Opinion
NOT TO BE PUBLISHED
APPEAL from a judgment of the Superior Court of San Diego County No. GIC876557, Steven R. Denton, Judge.
O'ROURKE, J.
This appeal arises out of cross-motions for summary judgment involving a determination of whether defendant Progressive Casualty Insurance Company (Progressive) and/or plaintiff Williamsburg National Insurance Company (Williamsburg) owed an insured a duty to indemnify and defend under their respective commercial automobile liability insurance policies. After third parties filed a personal injury suit against the insured stemming from an October 22, 2005 automobile accident, Progressive declined to defend the underlying lawsuit on grounds the insured had instructed it to cancel its policy as of September 18, 2005, and it had obtained a hold harmless agreement from Williamsburg acknowledging the cancellation. Williamsburg defended and settled the third party matter and sued Progressive for declaratory relief, equitable indemnity and equitable contribution, seeking a judicial determination that Progressive, not it, had a duty to defend and indemnify the insured. The trial court granted Williamsburg's motion and denied Progressive's motion, in part ruling Progressive's retroactive cancellation of its policy to September 18, 2005, was ineffective because there was no mutual assent to the cancellation.
On appeal, Progressive contends the summary judgment should be reversed on grounds the evidence shows the insured through its authorized agent made an unconditional and definite request to cancel the Progressive policy before the underlying personal injury loss. Progressive further contends Williamsburg's equitable causes of action are barred by equitable estoppel and the unclean hands doctrine. We conclude that as a matter of law Progressive cannot establish an effective cancellation of its policy as of a date before its insured's loss. We further conclude Williamsburg's coverage was excess to Progressive's as a matter of law. Finally, we conclude Progressive has not shown triable issues of material fact preventing summary judgment in Williamsburg's favor with respect to Progressive's equitable estoppel and unclean hands defenses. Accordingly, we affirm the summary judgment.
FACTUAL AND PROCEDURAL BACKGROUND
We set out the undisputed facts from the parties' separate statements and other unchallenged evidence presented in their cross-motions for summary judgment/summary adjudication. (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 843 (Aguilar); Cotta v. City and County of San Francisco (2007) 157 Cal.App.4th 1550, 1553, fn. 2; Alexander v. Codemasters Group Limited (2002) 104 Cal.App.4th 129, 139.) We state other facts and draw inferences in the light most favorable to Progressive. (Conroy v. Regents of University of Cal. (2009) 45 Cal.4th 1244, 1249-1250.)
In July 1998, Brown Bulk Transportation (Brown Bulk or the insured), a trucking company, purchased a commercial automobile liability insurance policy from Progressive (the Progressive policy) through the Norven Storrs Insurance Agency (Norven Storrs). Over the next seven years, the Progressive policy was in force at various times with respect to select motor vehicles. In mid-July 2005, the Progressive policy renewed for a one-year period. At that time, the Progressive policy insured a 1996 Peterbilt dump truck and a 1972 Superior Trailer (the subject truck and trailer or subject vehicles), as reflected on a schedule specifically identifying those vehicles. The policy also contained an endorsement permitting the insured to cancel the policy "by mailing or delivering to us advance written notice of cancellation." Because Brown Bulk is a commercial trucking company, Progressive was required under Vehicle Code section 34630 to file a certificate of insurance with the California Department of Motor Vehicles (DMV) obligating it to cover all of Brown Bulk's vehicles even if they were not listed within the insurance policy.
For some years before 2005, Brown Bulk also maintained commercial liability insurance with Williamsburg, which insured the majority of Brown Bulk's vehicles. In mid-September 2005 (all further dates are in 2005 unless otherwise indicated), Williamsburg issued to Brown Bulk a commercial auto policy (the Williamsburg policy), effective September 18, 2005, to September 18, 2006. Brown Bulk's insurance broker, R.S.I. Insurance Brokers Insurance Agency (RSI), placed the insurance through Williamsburg's appointed agent, Interline Insurance Services, Inc. The Williamsburg policy did not list the subject truck and trailer; however, like Progressive, Williamsburg was required to issue the DMV endorsement under Vehicle Code section 34630.
