liability applies to certain hazards, including 'Automobile Hazard.' The endorsement defines automobile hazard, and states (as amended by endorsement No. UU-3169, at page 19 of policy) that the definition of automobile hazard does not include: '(1) any automobile (i) while rented to others by the named insured unless to a salesman for use principally in the business of the named insured or to a customer of the named insured while such customer's automobile is temporarily left with the named insured for service, repair or sale * * *.'
Appellant argues, however, that the existence of policy No. 796184 (referred to as an 'errors and omissions' policy) is relevant to appellant's argument that the leased car exclusion does not violate public policy in that policy No. 796184 provided coverage of $10,000/$20,000 for liability imposed on National by reason of failure of a lessee of National to obtain liability insurance in the amount required by the lease. In the present case, Hamlin (lessee) acquired liability insurance in the amount required by the lease.
In the policy it is stated that the business of the insureds (Ogner Bros., Danny McGroo, and National) is automobile sales and service; however, as stated in appellant's brief, National is engaged in the business of leasing automobiles and is not engaged in the business of sales and service of automobiles.
Another endorsement (No. UU-3050) on policy No. 528360 provides in part that where a person who is not insured under the policy becames insured in conformity with the financial responsibility laws or other laws of the state in which the accident occurs, the insurance afforded by the policy for bodily injury liability or for property damage liability shall comply with the provisions of such law to the extent of the coverage and limits of liability required by such law, but in no event in excess of $10,000 for each person, or $20,000 for each accident, for bodily injury liability; and such insurance shall be in excess over any other insurance available to the insured.
On May 21, 1965, National, as lessor, and Gomer Hamlin, on behalf of Gomer Electric Company, as lessee, executed a written 'Lease Agreement' whereby National leased a 1965 Lincoln automobile to Gomer Electric Company (Hamlin) for 36 months at a monthly rental of $140.40. It provides in part that the agreement 'is one of leasing only and the Lessee shall not have or acquire any right, title, or interest in or to the vehicle except the right to use or operate it as provided herein;' the lessee shall maintain the vehicle in good operating condition and shall pay the cost of all gasoline, oil, washing, polishing, and storage; the lessee shall provide insurance as provided in Lessee's order (a lease order, attached to lease as Exhibit A, provides in part that the amount of public liability insurance is $100,000/$300,000), that such insurance shall be endorsed to provide that the insurer shall notify the lessor immediately in the event that the insurance is materially altered or cancelled, and that the insurance policy shall be endorsed to protect the lessee and the lessor; lessee agrees to return the vehicle at the end of the lease term, or upon earlier termination of the lease, in the same condition as it was when it was delivered, ordinary wear and tear excepted; when the vehicle is returned to the lessor, the lessor shall promptly obtain the highest available cash offer at wholesale for the vehicle and notify lessee of the offer 'indicating the gain or loss'; lessee will notify lessor that lessee will accept such offer; if lessee fails to make an election, lessor is authorized to accept such offer and credit or debit lessee as appropriate; lessee shall permit only safe, careful, licensed and authorized drivers to operate the vehicle; lessee agrees, upon complaint by lessor specifying excessive collision claims or any other incompetence by any driver, that lessee will take such action as is necessary to correct these conditions; the vehicle shall not be used for hire or public transportation, and use of the vehicle shall, except with permission of the lessor, be confined to the United States and Canada; lessee shall not permit the vehicle to be used in violation of any laws or ordinances; neither the lease agreement nor any interest therein may be assigned by lessee without the prior consent of the [92 Cal.Rptr. 141]lessor; in the event that lessee fails to pay any rental payment, or defaults in performance of any of the other terms, conditions and covenants herein, or in event of lessee's insolvency or bankruptcy, lessor shall have the right to take immediate possession of the vehicle, with or without process of law, and to terminate the lease.
After the lease was executed Hamlin caused the Lincoln automobile to be included in a policy of insurance which he carried with Allstate; and National was designated therein as an additional insured. Among other things, that policy provided coverage for bodily injury liability in the amount of $10,000 for each person and $20,000 for each accident. Hamlin also obtained a policy of insurance from Reserve which provided for coverage for bodily injury liability, in excess to the coverage of the Allstate policy, in the amount of $90,000 for each person and $280,000 for each accident; and National was designated as an additional insured in that policy.
