Opinion
G054369
02-07-2018
MERCURY INSURANCE COMPANY, Plaintiff and Appellant, v. CHARTIS PROPERTY CASUALTY COMPANY, Defendant and Respondent.
O'Connor, O'Connor & Schmeltzer and Lee P. O'Connor for Plaintiff and Appellant. McCormick, Barstow, Sheppard, Wayte & Carruth, James P. Wagoner and Nicholas H. Rasmussen for Defendant and Respondent.
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115. (Super. Ct. No. 30-2015-00799703) OPINION Appeal from a judgment of the Superior Court of Orange County, Nathan R. Scott, Judge. Reversed and remanded with directions. O'Connor, O'Connor & Schmeltzer and Lee P. O'Connor for Plaintiff and Appellant. McCormick, Barstow, Sheppard, Wayte & Carruth, James P. Wagoner and Nicholas H. Rasmussen for Defendant and Respondent.
Sami Hayek was involved in a serious automobile accident while driving a borrowed vehicle with the permission of its owner. Settlements were reached in connection with the injuries suffered by other participants, and three insurers contributed to those settlements.
The vehicle owner's primary automotive liability insurer, AIG Property Casualty Company (AIGPCC), contributed its entire $1 million policy limit, and the propriety of that contribution is not in dispute. This appeal arises out of a dispute between the other two insurers as to the order in which they were obligated to contribute to those settlements.
Plaintiff Mercury Insurance Company (Mercury), which issued an automotive liability policy to Sami, contributed its policy limit to each of the two settlements. However, Mercury reserved its right to seek reimbursement for its contributions from respondent Chartis Property Casualty Company (Chartis), and subsequently filed this lawsuit to recoup those payments. Chartis, which issued an excess liability policy to the vehicle owner, paid the balance of both settlements.
Because there are two insureds in this case who share the same last name, we refer to them by their first names, solely for the sake of clarity. No disrespect is intended.
Mercury argues that in accordance with Insurance Code section 11580.9, subdivision (d) (section 11580.9(d)), which sets forth a rule for determining which of multiple insurance policies that apply to the same vehicle in an accident qualifies as primary coverage, the Chartis policy is deemed primary coverage in connection with the settlements. Consequently, Mercury contends Chartis was obligated to apply its policy limits to the settlements before Mercury could be required to contribute anything.
Chartis countered that section 11580.9(d) does not apply to its policy, primarily because the policy is already defined by its terms as providing only excess coverage. Chartis also argues (1) only one insurance policy can be designated as "primary" under section 11580.9(d), and in this case that was the AIGPCC policy; (2) the Chartis policy is an "umbrella" policy which does not "'apply'" to the vehicle itself; and (3) the policy does not meet the test for a primary policy under section 11580.9(d).
Although the trial court found Chartis's arguments to be persuasive, we do not. We consequently reverse the judgment and remand the case to the trial court with directions to enter judgment in favor of Mercury.
Because the express purpose of section 11580.9(d) is to establish which of multiple liability policies qualifies as primary in a given situation, and which are excess, Chartis cannot avoid its application by asserting that its policy is already defined as an excess policy. The assertion merely begs the question; it cannot answer it.
Moreover, there is no support for Chartis's assertion only one policy can be designated as "primary" under section 11580.9(d). Indeed, the cases it cites in support of the assertion suggest the opposite. And Chartis's contention that its liability policy falls outside the scope of section 11580.9(d) because it is an "umbrella policy" ignores the fact that as to the Ford GT's owner, the policy expressly limits coverage to liability arising out of its ownership or use of that particular vehicle.
And finally, we conclude the Chartis policy describes a specific vehicle—an apparently rare and valuable 2006 Ford GT—with sufficient particularity to satisfy all parties that it refers to the vehicle involved in the relevant accident. That satisfies section 11580.9(d)'s requirement that a primary policy is one in which the vehicle is "described or rated as an owned automobile."
FACTS
The following underlying facts were established by stipulation of the parties:
On February 23, 2014, Sami was driving a 2006 Ford GT owned by FHPGT, LLC, with permission, when he was involved in a collision with another vehicle driven by Alvin Javier Gomez. As a result of the accident, Sami's passenger in the 2006 Ford GT, Ian Sala de Cuttler, suffered fatal injuries, while Gomez suffered nonfatal injuries.
