Opinion
For Opinion on Hearing, see 115 Cal.Rptr. 232, 524 P.2d 360.
Opinions on pages 252-269 omitted.
HEARINGS GRANTED
Veatch, Snow, Carlson, Dorsey & Quimby, Robert P. Dorsey, and Henry F. Walker, Los Angeles, for defendant and appellant.
Schell & Delamer, Eugene D. Hillman, Los Angeles, for plaintiff and respondent.
STEPHENS, Associate Justice.
This is an action for declaratory relief and for money paid, brought by one liability insurance carrier against another insurer. The question presented in this appeal by defendant is whether the trial court adopted the proper method of prorating loss and defense costs between the two insurers.
Facts
The facts are set forth in a Stipulated Statement of Facts, summarized as follows: On June 24, 1964, on U.S. Highway 99 near the town of Madera, California, a charter passenger bus was transporting a group of members of Los Angeles Chinese Drum & Bugle Corps from Los Angeles to Sacramento, when an accident occurred, as a result of which three of the bus passengers were killed, some thirty others were injured, and property damage occurred to musical instruments. Various actions were brought for damages for wrongful death and personal injury, alleging, inter alia, negligence of the bus owner Bus & Truck Repair Co., and of City Bus System and Orange County Bus System (hereinafter referred to jointly as City Bus), as operator of the bus.
At the time of the accident there were in effect two liability insurance policies, the interpretation of which is involved in this action. Plaintiff, The Travelers Indemnity Company (hereinafter, Travelers) had issued [109 Cal.Rptr. 856] a policy of liability insurance to City Bus as the named insured. Standard Accident Insurance Co. (hereinafter, Standard) had issued its policy of liability insurance to Bus & Truck Repair Co. as named insured. Standard has been succeeded by Reliance Insurance Company (hereinafter, Reliance), the defendant in this action. Both insurance polices were in effect at the time of the accident.
Defense of tort actions in behalf of City Bus was tendered to and refused by Reliance. In the course of events all the damage actions and claims were settled by compromise and paid in the total sum of $242,395.10. Firestone Tire & Rubber Co., whose insurance coverage is not involved here, paid five-eighths of this total ($151,496.94) and Travelers paid the balance of $90,898.16 in behalf of City Bus. Travelers also incurred and paid $16,627.57 in legal costs in connection with defense of the damage actions. Reliance did not pay any part of the settlements or defense costs. The amounts paid by Travelers varied with the individual claims from $33,750 as the highest amount down to $262.50 as the lowest. The exact sums paid in individual claims are itemized in Exhibit 1, and in the Court's Finding X, and are set forth in the accompanying footnote.
In connection with the following, Column A represents the combined payment made by Firestone and Travelers for a particular item, and Column B represents the amount paid by Travelers for a particular item:
[109 Cal.Rptr. 857]The trial court also concluded: 'City School Bus System and Orange County Bus System were insured against the claims and expenses herein described and arising out of the accident of June 24, 1964, by both of the policies of the parties hereto; and the Court further finds in arriving at the proportion of the settlements and expenses paid and incurred in respect to the share of said insureds to be borne by the parties to this action as follows:' (Then the court applied a formula which it obtained from what is no longer case authority, but which it considered itself bound to follow at that time.) It then expressed itself as to the formula it would have applied had it not considered itself bound by the stated case. Continuing, the court said it would apply the following formula if it felt free to do so:
'That Reliance's available insurance would be on the basis of $100,000.00 and Traveler's available insurance on the basis of $310,000.00 or a total amount of insurance available for proration of $410,000.00; that Reliance would pay 10/41 and Travelers would pay 31/41; under which formula Travelers would be required to bear $68,727.87 on account of losses paid and Reliance ought to bear $22,170.28 thereof; and Travelers ought to bear $12,572.05 being its share of expenses for investigation and defense and Reliance ought to bear $4,055.50 thereof; under which formula plaintiff [Travelers] is entitled to judgment against defendant [Reliance] in the sum of $26,225.78, together with interest thereon at the rate of seven (7%) percent per annum from September 20, 1967, until the date of judgment herein and for its costs of suit herein incurred.'
Reliance argues that 'while the Reliance policy provides less in monetary limits than the greater $310,000 monetary limits of the Travelers policy, Travelers, as to the $90,898.16, has been held responsible for but $34,574.24 or percentage-wise 37.106% thereof; and Reliance has been held responsible for the remaining or more than 60%; roughly an apportionment of 1/3 to Travelers and 2/3 to Reliance! Also, while the Reliance policy provides less in monetary limits than the greater $310,000 monetary limits of the Travelers policy, Travelers, as to the $16,627.57 expended for costs of defense, has been held responsible for but $1,992.34 or percentage-wise 12% thereof; and Reliance has been held responsible for the remaining or approximately 88%; roughly an apportionment of 3/25 (12/100) to Travelers and 22/25 (88/100) to Reliance! [p] In other words, while the polices were to prorate and while Travelers' policy had the greater limits of $310,000 than Reliance's policy (which latter had limits of $100,000 per person, $300,000 per accident, and $100,000 property damage), Reliance has been held to be responsible for a pro rata share in amounts which far exceed that for which Travelers has been held responsible. The insure under the policy with the greater limits has been held responsible for a less proportion that the insurer under the policy with the lesser limits.' We find no fallacy in the argument.