On June 23, 1966, while the lease agreement and the policies of insurance were in effect, the Lincoln automobile, operated by Hamlin, struck a motorcycle operated by Richard Metz. As previously stated, Richard received injuries in the accident; Richard and Elmo Metz obtained judgment against Hamlin and National for $254,539.74; Reserve and Allstate paid the respective limits of their policies in partial satisfaction of that judgment; and Reserve commenced this declaratory relief action, wherein it was adjudged that Richard and Elmo Metz recover $154,539.74 (balance on previous judgment after crediting partial satisfaction by Reserve and Allstate) and interest from Universal.
Some of the statements (in declarations) by Universal in opposition to the motion for summary judgment were in substance that National leased from 184 to 316 automobiles a month from May 1965 to June 1966; National did not repair, service, or sell automobiles which it leased; National did not maintain a stock of automobiles for lease--its practice was to purchase an automobile when it was ordered by a prospective lessee and to deliver the automobile to the lessee; National purchased the Lincoln on May 21, 1965, with the intention of leasing it; and the lease was executed by Hamlin and National, and the Lincoln was delivered to Hamlin on the day (May 21, 1965) National purchased it.
There are other statements in declarations (of an attorney and an underwriter) submitted by Universal to the effect that Universal did not intend to insure any vehicle owned by National 'while rented to others'; the premiums for Universal's policy 'were computed on the basis of the foregoing intent'; the premiums were based on the estimated payroll for three classes of employees of National (referred to as clerical, drivers in connection with business, and service and maintenance persons); and if coverage had been afforded for automobiles leased by National, then the additional premium 'for coverages A and C [bodily injury liability and property damage liability] would have been approximately $240 per car per year.'
Appellant (Universal) contends that its policy (No. 523860) excluded coverage of vehicles leased by National, and therefore it did not cover Hamlin's use of the Lincoln. It argues, among other things, that such exclusion does not violate the public policy of the state with reference to coverage by automobile liability insurance of innocent third persons injured by an insured's automobile driven with the permission and consent of the insured. (See Wildman v. Government Employees' Ins. Co., 48 Cal.2d 31, 39, 307 P.2d 359; Interinsurance Exchange of Automobile Club of Southern California v. Ohio Cal. Ins. Co., 58 Cal.2d 142, 145 et seq., 23 Cal.Rptr. 592, 373 P.2d 640; Abbott v. Interinsurance Exchange, 260 Cal.App.2d 528, 530 et seq., 67 Cal.Rptr. 220; Bohrn v. State Farm etc. [92 Cal.Rptr. 142]Ins. Co., 226 Cal.App.2d 497, 501 et seq., 38 Cal.Rptr. 77, and cases cited therein.)
In the order granting the motion for summary judgment herein, it was stated: 'Universal's policy while on its face purporting to exclude from coverage a certain class of vehicles, in actuality tries to exclude a class of drivers. Under the facts determined in Metz vs. Hamlin, National was the owner of the vehicle in question. Hamlin was using it with permission. The Court is of the opinion that public policy as announced in the applicable statutes and in decided cases forbids the exclusion of a class of drivers.'
In Widman v. Government Employees' Ins. Co., supra, 48 Cal.2d at page 39, 307 P.2d at page 364, it was said: 'It appears that section 415 [now section 16451 of the Vehicle Code. ] must be made a part of every policy of insurance issued by an insurer since the public policy of this state is to make owners of motor vehicles financially responsible to those injured by them in the operation of such vehicles. Section 402 [now section 17150 of the Vehicle Code 4 provides that 'Every owner of a motor vehicle is liable and responsible for the death of or injury to person or property resulting from negligence in the operation of such motor vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner, and the negligence of such person shall be imputed to the owner for all purposes of civil damages.' 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 and 415 of the Vehicle Code.' (See Interinsurance Exchange of Automobile Club of Southern California v. Ohio Cas. Ins. Co., supra, 58 Cal.2d 142, at page 145, 23 Cal.Rptr. 592, at page 641, 373 P.2d 640 at page 641 wherein it is said that the Wildman case 'held that every automobile liability policy, as a matter of law, covered permissive users, and that any provision in the policy excluding them was illegal.')
See Abbott v. Interinsurance Exchange, supra, 260 Cal.App.2d 528, at page 531, 67 Cal.Rptr. 220.