At the time of the accident, Sami was insured under an automobile insurance policy issued by Mercury. The terms of that policy reference Sami's owned vehicle, described as a 2010 Volvo, and include its serial number. The policy provides Sami with insurance against liability he incurs for damages arising out of the ownership or use of his owned automobile, as well as for damages arising out of his use of a nonowned automobile. The policy also provides liability insurance to persons who use Sami's owned automobile with his permission. The Mercury policy's limits of liability for personal injury are $100,000 per person, and $300,000 per accident.
Additionally, FHPGT, LLC, the owner of the 2006 Ford GT was insured at the time of the accident under an automobile insurance policy issued by AIGPCC. The terms of the policy describe the covered vehicle as a 2006 Ford GT, with an agreed value of $123,365, and include the vehicle's identification number (VIN). The policy provides FHPGT, LLC with insurance against liability it incurs for damages arising out of the ownership or use of an auto or trailer. The policy also includes, within its definition of an "Insured," "[a]ny person using your covered auto." The AIGPCC policy's limit of liability is $1 million per accident.
And finally, Chartis issued a "Personal Excess Liability Policy" to Salma Hayek and Francois Pinault (Sami's sister and brother-in-law), which was also in effect at the time of the accident. That policy provides broad liability coverage to the named insureds, but also requires various underlying insurance policies, including policies covering private automobiles, be maintained in amounts specified. In a "'schedule of underlying insurance,'" the Chartis policy identifies several vehicles, including one described as "2006 Ford GT." The policy states that it provides liability coverage for damages an insured person is legally obligated to pay that are either "[i]n excess of damages covered by the required underlying insurance," or "[f]rom the first dollar of damages where required underlying insurance either" "[e]xists but, coverage does not apply for a particular occurrence; or" "[i]s not required under this policy and no underlying insurance exists." (Boldface omitted.) The policy's limit of liability is $1 million.
This hybrid coverage means that the Chartis policy operates as both an "excess insurance" policy and a primary "umbrella policy." As explained in Legacy Vulcan Corp. v. Superior Court (2010) 185 Cal.App.4th 677, 689, "[p]rimary insurance provides coverage immediately upon the occurrence of a loss or an event giving rise to liability, while excess insurance provides coverage only upon the exhaustion of specified primary insurance. [Citation.] Insurance policies sometimes include both excess and umbrella insurance. Umbrella insurance provides coverage for claims that are not covered by the underlying primary insurance. [Citation.] An umbrella insurer 'drops down' to provide primary coverage in those circumstances. [Citations.] Thus, a policy that provides both excess and umbrella insurance provides both excess and primary coverage."
However, the Chartis policy also includes a "Manuscript Coverage," which specifically adds FHPGT, LLC, the owner of the 2006 Ford GT, as an additional named insured, but offers it only limited coverage. The endorsement states that FHPGT, LLP is "an insured person but only with respect to personal injury or property damage caused by an occurrence arising solely out of the ownership, maintenance or use of the vehicle(s) shown in the above schedule." (Italics added.) The only vehicle listed in that schedule is described as "2006 Ford GT."
Moreover, the Chartis policy also includes within its definition of an insured person "[a]ny person given permission by you or a family member to use a vehicle . . . covered under this policy with respect to their legal responsibility arising out of its use." (Boldface omitted.)
Both Gomez, and the de Cuttler surviving heirs, presented claims for damages against Sami, Salma, Pinault, and FHPGT, LLC, arising out of the accident. The de Cuttler claim was settled before suit by payment of $3,571,543.19, in return for which the claimants released and discharged AIGPCC, Mercury and Chartis, along with their respective insureds, "from any and all claims, demands, actions, or causes of action" arising out of the accident.
To fund the de Cuttler settlement payment, AIGPCC contributed the full $1 million limit of liability under its policy, Mercury contributed its $100,000 "per person" limit of liability, subject to a reservation of rights, and Chartis contributed the remaining $2,471,543.19.
The Gomez claim was also settled before suit, by payment of $500,000, in return for which the claimants released and discharged AIGPCC, Mercury and Chartis, along with their respective insureds, from any and all liability arising out of the accident.
In July 2015, Mercury filed its complaint for equitable subrogation and declaratory relief against Chartis, seeking reimbursement for the $100,000 contribution it made to both settlements. Mercury alleged that pursuant to section 11580.9(d), Chartis's policy was conclusively presumed to be "primary," while Mercury's policy was excess. Consequently, Mercury was not obligated to contribute to the settlements unless the Chartis coverage was first exhausted.