The trial court did not express itself on the method of proration based solely upon the total per-accident coverage of Travelers and Reliance which would provide a divisor of 61, i.e., $310,000 plus $300,000, for a total of $610,000. This formula is urged as an alternative to the formula expressed as desirable by the trial court. [109 Cal.Rptr. 858] Under this method, the proportionate share each company would pay toward each settlement on the per person basis would then be 31/61 for Travelers and 30/61 for Reliance. We have considered this approach and find it faulty under the facts before us. An example should suffice to show that this formula may not be relied upon: Assume a case in which more than three persons were injured-claimants and one of them recovered $210,000. Under the formula of 30/61 and 31/61, Reliance would be called upon to pay in excess of $103,000. Of course, its per person limit of $100,000 precludes such participation. The cases of Government Employees Insurance Co. v. St. Paul Fire Etc. Inc. Co., 243 Cal.App.2d 186, 52 Cal.Rptr. 317 and Allstate Insurance Co. v. Consolidated Mutual Ind. Co., 35 A.D.2d 535, 313 N.Y.S.2d 181 are cited as authority for the above stated formula. Neither case makes an analysis of the effects of such a formula. In adopting the formula first expressed by the trial judge in this case, we believe that there are no circumstances in which its application would not effectively provide the proportionate contribution for participating insurance companies.
At the time of the argument before us, Travelers essentially conceded that such a formula would be acceptable. We are not bound by any such concession, but accept it as a fortification of the conclusion that the judgment based on the formula adopted (begrudgingly) by the trial court must be reversed.
Since we are not controlled by the theory applied (unwillingly) by the trial court, we adopt the formula which the trial judge stated he would like to have applied, for to us it is the more reasonable one. The lack of analytical authority, either text or case, leaves the choice of formula unfettered by a result based upon different circumstances. As a precautionary measure only, we wish it understood that we do not decide what formula might be appropriate where the total to be recovered exceeds the maximum limits of both parties, except to again call attention to the example above set forth and to express the desire that an appropriate single formula be adopted so as to aid future draftsmen in the preparation of insurance policies.
The judgment is reversed and remanded with directions that a judgment be entered in conformance with the views expressed in this opinion.
KAUS, P. J., and ASHBY, J., concur.
Name Column A Total Column B Amount Paid Settlement By Travelers --------------------------------- ---------------- --------------------- 1. Georgina Shum $ 950 $ 356.25 2. Grace Lowe 1,125 421.87 3. Morris Lowe 6,000 2,250.00 4. Harry G. Quan 5,684 2,131.50 5. Cynthia G. Quan 5,700 2,137.50 6. Michael Tong 2,500 937.50 7. Gene Yonemoto 1,250 468.75 8. Richard Yee 3,750 1,406.25 9. Ronald Chan 800 300.00 10. Janice Chew 1,000 375.00 11. Dorothy Chu 1,100 412.50 12. Judy Chu 700 262.50 13. Grepory Fong 80,000 30,000.00 14. Howard Ng 2,000 750.00 15. Nathan Nought 700 262.50 16. Joseph Kim Oh 2,000 750.00 17. Frederick Tom 700 262.50 18. Lenore Tom 1,000 375.00 19. Jeffrey Tong 700 262.50 20. Sherrilyn Tong 700 262.50 21. Jayson Wing 800 300.00 22. Terrence Moy 800 300.00 23. Stanton Joe 1,000 375.00 24. Benson Chan 700 262.50 25. Lawrence Joe 3,000 1,125.00 26. Robert Joe 900 337.50 27. Willie Wong 3,000 1,125.00 28. Clifford Tom 700 262.50 29. Nelson Ng 8,000 3,000.00 30. Rose Tong 6,500 2,437.50 31. Stella Jue 90,000 33,750.00 32. Michael Jue 4,000 1,500.00 33. Ronald Jue 4,000 1,500.00 ---------------- --------------------- Subtotal $241,395.10 $90,059.62 Correct Subtotal $241,759.00 $90,059.62 34. Hartford Ins. Co. (Property 636.10 238.54 damage for musical instrument) ---------------- --------------------- Grand Total $242,395.10 $90,898.16