In Bohrn v. State Farm etc. Ins. Co., supra, 226 Cal.App.2d 497, at pages 503-504, 38 Cal.Rptr. 77, at page 80 (and in Abbott v. Interinsurance Exchange, supra, 260 Cal.App.2d 528, at pages 532-533, 67 Cal.Rptr. 220, quoting from Bohrn), it was said: 'The holding in Wildman was, of course, binding upon subsequent decisions in trial and appellate courts [citations], and was followed consistently in the following decisions by the appellate court: [citations]. The rule of public policy therein expressed has been repeated and reaffirmed by the Supreme Court itself [citations]. In its latest utterance on the question [citation--Interinsurance Exchange etc. Southern Cal. v. Ohio Cas. Ins. Co., supra], the court listed a number of cases decided subsequent to Wildman in which certain types of attempted exclusions had been nullified. [Citations, including cases which nullified a 'garage exclusion,' a 'customer exclusion,' and an exclusion of 'others than named insured.'] In Interinsurance Exchange of Automobile Club of Southern California [etc.] Southern Cal. v. Ohio Cas. Ins. Co., supra, the court stated, 58 Cal.2d at page 150, 23 Cal.Rptr. at page 596, 373 P.2d at page 644: 'Any provision in a policy which purported to exclude certain classes of permissive users from coverage was declared to be contrary to this public policy and, therefore, void.' (Italics added.) It is upon this one sentence lifted from the context of the decision, that appellant predicates its contention that the exclusionary ban was meant to apply only to groups or classes of permissive drivers, and not to named individuals. This interpretation appears to us to be completely unwarranted and untenable, and contrary to the rule of liberal construction enjoined by the Supreme Court upon the entire automobile financial responsibility law, to the end that there be given [92 Cal.Rptr. 143]'monetary protection to that ever changing and tragically large group of persons who while lawfully using the highways themselves suffer grave injury through the negligent use of those highways by others.' [Citation.] The purpose of Vehicle Code section 16451 is to broaden insurance coverage and to protect those injured by the negligence of drivers operating automobiles with the owners' consent. [Citations.] There are no exceptions in the statute to the omnibus coverage thus required. Since the provisions of section 16451 are made a part of every policy of insurance issued by an insurer, if not expressly then by implication of law, it must follow that any provision which would exclude such coverage, whether it relates to a group or class of permissive drivers, or to some named individual, being contrary to the provisions of the statute, and against public policy, must be held invalid and void.'
In the present case, appellant (Universal) makes several arguments regarding its contention that the exclusion of leased vehicles from coverage does not violate public policy.
It argues that an insurer 'may limit the risks and coverages,' and may 'select the character of the risks it will assume'; and that its policy herein 'does not simply exclude coverage for permissive users of leased cars. Rather, it does not insure leased vehicles at all.'
In Bohrn v. State Farm etc. Ins. Co., supra, appellant argues [226 Cal.App.2d, at p. 500, 38 Cal.Rptr. 77] that an insurance company has the right to insure and select its risks and to decline risks. The court said (id.) that such proposition can be accepted generally as a correct statement of law, and that an insurance company has the right to limit the coverage of a policy issued by it. The court then said (p. 501, 38 Cal.Rptr. p. 79): 'However, any such linitation must conform to the law; if contrary to public policy it is void.'
In the present case, Universal's policy provides that Universal will pay all sums which the insured (National) shall be legally obligated to pay as damage for bodily injury and injury to property 'caused by accident and arising our of the ownership, maintenance and use of any automobile.' The policy does not describe any automobile or automobiles to which coverage applies. In printed words, followed by the typewritten words 'Customer Rental,' the policy provides that 'there is no liability or medical payments coverage applicable to any vehicle while rented to others by the named insured' (National).