Chartis filed its answer to the complaint in September 2015, and the parties agreed to try the case to the court, based on stipulated facts. In support of its interpretation of section 11580.9(d), Chartis requested the trial court take judicial notice of the legislative history underlying the statute.
The case was tried to the court in September 2016. The court took the matter under submission and issued its ruling, in favor of Chartis, in October 2016.
In its ruling, the court explained that under general priciples of insurance law, Mercury's policy—which offered Sami primary coverage for liability incurred in an automobile accident—was obligated to contribute its policy limit to the settlements before Chartis, which had agreed to provide the vehicle owner with only excess coverage, could be obligated to contribute anything. The court reasoned section 11580.9(d) did not alter the application of those general principles because (1) only one liability policy can be designated as "primary" under that provision—and in this case that policy would have been the vehicle owner's primary liability policy; and (2) the Chartis policy did not describe the vehicle involved in the accident with sufficient particularity to qualify it as a policy that "described or rated [the vehicle] as an owned vehicle" under the statute.
Judgment was entered in favor of Chartis and against Mercury in November 2016.
DISCUSSION
Mercury's argument is that pursuant to the terms of section 11580.9(d), the Chartis policy is conclusively presumed to be "primary" because it describes the 2006 Ford GT while the Mercury policy is relegated to "excess" status. Thus, the Mercury policy was not liable for any contribution to the settlements until after the Chartis policy limit was exhausted, and consequently it is entitled to reimbursement from Chartis.
Because this case was tried on stipulated facts, and the issue raised on appeal involves only the interpretation of a statute and its impact on undisputed provisions of insurance policies, our review is de novo. (See Weatherford v. City of San Rafael (2017) 2 Cal.5th 1241, 1247 ["As this is a question of statutory interpretation, we consider it de novo"]; MRI Healthcare Center of Glendale, Inc. v. State Farm General Ins. Co. (2010) 187 Cal App.4th 766, 777 ["Insurance contracts are to be interpreted de novo in the same manner as any other contract, giving effect to the mutual intention of the parties"].) 1. The Statutory Provision
Section 11580.9(d) is one subdivision of a broader statute that governs the priority of multiple automobile liability policies applicable to the same loss in various contexts. As the Legislature expressly declared in the preceeding statute, Insurance Code section 11580.8, "it [is] the public policy of this state to avoid so far as possible conflicts and litigation, with resulting court congestion, between and among injured parties, insureds, and insurers concerning which, among various policies of liability insurance and the various coverages therein, are responsible as primary, excess, or sole coverage, and to what extent, under the circumstances of any given event involving death or injury to persons or property caused by the operation or use of a motor vehicle." Thus, the Legislature further declared "it [is] the public policy of this state that Section 11580.9 of the Insurance Code expresses the total public policy of this state respecting the order in which two or more of such liability insurance policies covering the same loss shall apply." (Ibid.)
Insurance Code section11580.9 subdivisions (a), (b), and (c) govern specific situations, none of which are applicable here (e.g., subd. (a) governs situations where "one policy affords coverage to a named insured engaged in the business of selling, repairing, servicing, delivering, testing, road-testing, parking, or storing motor vehicles").
But section 11580.9(d), establishes a broader rule, to be applied whenever the rules set forth in subdivisions (a), (b), and (c) do not apply: "Except as provided in subdivisions (a), (b), and (c), 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." (Italics added.)
On its face, this provision seems to establish a blanket rule that any liability policy that describes the vehicle involved in a loss as an owned vehicle is deemed primary, as compared to all other policies applicable to the same loss that do not describe the vehicle. This is essentially Mercury's contention.
