Opinion
Rehearing Denied Dec. 6, 1930
Hearing Granted by Supreme Court Jan. 5, 1931
Appeals from Superior Court, San Mateo County; George H. Buck, Judge.
Actions by Anna Irene Kautz and by Lesley Tudhope, by her guardian ad litem, George Tudhope, against the Zurich General Accident & Liability Insurance Company, Limited. From judgments in favor of plaintiffs, defendant appeals.
Reversed.
COUNSEL
J. Hampton Hoge, of San Francisco, and J.E. McCurdy, of San Mateo (A. Dal Thomson, of San Francisco, of counsel), for appellant.
Jered A. Maguire, of San Francisco, and James T. O’Keefe, of Redwood City, for respondent Tudhope.
Norman S. Menifee, of San Francisco, for respondent Kautz.
OPINION
PER CURIAM.
The above actions were brought to recover on a policy of insurance issued by Zurich General Accident & Liability Insurance Company, Limited, a corporation, to Stella Bayne, who is designated therein as the assured. Defendant corporation agreed for the period of one year commencing December 7, 1927, to indemnify the assured against loss from legal liability for damages caused by bodily injury accidentally suffered as the result of the ownership, maintenance, or use of a certain automobile. Upon the policy was an "omnibus coverage indorsement," which read as follows: "The policy to which this endorsement is attached is hereby extended to apply to any person or persons (other than the assured named in Special Condition 1) while riding in or legally operating any of the automobiles described in Special Condition 5, and any person, firm, or corporation legally responsible for the operation thereof, provided, such use or operation is within the permission of the named assured, or if the named assured is an individual, with the permission of an adult member of the named assured’s household other than a chauffeur or a domestic servant, and provided also that this endorsement shall not be available to any automobile garage, sales agency, and/or service station, nor to any agent or employee thereof, and provided further that indemnity under the said policy shall inure first to the named assured and then (as to the remainder, if any) to any other person entitled thereto."
At the time of its issuance, the policy contained certain special conditions, among which were the following: "2. Address of insured 2742 Filbert Street, San Francisco. *** 9. The automobiles are principally maintained and garaged in the city or town of Los Altos. 10. The automobiles are principally used in the city or town of Los Altos and in the vicinity of said city or town." On March 21, 1928, an indorsement referring to the above conditions was attached to the policy. This indorsement was as follows: "Special Conditions 2, 9, and 10 of the policy to which this endorsement is attached are hereby amended to show that the address of the assured is now 201 Buena Vista Avenue, Mill Valley, California, and that the automobile covered is maintained, garaged, and principally used in the city or town of Mill Valley, California. This endorsement to be effective as of noon (12:01 a.m. or 12:00 noon) of the 21st day of March, 1928. This endorsement is issued subject to such agreements, conditions, provisos, declarations and warranties as are contained in the policy to which it is attached, if not inconsistent herewith. ***" Pursuant to the statute (Stats.1919, p. 776), there was inserted in the policy a provision "that in case judgment shall be secured against the insured in an action brought by the injured person *** then an action may be brought against the company on the policy and subject to its terms and limitations by such injured person."
On November 18, 1928, the plaintiff Tudhope, due to the negligent operation of the automobile by one Earle L. Drais, who was driving the same by permission of the assured, accidentally suffered bodily injuries. An action to recover damages therefor was filed by said plaintiff against Drais, and on April 12, 1929, a judgment in the sum of $2,750 and costs, which has become final, was recovered against him. Execution issued thereon, and the same was returned wholly unsatisfied, whereupon demand for the amount of the judgment was made upon defendant corporation and refused. Plaintiff Kautz, who was also riding in the automobile with Drais, suffered injuries in the same accident, and on May 7, 1929, recovered against the latter a judgment for damages in the sum of $2,500, with costs, based upon his negligent operation of the car. This judgment has also become final. Execution issued thereon against Drais was returned wholly unsatisfied, and a demand for payment of the judgment was refused by defendant corporation. In the present actions, by which plaintiff sought to recover the amounts of said judgments from defendant company, the above facts were alleged, and as defenses thereto defendant averred that Drais was not legally operating the automobile at the time plaintiffs were injured, and, further, that by the indorsement hereinbefore referred to it was provided that the automobile should be maintained, garaged and principally used in the city or town of Mill Valley; that contrary thereto the automobile was on the date of the accident, and for a long time prior thereto had been, maintained, garaged, and principally used in the city and county of San Francisco, and that this fact materially affected the risk. The questions were submitted for decision upon the same evidence. The trial court found in accordance with the allegations of the complaints and against the defendant upon the defenses mentioned. Judgments from which defendant has appealed were entered accordingly. The evidence shows without dispute that Drais at the time of the accident was intoxicated, and defendant contends that the court consequently erred in its conclusion that the driver was legally operating the automobile within the meaning of the policy, and also that evidence tending to prove the alleged breach of the policy was improperly excluded. The appeals were presented and will be considered together.