A similar insurance-policy provision was involved in Republic Indem. Co. of America v. Employers Liab. Assur. Corp., 267 Cal.App.2d 121, 123, 72 Cal.Rptr. 718, wherein a garage owner had loaned his automobile to a customer while the customer's automobile was being repaired at the garage. In that case the 'garage policy,' which was issued to the garage owner by Republic Indemnity, provided: '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.' While the customer therein was using the loaned automobile it was involved in a collision, and a person (in the other automobile) was injured. The injured person sued the customer and the garage owner. Republic Indemnity, which had issued the policy to the garage owner, paid an amount in settlement of the injured person's claim. The customer had an insurance policy which was issued by Employers Liability. The cited case (Republic Indemnity Co. of America v. Employers Liability) was for declaratory relief to determine the primary liability as between the two insurance companies. Republic, the plaintiff, asserted that the policy which it had issued to the garage owner specifically excluded coverage of the garage owner's automobile when it was 'on loan' to a customer of the garage. The defendant (Employers) asserted that the endorsement on the garage policy, relative to excluding coverage when the garage owner's automobile was loaned to a customer, was not effective because it [92 Cal.Rptr. 144]is opposed to public policy. The reviewing court therein held (p. 126, 72 Cal.Rptr. 718) that the endorsement on the policy which attempted to exclude coverage when the named insured (garage owner) loaned his automobile to customers was ineffective to exclude coverage on the loaned automobile. The court said (p. 126, 72 Cal.Rptr. p. 721): 'Whether the policy is termed a garage owner's policy with the additional individual personal injury and property damage coverage for Lech [garage owner] 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 [garage owner] 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 Employees Ins. Co., supra * * *) 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 said assured, * * *' [Citation.] The with the express or implied permission of said assured, * * *' (Citation.] The endorsement is a restriction against permissive users such as has been continually held to be violative of public policy. [Citations.] The Republic policy insuring Lech [garage owner], therefore, is the primary insurance and the Employers policy applies to the excess, if any (none here).'
In the present case, the attempted exclusion of coverage for liability to third persons arising from use of an automobile by a class of drivers with the consent of the insured violates the above-mentioned public policy.
Appellant Universal argues, however, that National (ind) was not the owner of the Lincoln--that 'Hamlin [lessee of National] was, for all practical purposes, the owner of the Lincoln.' It argues that National 'was but a conduit through which possession of the car passed from the dealer to Hamlin and ultimately to the wholesale buyer'; that National retained none of the incidents of ownership of the car other than 'bare legal title'; and that Hamlin paid all the taxes and costs of maintenance, had exclusive possession and control of the car, had responsibility to insure the car, and would have taken the gain or loss from sale of the car upon termination of the lease. It is to be noted that there is an express provision in the lease that the lease agreement was 'one of leasing only and the Lessee [Hamlin] shall not have or acquire any right, title, or interest in or to the vehicle except the right to use or operate it as provided herein.' Also there are several other provisions in the lease whereby National retained incidents of ownership of the automobile (e. g., National's right to take immediate possession of the automobile upon default by Hamlin in payment of rent, or upon his default in performance of any other terms, or upon his insolvency or bankruptcy; the right of National to approve any insurance obtained by Hamlin, or to obtain insurance itself; the requirement that such insurance protect the interest of National, and that such insurance be endorsed to require the insurer to notify National of alterations or cancellation thereof; and the various restrictions imposed by National, as lessor, on the manner of use of the automobile by Hamlin, as leased). Under the circumstances, National was the owner of the automobile and Hamlin was using it with National's permission and consent.
In a minute order herein it was stated that under the facts determined in Metz v. Hamlin (personal injury action resulting in judgment of $254,539.74 in favor of Richard and Elmo Metz against Hamlin and National), National was the owner of the vehicle, and Hamlin 'was using it with permission.' The record on appeal does not include the file in the personal injury action or statements with reference to findings in that action other than statements to the effect that the trial therein was 'bifurcated' and that the court found in favor of plaintiffs, and against Hamlin and National, on the issue of liability.
[92 Cal.Rptr. 145]Appellant also argues that the leased-car exclusion is permitted by public policy which exempts a vendor of a car under a conditional sales contract from liability as an owner of the car, because the lease herein was a conditional sales contract. (Section 17156 of the Vehicle Code provides that if a vehicle is sold under a contract of conditional sale whereby title to the vehicle remains in the vendor, the vendor shall not be deemed an owner within the provisions of this chapter.) Appellant argues that the lease agreement and the lease order attached thereto 'clearly constitute a conditional sales contract' because Hamlin agreed to pay as compensation an amount substantially equivalent to the value of the Lincoln; the monthly rental rate included depreciation, interest, profit for National, and sales tax; Hamlin remained liable upon termination of the lease for the depreciated value of the Lincoln; and Hamlin would become, or he had the option of becoming, the owner of the Lincoln upon termination of the lease because he was compelled to take the gain or loss resulting from the sale of automobile by National at wholesale.