However, Chartis contends, for a variety of reasons, that section 11580.9(d) cannot transform its policy, which by its terms provides "excess" coverage, into primary coverage. Much of Chartis's argument is grounded on what it contends are two established principles of insurance law: First, that any liability coverage designed by policy terms to operate as "primary" (e.g., Mercury's) must always be exhausted before any coverage designed to operate as "excess" (e.g., Chartris's) can be applied to a loss to which both policies apply; and second, that because the driver of a vehicle involved in an accident is the person in the "best position to avoid the loss," and thus "should be encouraged to exercise due care," the driver's insurer cannot be relieved of primary liability for a covered loss. Both contentions are misplaced, and thus neither is actually helpful to Chartis. 2. Significance of Chartis's Status as an "Excess" Insurer
Chartis's designation as an excess insurer is neither an immutable characteristic, nor a creation of public policy. Instead, it merely reflects the circumstances in which liability will attach under the terms of Chartis's policy. And significantly, that policy specifies only that required underlying insurance must first be exhausted before liability will attach. (See Hartford Accident & Indemnity Co. v. Sequoia Ins. Co. (1989) 211 Cal.App.3d 1285, 1295 (Hartford) ["'"Excess" or secondary coverage is coverage whereby, under the terms of the policy, liability attaches only after a predetermined amount of primary coverage has been exhausted'"].) In this case, the underlying insurance required by the Chartis policy in relation to the 2006 Ford GT was the AIGPCC primary policy. Consequently, Chartis is contractually entitled to excess status only in relation to the required exhaustion of that AIGPCC policy. Once the AIGPCC policy was exhausted (as Chartis agrees it was in this case), Chartis had received the benefit of its excess insurer designation, and liability for the accident immediately attached under the terms of its policy.
We acknowledge the Chartis policy also contains a generic "Other Insurance" clause, declaring that its coverage "shall apply as excess over any other insurance, except when the other insurance is specifically written to apply in excess of this policy." (Italics added.) However, the Mercury policy also contains its own "Other Insurance" clause, which states more specifically that "[w]ith respect to a non-owned automobile, this policy shall be excess over any other insurance . . . that applies to the same accident or loss." And in the absence of some other basis for determining that one insurer is primary and the other excess with respect to each other, such competing "other insurance" clauses will often be ignored. (See Firemean's Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1304-1305 ["where two or more primary insurers' policies contain excess 'other insurance' clauses purporting to be excess to each other, the conflicting clauses will be ignored and the loss prorated among the insurers on the ground the insured would otherwise be deprived of protection"].) In this case, neither party relies on its "Other Insurance" clause.
Chartis also cites a litany of cases which it contends establish that liability can never attach under an excess insurance policy unless all "primary" insurance—including unrelated policies—is first exhausted. Chartis asserts that "'all primary insurance' must exhaust prior to the attachment of excess coverage, 'even if the total amount of primary insurance exceeds the amount contemplated' by the excess policy." (Quoting Olympic Ins. Co. v. Employer's Surplus Lines Ins. Co. (1981) 126 Cal.App.3d 593, 601 (Olympic).) Based upon that "horizontal exhaustion" rule (see Legacy Vulcan Corp. v. Superior Court, supra, 185 Cal.App.4th at p. 697), Chartis claims that because Mercury's policy is a primary level policy, it must also be exhausted before liability attaches under Chartis's excess policy. We disagree.
The cases Chartis relies upon are inapposite because they presume the existence of two primary insurers who provide "the same level of coverage" (Legacy Vulcan Corp. v. Superior Court, supra, 185 Cal.App.4th at p. 697) and are thus required to contribute proportionally with each other. In that situation, the liability of both primary policies is prorated—meaning the two policy limits "are necessarily exhausted at the same time." (Olympic, supra, 126 Cal.App.3d at p. 600, fn. 3, italics added.) Consequently, the liability of an excess policy tied specifically to the exhaustion of either primary policy would not be triggered until after both policies had been exhausted.
Thus, in Olympic, supra, 126 Cal.App.3d at page 601, the court described a case where "there were two primary policies with pro rata 'other insurance' clauses and a secondary policy written as 'specific excess' to one of the two primary policies." In that case, the proper result was to "prorate[] the two primary policies, with the result that neither of the two primary policies was exhausted. Therefore, the secondary policy incurred no liability." (Ibid.) Similarly, in McConnell v. Underwriters of Lloyds of London (1961) 56 Cal.2d 637, 64, the court explained that the excess insurer incurred no liability because "[b]oth the Interstate policy and the Lloyds primary policy contain an 'other insurance' clause providing for proportionate sharing of the loss with all other 'valid and collectible insurance' against such loss. . . . Under such circumstances it is held that the excess insurance does not attach until all primary insurance has been exhausted."
In this case, however, the Mercury policy does not share co-equal liability for the loss with the AIGPCC primary policy, and thus it would not have to be exhausted at the same time. Instead, as Chartis itself points out in connection with a different argument in its brief, "both the Mercury and the Chartis policies [are] 'excess' to the AIGPCC policy." (Italics added.) This is true because, as Chartis acknowledges, the AIGPCC policy "unquestionably 'described' and 'rated' the 2006 Ford GT as an 'owned automobile'" and thus qualifies as a primary policy under section 11580.9(d). And establishing that the AIGPCC policy is "primary" under the provision also means that the Mercury policy is deemed excess in relation to it—just like the Chartis policy.