It was held in Pacific Heating & Ventilating Co. v. Williamsburgh, etc., Ins. Co., 158 Cal. 367, 111 P. 4, 5, that, while a policy of insurance, like other contracts, must be construed according to the language and terms used therein to arrive at their true sense and meaning and courts will not undertake to relieve parties from the plain stipulations of the policy, still the rule is well established that provisos and exceptions must be strictly construed against the insurer, who is bound to use such language as to make the conditions, specifications, and provisions thereof clear to the ordinary mind, and, in case it fails to do so, any ambiguity or reasonable doubt must be resolved in favor of the assured. In each of the following cases the policy was similar in form to the one in question, and the insurer denied liability on the ground that the driver, not having procured an operator’s license, was illegally operating the automobile. It was held that, notwithstanding such failure, the car was being legally operated within the meaning of the policy. Odden v. Union Indemnity Co. (Wash.) 286 P. 59; Fagiani v. General Accident, etc., Corporation, Limited, (Cal.App.) 287 P. 377. In the case last cited, the court said: "Under a liberal definition of the term, one is not ‘legally operating’ an automobile when he is driving it in violation of any provision of law, but obviously the term was not used in that broad sense in the policy in question, because to give it that meaning would be to destroy the protection which the policy purports to give to persons driving the automobile with the permission of the owner. It is a matter of common knowledge that nearly every automobile accident is due to a breach of some statutory provision." The court suggested that the provision related to the manner of operating the automobile, but this construction no less than the one urged by the insurer in that case would tend to destroy the value of this character of insurance; it also being a matter of common knowledge that the majority of automobile accidents are caused by the failure to observe the statutory regulations respecting the driver’s condition as to sobriety, and the manner of operating the car; such violations with few exceptions being made criminal offenses. But, as the court further said, after referring to the fact, which is true here, that the exemption claimed by the insurer was not inserted in the "exclusion" clause of the policy, and stating that this might properly be considered in construing the contract: "It is not necessary to determine what was intended by the use of the term ‘legally operating,’ but it is sufficient to show that it is uncertain whether it was the intention of the parties to the contract to give it the meaning for which appellant [the insurer] contends." As was aptly said in Pacific Heating, etc., Co. v. Williamsburgh, etc., Ins. Co., supra, with respect to the rule of construction where the provisions of the policy are ambiguous: "This rule is based upon the fact that the contract of insurance is drawn by the insurer, and in it are usually placed many exceptions, conditions, and forfeitures deliberately and purposely by the insurer so as to avoid liability, and the ordinary person in paying a premium and accepting a policy does not read, or, if he does read, he cannot understand the many conditions, exemptions, and exceptions contained therein. *** Therefore the courts endeavor to carry out the contracts as made by the parties, and, at the same time, prevent, if possible, the exceptions and conditions from wholly devouring the policy."
While the meaning of the provision cannot be determined with certainty, yet when the whole contract is considered in connection with what the parties appear to have had in mind, namely, indemnity against the consequences of the negligent use or operation of the automobile, it is reasonably clear that it was not the intention to limit the policy to the few instances where the negligent act or omission is not made penal by the statute. The construction given the instrument by the trial court appears to be consistent with the true intent of the parties, and, where that is the case, the appellate court will not substitute another interpretation, though it seem equally tenable. Slama Tire Protector Co. v. Ritchie, 31 Cal.App. 555, 161 P. 25; Manley v. Pacific Indemnity, etc., Co., 79 Cal.App. 641, 250 P. 710.