As previously stated, the agreement whereby possession of the Lincoln was transferred to Hamlin by National is entitled 'Lease Agreement'; National is referred to therein as lessor, and Hamlin is referred to as lessee; and it is provided that National leases the Lincoln to Hamlin for a term of 36 months at monthly rate in the order (in the order it is provided that the rate is $135 per month, and the sales tax is $5.40 per month, for a total payment of $140.40 per month; and that said 'Rental' is to be paid on the 22nd day of each month). It is also provided that the agreement 'is one of leasing only and the Lessee shall not acquire any right, title, or interest in or to the vehicle except the the right to use or operate it'; and, there is no provision that the transaction is a sale, conditional or otherwise. Other provisions of the lease agreement are provisions used in a lease of personal property, and are not provisions used in a contract of conditional sale of such property. Appellant's argument that the lease is a contract of conditional sale is not sustainable.
Appellant also argues that the leased-car exclusion is authorized by the provisions of section 11580.1, subdivisions (b) and (c), of the Insurance Code (added by Legislature in 1963) --that it is necessarily implied from such provisions that 'an insurer may select those vehicles for which coverage is not intended to be granted'; and that Universal's policy explicit describes vehicles for which coverage is intended to be granted--'owned, non-leased vehicles--and explicitly describes those for which coverage is not intended to be granted--'owned, leased vehicles.' Such argument is a variation of appellant's argument, hereinabove discussed, to the effect that it may limit the risks or select the risks which it will assume. As stated in Bohrn v. State Farm etc. Ins. Co., supra, 226 Cal.App.2d 497, at p. 502, 38 Cal.Rptr. 77, any such limitation must conform to the law; if contrary to public policy it is void. As hereinbefore stated, the exclusion of coverage for liability to third persons arising from the use of an automobile by a class of drivers (customers renting automobile) with the consent of the insured violates public policy. (Cf. Abbott v. Interinsurance Exchange, supra, 260 Cal.App.2d, at pages [92 Cal.Rptr. 146]534 -536, 67 Cal.Rptr. 220, wherein the court rejected appellant's contention that by adopting section 11580.1 of the Insurance Code in 1963 the Legislature changed the public policy set forth in the Wildman case.) The asserted exclusion herein is invalid.
Section 11580.1 of the Insurance Code provides in part: 'No policy of liability insurance * * * covering liability arising out of the ownership, maintenance or use of any motor vehicle shall be issued * * * unless it contains the following provisions:
Appellant further contends that if the exclusion is invalid, then the coverage under Universal's policy is 'only $10,000/$20,000, excess to the Allstate and Reserve policies' by reason of endorsement No. UU-3159 (garage endorsement) and by reason of endorsement No. UU-3050 (endorsement re financial responsibility law of state where accident occurs).
The argument with reference to endorsement No. UU-3159 is that section B, subdivision (3)(b), of the endorsement is 'a valid escape 'other insurance' clause' permitted by section 11580.1, subdivision (f), of the Insurance Code.
Section B of the endorsement, which is entitled 'Definition of Insured,' states that each of the following designated persons is an insured with respect to the garage operations hazard: (1) the named insured, (2) certain persons (employee, director, etc.) with respect to garage operations other than the automobile hazard, and '(3) With respect to the Automobile Hazard: (a) any partner, or paid employee or director * * *, and (b) any other person using * * * such automobile * * with the permission of the named insured * * * provided further that the insurance coverage afforded hereunder to such person shall not be applicable if there is any other valid and collectible insurance applicable to the same loss covering such person as a named insured * * * with limits of liability at least equal to the requirements of the Financial Responsibility Law. In the event there is such other valid and collectible insurance, the two or more policies shall not be construed as providing cumulative or concurrent coverage and only the policy which covers the liability of such person as a named insured * * * shall apply.'
Appellant argues that the 'escape 'other insurance' clause' (section B (3)(b) of garage endorsement) is permitted by section 11580.1, subdivision f, of the Insurance Code, and that such escape clause applies herein because Hamlin was a named insured under other policies (Reserve and Allstate) with limits (Reserve, $90,000--Allstate, $10,000) at least equal to the requirements of the Financial Responsibility Law.
It is to be noted that said endorsement is entitled 'Garage' and that it relates to 'premises where the named insured conducts garage operations,' and to hazards in connection with garage operations. As previously stated, the policy designates three 'named' insureds (Ogner, McGroo, National) doing business at the same address and states that the business of the 'insured' is 'automobile sales and service.' National (according to appellant's brief) is engaged in automobile leasing, and is not engaged in the business of automobile sales and services. Under the 'Insuring agreements' (paragraph 1) of the [92 Cal.Rptr. 147]policy (as distinguished from endorsements) Universal agreed to pay all sums which the insured became legally obligated to pay because of bodily injury caused by accident and arising out of the ownership or use of any automobile. Richard Metz received bodily injuries in an accident on a public highway caused by an automobile which Hamlin used (and had been using for 13 months) with the consent of National (owner of automobile). The liability of National and Hamlin for such injuries was a liability within the basic insuring agreement.