Unfortunately for Chartis, though, its concesssion that Mercury's policy is also "excess" to the AIGPCC policy fatally undermines its assertion of excess insurer status in relation to the Mercury policy. Because neither policy incurs any liability until after that AIGPCC policy limit is exhausted, the authorities Chartis relies upon to establish its excess status in relation to Mercury are plainly inapposite.
We consequently reject Chartis's attempt to distinguish itself from Mercury on the basis of its status as an "excess" insurer. That status merely entitled it to avoid liability for the loss until the AIGPCC policy limit was exhausted—an entitlement all parties agree was also bestowed on Mercury by operation of section 11580.9(d). 3. Significance of Mercury's Status as the Driver's Insurer
We also reject Chartis's assertion that a fundamental policy of insurance law requires that Mercury, as the driver's insurer, must be held primarily liable for a loss allegedly caused by the driver's own negligence. First, as Chartis concedes, section 11580.9(d) is itself inconsistent with that supposed policy. Although the Legislature presumably could have specified that in any situation where none of the other rules applies, the insurance policy which indentifies the driver will be presumed primary, and all other policies are excess, it did not do that. Instead, the Legislature chose to designate the insurance policy which describes the vehicle as primary. Given that clearly stated choice, we cannot presume public policy actually favors a different priority.
After acknowledging that section 11580.9(d) represents an "exception" to the rule it asserts, Chartis simply declares, without further explanation, that it's "an exception which, by definition, does not apply to the [Chartis] policy."
But Chartis's assertion fails for a different reason as well. Stated simply, Chartis fails to acknowledge that all three of the insurance policies that contributed to the settlements underlying this case—not just Mercury's—directly insured the driver for whatever liabiliy he incurred while driving the 2006 Fort GT.
Indeed, California law generally requires that automobile liability policies include a provision "affording insurance to the named insured with respect to any owned or leased motor vehicle covered by the policy, and to the same extent that insurance is afforded to the named insured, to any other person using the motor vehicle, provided the use is by the named insured or with his or her permission, express or implied, and within the scope of that permission." (Ins. Code, § 11580.1, subd. (b)(4), italics added; see Haynes v. Farmers Ins. Exchange (2004) 32 Cal.4th 1198, 1213 ["With some exceptions, Insurance Code section 11580.1, subdivision (b)(4) requires every automobile liability insurer to provide permissive user coverage to the same extent as that afforded to the named insured"].)
In accordance with that statutory requirement, both the AIGPCC policy and the Chartis policy included, within their definition of an insured, any person who was driving a vehicle covered under the policy. Hence, both policies directly insured the insured driver, Sami, for any liability he incurred while driving the 2006 Ford GT. Consequently, this is not a situation in which one insurance policy chose to assume liability for the actively negligent driver, while two other policies merely agreed to cover the passively negligent owner of the vehicle. Instead, we have three policies that each directly insured the negligent driver, and two of those—the AIGPCC and Chartis policies—also insured the negligent vehicle owner. Needless to say, if this situation could be said to justify placing primary responsibility for the loss on any insurer, it would not be Mercury.
And having determined that neither Chartis's status as an "excess" insurer, nor Mercury's status as "the driver's insurer" is relevant to our analysis, we turn to the other arguments advanced by Chartis. 4. Whether More than One Policy Can be Presumed Primary Under Section 11580 .9(d)
Chartis also contends that because section 11580.9(d) employs a singular reference in its description of an insurance policy that would be conclusively presumed "primary" under its terms—i.e., "that policy in which the motor vehicle is described or rated"—the rule it establishes can only be applied to a single insurance policy in any given situation. Relying on that interpretation, Chartis argues that because the provision "unquestionably" applies to the AIGPCC policy, it cannot also apply to the Chartis policy. In short, Chartis likens section 11580.9(d) to a gun with only one bullet—if it hits one policy, it cannot hit any others. We disagree.