As stated, the indorsement of March 21, 1928, amended certain of the "special conditions" in the policy, namely, conditions 9 and 10, by providing "that the automobile covered is maintained, garaged, and principally used in the city or town of Mill Valley, California." The policy also contained the following provision: "This policy is made and accepted subject to the general conditions, special conditions, and warranties hereinafter set forth, together with such other general conditions, special conditions, and warranties as may be endorsed hereon or added hereto in like manner as if the same were respectively repeated and incorporated herein, and compliance with such general conditions, special conditions, and warranties shall be a condition precedent to the right of recovery hereunder." While no particular form of words is necessary to create a warranty (Civ.Code, § 2604), here the statement quoted is not found among the schedule of warranties in the policy, but is designated in the policy as one of the special conditions. The effect intended by these provisions is obscurely expressed, and, in case of doubt as to the construction to be given where the meaning of the instrument is not plain, it has been held that "the court should lean against that construction which imposes upon the assured the obligation of a warranty." National Bank, etc., v. Union Insurance Co., etc., 88 Cal. 497, 504, 26 P. 509, 22 Am.St.Rep. 324. The statute provides that "a policy may declare that a violation of specified provisions thereof shall avoid it, otherwise the breach of an immaterial provision does not avoid the policy." Civ.Code, § 2611. To meet the terms of this section, however, the policy must contain a declaration that a violation of the specified provisions thereof shall avoid it, and it was held in Everett v. Standard Accident Insurance Co., 45 Cal.App. 332, 345, 187 P. 996, 1001, that a clause, in substantially the same language as that above quoted, requiring compliance with the provisions of the policy as a condition precedent to a recovery thereunder, fell short of the declaration required by the statute. As the court said: "If such had been the intention, the policy should have so declared in clear and unmistakable terms."
But if the provision in question be in fact material to the risk, though its violation be not declared a ground for avoiding the policy, a noncompliance therewith will nevertheless constitute a defense to an action on the policy. Victoria Steamship Co. v. Western Assurance Co., etc., 167 Cal. 348, 139 P. 807; Everett v. Standard Accident Insurance Co., supra. The authorities recognize the reasonableness of the classification and premium charges based upon the place where automobiles are kept and used (Brest v. Commissioner of Insurance [Mass.] 169 N.E. 657), and we cannot say as a matter of law that the stipulation that the automobile "is maintained, garaged, or principally used" in Mill Valley was not a material provision of the policy. Whether it was material in the sense that a noncompliance increased the hazard or that the stipulation influenced the insurer in fixing the rate of the premium was a question to be determined from all the facts and circumstances by the trial court. McEwen v. New York Life Ins. Co., 23 Cal.App. 694, 139 P. 242. Defendant in this connection sought to prove that, contrary to the stipulation in the policy, the automobile was garaged in San Francisco and not in Mill Valley. The court excluded the evidence on the ground that the fact would be immaterial. While defendant’s offer of proof did not expressly include evidence that the alleged failure to comply with this provision increased the risk further than that its counsel stated that a lower rate was charged in Mill Valley than in San Francisco, proof of the fact that the provision was not complied with was the foundation of the defense, and, where this was excluded, it has been held that a party is not bound to offer all the facts which would authorize a judgment in his favor, as it will be presumed under such circumstances that he could have proved them in the absence of a ruling rendering further evidence immaterial. Brundage v. Mellon, 5 N.D. 72, 63 N.W. 209; Loeb v. Willis, 100 N.Y. 231, 3 N.E. 177; Murphey v. Brown, 12 Ariz. 268, 100 P. 801.
Proof that contrary to the terms of the policy the automobile was garaged in San Francisco and that this fact was material to the risk would have constituted a defense to the action (Victoria Steamship Co. v. Western Assurance Co., etc., supra; Everett v. Standard Accident Ins. Co., supra), and the exclusion of evidence on this issue was prejudicially erroneous. For this reason the judgments must be reversed.
The judgments appealed from are accordingly reversed.