As hereinbefore indicated, the provision in the basic policy purporting to exclude coverage of liability to third persons, arising from use of an automobile by a class of drivers with the consent of the insured, was against public policy. Also, as above shown, it was determined in the case of Republic Indemnity Company of America v. Employers Liability Assurance Corporation, supra, that the policy endorsement therein, which attempted to exclude coverage when the garage owner loaned his automobile, was ineffective. By reason of those conclusions, it would serve no useful purpose herein to determine, under the provisions of the garage endorsement, which of the named insureds, if any, engaged in garage operations within the meaning of the garage endorsement.
In further support of the contention that Universal's coverage is only excess to the coverage of Allstate and Reserve, appellant argues that endorsement No.UU-3050 limits Universal's coverage to such excess. That endorsement provides in part as follows: 'When (1) this policy is certified as proof of financial responsibility * * * or (2) a person or organization not insured under the provisions of this policy * * * becomes an insured in conformity with the Financial Responsibility Laws * * * of the State in which the accident occurs, such insurance as is afforded by this policy for bodily injury liability * * * shall comply with the provisions of such law * * * to the extent of the coverage and limits of liability required by such law, but in no event in excess of the following limits of liability: * * * Bodily Injury Liability--Automobile $10,000 each person $20,000 each accident.'
Appellant argues that should this court hold that Hamlin was an insured under the policy, Hamlin would be an insured by operation of law, and endorsement No. UU-3050 would then apply and the only available insurance under Universal's policy would be $10,000/$20,000, excess to the Allstate and Reserve policies. It also argues that said endorsement is valid because the 'law is clear that if the policy contains an express liability differentiation between named insureds and those who become insured by operation of law, such differentiation will be allowed.' As respondent argues, there is a question whether a differentiation in coverage between a 'named' insured and a person using an automobile with the consent of a named insured is valid, especially in view of the broad public policy enunciated by the Legislature and the courts to extend coverage to persons injured by automobiles used with the consent of the owner ('named' insured). In any event, in the present case Hamlin, who was using the automobile with the consent of the 'named' insured, became an insured by reason of the provisions of Universal's policy, and he did not become an insured by reason of the financial responsibility law; and endorsement No. UU-3050 applies only when the policy is certified as proof of financial responsibility (certification not involved herein) or when a person becomes an insured by reason of the financial responsibility law. Universal's coverage herein was not limited to '$10,000/$20,000, excess to the Allstate and Reserve policies.'
Appellant further contends that the judgment incorrectly allows 'interest on interest.' Respondent concedes that the judgment should be modified to provide that cross-complainants recover $154,539.74 with interest thereon at the rate of 7 per cent per annum from December 30, 1968 (date of judgment in personal injury action).
[92 Cal.Rptr. 148]The judgment provides that cross-complainants have judgment against cross-defendant 'in the amount of ONE HUNDRED FIFTY-FOUR THOUSAND FIVE HUNDRED THIRTY-NINE AND 74/100 dollars ($154,539.74) and interest thereon at the rate of 7% per annum from December 30, 1968, which is in the amount of EIGHT THOUSAND TWO HUNDRED NINE AND 64/100 DOLFARS ($8,209.64), making a total sum of ONE HUNDRED SIXTY-TWO THOUSAND SEVEN HUNDRED FORTH-NINE AND 38/100 DOLLARS ($162,749.38); costs waived.'
The judgment is modified by deleting therefrom the following words and figures (commencing in line 13, page 2, thereof, and ending in line 16, page 2, thereof): 'which is in the amount of EIGHT THOUSAND TWO HUNDRED NINE AND 64/100 DOLLARS ($8,209.64), making a total sum of ONE HUNDRED SIXTY-TWO THOUSAND SEVEN HUNDRED FORTY-NINE AND 38/100 DOLLARS ($162,749.38);.'
As modified, the judgment is affirmed.
THOMPSON and GUSTAFSON, JJ., concur.
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'(b) Provision designating by explicit description or by appropriate reference all motor vehicles with respect to which coverage is intended to be granted.
'(c) Provision designating by explicit description the purposes of use of such motor vehicles with respect to which coverage is not intended to be granted.
'* * *'