Chartis cites four cases in support of its assertion, GuideOne Mutual Ins. Co. v. Utica National Ins. Group (2013) 213 Cal.App.4th 1494, 1503 (GuideOne); Hartford, supra, 211 Cal.App.3d at p. 1302; Highlands Ins. Co. v. Continental Casualty Co. (9th Cir. 1995) 64 F.3d. 514, 519 (applying Hartford); and Hartford Cas. Ins. Co. v. Am. Alternative Ins. Corp. (E.D. Cal., Apr. 22, 2015, No. 1:14-cv-00856-KJM-GSA) 2015 WL 1850195 (applying GuideOne & Hartford).
However, all of those cases are distinguishable and all for the same reason: in each of those cases, there was only one policy—the one conclusively presumed to be primary—that actually described or rated the vehicle involved in the accident as owned; none of the remaining policies did so. It was for that reason, and no other, that the courts acknowledged section 11580.9(d) could play no role in distinguishing among those remaining policies.
For example, in Hartford, supra, 211 Cal.App.3d at pages 1297-1298, the court explained: "In this case, of the four policies involved, only the Hartford Business Auto Policy No. 51 AB FC6905 is one in which the 1976 Chevrolet Blazer involved in the accident was 'described or rated' as an owned automobile. . . . Neither the Sequoia policy, the Transamerica Umbrella policy, or the Hartford Umbrella policy contained any mention of, reference to, or 'particularization' of the 1976 Chevrolet Blazer. For this reason, it seems clear that under section 11580 .9, subdivision (d), only the Hartford Business Auto Policy is primary." (Italics added.)
Similarly, in GuideOne, supra, 213 Cal.App.4th at page 1502, the court noted, "Because the State Farm policy provided coverage for West's vehicle as an owned or rated automobile, it is conclusively deemed a primary policy under section 11580.9(d). The GuideOne policies did not specifically identify West's vehicle. However, they covered West and covered the vehicle as a nonowned auto. Likewise, the Utica policies did not specifically identify West's vehicle, but covered CEA for West's vehicle as a nonowned auto. Thus, section 11580.9(d) renders the two GuideOne policies and the two Utica policies excess to the primary State Farm policy." (Italics added.)
Indeed, none of the cases Chartis relies upon actually stands for the proposition that only one policy could be deemed primary in relation to other policies under section 11580.9(d). To the contrary, GuideOne appears to acknowledge the possibility of multiple policies being deemed primary under the statute when it states the State Farm policy is deemed "a primary policy under section 11580.9(d)" (GuideOne, supra, 213 Cal.App.4th at p. 1502, italics added), rather than the primary policy. Similarly, Hartford's analysis—relying on the fact that "only the Hartford Business Auto Policy" describes or rates the vehicle, as the basis for concluding that "only the Hartford Business Auto Policy is primary" (Hartford, supra, 211 Cal.App.3d at pp. 1297-1298, italics added)—suggests the possibility of multiple primary policies.
And even if we agreed the statute was ambiguous, we would reject Chartis's interpretation for a more practical reason: Stated simply, limiting section 11580.9(d)'s conclusive presumption to a single policy in a given case would essentially nullify its effect in any case where its definition of a "primary" policy actually does apply to multiple policies. Specifically, if we assume that two policies in a single case can satisfy the statutory description of a primary policy, then arbitrarily limiting that statutory designation to only one of the two policies would create an obvious stalemate: both insurers would be free to argue that it is the other policy to which the statute applies, and thus it cannot apply to their own.
Such a result would create an absurdity, which must be avoided if possible: "'When uncertainty arises in a question of statutory interpretation, consideration must be given to the consequences that will flow from a particular interpretation. [Citation.] In this regard, it is presumed the Legislature intended reasonable results consistent with its expressed purpose, not absurd consequences.'" (Santa Clara County Local Transportation Authority v. Guardino (1995) 11 Cal.4th 220, 235.)
Moreover, to artificially limit the application of the provision in a particular case is directly contrary to the Legislature's stated goal in enacting the statute, which was "to avoid so far as possible conflicts and litigation . . . between and among . . . insurers concerning which, among various policies of liability insurance and the various coverages therein, are responsible as primary, excess, or sole coverage." (Ins. Code, § 11580.8, italics added.) Where, as here, applying the statute to more than one policy would bring clarity to the situation, we are compelled to conclude that is what the Legislature intended.
In any event, we find nothing ambiguous about the language of section 11580.9(d). The rule it creates is necessarily one that distinguishes between any individual policy that describes or rates a specific owned vehicle, and every policy that does not. (See Transport Indemnity Co. v. Royal Ins. Co. (1987) 189 Cal.App.3d 250, 253, italics added, [recognizing that under section 11580.9(d), "any policy which describes or rates the motor vehicle as an 'owned automobile' bears primary responsibility for the loss and any other policy is excess"].)
Further, applying that rule to a contractually designated excess insurer such as Chartis works no unfairness towards it. Because the rule distinguishes only between an insurance policy that describe the vehicle, and those that do not, it has no effect on Chartis's right to enforce its excess status in relation to AIGPCC. Thus, it does not deprive Chartis of the benefits of its contractual bargain.
For all of these reasons, we reject Chartis's contention that section 11580.9(d) can be applied to only one insurance policy in a case. 5. Whether the Chartis Policy "Applies" to the 2006 Ford GT
The trial court denied Chartis's request that it take judicial notice of documents it identified as legislative history relevant to the interpretation of section 11580.9(d). The court explained that judicial notice was inappropriate because the language of the statute was clear, and also because the documents Chartis relied most heavily on were "letters to legislators that are not properly subject to judicial notice." We decline to take judicial notice of the documents for those same reasons. --------
Chartis next argues that even if the rule established in section 11580.9(d) could be applied to a second insurance policy, it does not apply to the Chartis policy specifically. As Chartis explains, section 11580.9(d) distinguishes only among policies that "apply to the same vehicle in an occurrence," and its policy purportedly does not apply to any vehicles. Instead, as a "personal excess liability policy," the Chartis policy allegedly "'applies' to the liability of 'people.'" The argument is unpersuasive.
As we have already noted, the assertion that a particular type of liability insurance policy applies "to the liability of people" does not serve to distinguish that policy from any other type of liability insurance policy. The defining feature of all liability insurance policies is that they apply to the liabilities incurred by people (including entities) because that is the only type of civil liability that can be imposed by our law. Thus, to claim that a liability policy applies to "the liability of people," rather than "to vehicles," creates a false parallel. There is no liability insurance that applies to vehicles in the same way the Chartis policy applies to people.
Instead, the relevant distinction to be drawn in deciding whether a particular liability policy falls within the scope of section 11580.9(d) is whether it is one among multiple policies that cover liability arising out of the same vehicle's involvement in an occurrence—and thus whether they will need to prioritize their contribution to that shared liability. If they do, then section 11580.9(d) imposes a rule addressing that need. In this case, all three policies met that test because each insured against the same losses arising out of the 2006 Ford GT's involvement in the accident at issue in the settlements.
In arguing that a "personal excess liability policy" is not the type of liability policy to which section 11580.9(d) applies, Chartis relies on Hartford, supra, 211 Cal.App.3d, 1285, 1301, and Continental Ins. Co. v. Lexington Ins. Co. (1997) 55 Cal.App.4th 637, 644 (Continental), which follows Hartford. But the analysis conflates the issue of whether a policy applies to the same vehicle in an occurrence,—i.e., whether it falls within the scope of section 11580.9(d)—with whether it describes or rates the vehicle as an owned automobile—i.e., whether it would be conclusively presumed as primary under that provision. In neither Hartford nor Continental did the court conclude the policy fell outside the scope of section 11580.9(d). Instead, in both cases the courts merely concluded that the policies did not meet the description of a primary policy because they did not describe or rate any motor vehicle. Thus, in Continental, the court explained "we can conclude that the policy does not describe or rate as an owned automobile the motor vehicle involved in the underlying accident, or any other motor vehicle. Instead, the policy affords coverage to 'persons insured,' defined at pages 4 and 5 of the policy, which includes permissive users of autos owned by the insured or hired for use on the insured's behalf." (Continental, at pp. 643-644; see also Hartford, at p. 1299 ["the 1976 Chevrolet Blazer is not 'described or rated as an owned automobile' in the umbrella policy and the trial court did not err in holding that section 11580.9 did not apply to the Hartford Umbrella"].)
In any event, the fact the Chartis policy qualifies as a "personal excess liability policy," offering broad coverage to its principal insureds, is immaterial in this case. Because as to FHPGT, LLC, the owner of the 2006 Ford GT, the policy operates exclusively as a policy of automobile liability insurance for an owed vehicle. The manuscript endorsement adding FHPGT, LLC as an insured explicitly defines its coverage as applying to liability "arising solely out of the ownership maintenance or use of the" 2006 Ford GT. (See Ins. Code, § 11580.1, subd. (a), characterizing a "policy of automobile liability insurance described in Section 16054 of the Vehicle Code" as one "covering liability arising out of the ownership, maintenance, or use of any motor vehicle.")
Given that the Chartis policy extends coverage to the 2006 Ford GT's owner with respect to liability arising out of its ownership, maintenance or use of that vehicle, we have no trouble concluding that the policy "applies" to the vehicle as that term is used in section 11580.9(d). 6. Whether the Chartis Policy Sufficiently "Describes" the 2006 Ford GT
Chartis's final contention is that its policy does not describe the 2006 Ford GT with sufficient particularity to qualify as a primary policy under section 11580.9(d). Again we are unpersuaded.
We do agree that section 11580.9(d) requires a vehicle to be described with particularity. (Ohio Cas. Ins. Co. v. Aetna Ins. Co. (1978) 85 Cal.App.3d. 521, 524 [a statutory requirement that specifies a "description or rating . . . in commonsense understanding, means a particularization of the vehicle"].)
However, the Chartis policy meets that requirement. To the extent the cases have rejected the application of section 115809(d) on the basis that a policy did not sufficiently describe the vehicle, it was because the policy did not mention the specific vehicle at all.
Thus, in Ohio Cas. Ins. Co. v. Aetna Ins. Co., supra, 85 Cal.App.3d. at page 524, the court concluded that a "'fleet' policy, by which a newly acquired vehicle automatically becomes insured upon transfer of ownership (premium to be calculated upon audit)" did not qualify as a primary policy under section 11580.9(d) because it did not describe or rate any particular vehicle. Similarly, in Hartford, supra, 211 Cal.App.3d, at page 1299, the court determined that an excess policy which merely referenced an underlying policy describing the vehicle, but did not actually incorporate that underlying policy by reference, or otherwise identify the vehicle itself, did not describe the specific vehicle.
But the Chartis policy does specifically identify the vehicle involved in the relevant accident. It refers specifically to the "2006 Ford GT" in its schedule of underlying insurance policies—rather neatly distinguishing this case from Hartford, in which the court pointedly noted the excess policy referenced the underlying insurance policy in its schedule of insurance, but not the car itself. (See Hartford, supra, 211 Cal.App.3d at p. 1299.) In this case, it was the opposite. More significantly, however, the Chartis policy again refers specifically to the "2006 Ford GT" in the manuscript endorsement that extends coverage under the policy to its owner, FHPGT, LLC, and defines the coverage in terms of that specific vehicle.
Chartis attempts to put a different spin on the manuscript endorsement, arguing that it refers to the 2006 Ford GT "solely for the self-evident purpose of delineating the limited extent of coverage provided to . . . FHPGT" under the policy, and not for the purpose of describing or rating the vehicle in the way an insurer would do it if it were extending insurance in connection with that specific vehicle. The attempt fails. The manuscript endorsement indisputably extends coverage to FHPGT, LLC with respect to the 2006 Ford GT. It does not limit any existing coverage that FHPGT, LLC already had.
Finally, we acknowledge the trial court suggested in its statement of decision that "'[t]he normal method of "particularization" of a vehicle is to state its [VIN].'" (Quoting Croskey, et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2016) ¶ 8:50, p..) We agree that the use of a VIN would be an excellent way of particularizing a vehicle. However, section 11580.9(d) does not require that a vehicle be described by reference to its VIN, and in a case such as this, where there is no apparent dispute as the identity of the specific 2006 Ford GT described in the Chartis policy, we conclude it is unnecessary.
For all of the foregoing reasons, we conclude the Chartis policy described the 2006 Ford GT as a vehicle owned by its insured, FHPGT, LLC, and thus that the policy was conclusively presumed to be primary under section 11580.9(d). As a consequence, the Mercury policy—which made no reference at all to the 2006 Ford GT—was deemed to an excess policy in relation to the Chartis policy.
And because the Chartis policy has a $10 million limit of liability, an amount far in excess of the total liability established by the two underlying settlements, Mercury was not obligated to contribute any funds to those settlements. Hence, Mercury is entitled to reimbursement from Chartis for the $100,000 it contributed to each of the two settlements under a reservation of rights.
DISPOSITION
The judgment is reversed and the case is remanded to the trial court with directions to enter judgment in favor of Mercury. Mercury is entitled to its costs on appeal.
THOMPSON, J. WE CONCUR: O'LEARY, P. J. IKOLA, J.