"As statutorily defined, an ' "[i]nsurance broker" means a person who, for compensation and on behalf of another person, transacts insurance other than life with, but not on behalf of, an insurer.' (Ins. Code, § 33.) In contrast, an ' "[i]nsurance agent" means a person authorized, by and on behalf of an insurer, to transact all classes of insurance other than life insurance.' (Ins. Code, § 31.)" (American Internat. Specialty Lines Ins. Co. v. Continental Casualty Ins. Co. (2006) 142 Cal.App.4th 1342, 1363.) Generally, an insurance broker, unlike an insurance agent, is the insured's agent. (See Marsh & McLennan of Cal., Inc. v. City of Los Angeles (1976) 62 Cal.App.3d 108, 117.)
The DMV endorsement of both policies states in part: "The purpose of this Endorsement is to assure compliance with the [Motor Carriers of Property] Act and related rules and regulations. [¶] Insurer agrees to each of the following: [¶] • that the coverage provided by the endorsement excludes any costs of defense or other expense that the policy provides. [¶]... [¶] Insurer agrees: [¶] • to pay an [sic] legal liability of the insured for bodily injury, death, or property damage arising from the operation, maintenance, or use of any vehicle for which a motor carrier permit is required, whether or not such vehicle is described in the attached policy; payment shall be consistent with the minimum insurance coverage required by California Vehicle Code (CVC) Section 34631.5 and consistent with the limits provided by the attached policy. [¶] • and certifies that the attached policy covers all vehicles used in conducting the service performed by the Insured for which a motor carrier permit is required, whether or not the vehicle is listed in the policy. [¶] • that the Certificate of Insurance shall not be canceled on less than thirty (30) days notice from the Insurer to the DMV, written on an authorized Notice of Cancellation form; the thirty (30) day period commences from the date the Notice of Cancellation was received at the office of the California Department of Motor Vehicles, Motor Carrier Services Branch, in Sacramento, California."
RSI did not learn of the Progressive policy until about October 18, when an Interline agent mentioned the policy's existence. After learning about the Progressive policy, an RSI producer, Bruce Fawcett, recommended that Brown Bulk cancel that policy and place all of its vehicles under the Williamsburg policy. Fawcett made this recommendation as a result of the problems stemming from having two policies covering liability under the DMV statutory filing. Brown Bulk's manager at the time, Jerry Brown, agreed. In the latter half of October, Brown spoke with Norven Storrs representative Carrie Lounsbury, about the existing policy with Williamsburg and advised her that he wanted to transfer all of the vehicles to the Williamsburg policy and cancel the Progressive policy. Lounsbury told Brown she would request cancellation, but Progressive would require Williamsburg to provide a hold-harmless agreement for liability under the DMV endorsement. Later that day, a person from Brown Bulk advised Lounsbury that RSI was Brown Bulk's broker and asked her to send RSI a copy of the Progressive policy's declaration page. In the meantime, RSI asked Interline to secure the hold-harmless agreement. Interline processed the endorsement to add vehicles, including the subject truck and trailer, to the Williamsburg policy effective October 24.
Brown's declaration, which we construe strictly for purposes of our review, states he spoke with Fawcett who requested that Brown Bulk cancel the Progressive policy and: "I agreed that Brown Bulk would transfer the vehicles to the Williamsburg policy and cancel the Progressive policy. The Progressive policy was to be cancelled only after the vehicles insured by Progressive were added to the Williamsburg policy. It is my recollection that the transfer and cancellation were to be effective at or about the beginning of November 2005. Neither myself nor anyone at Brown Bulk authorized any person at Norven Storrs or RSI to cancel the Progressive policy before all of the vehicles were added to the Williamsburg policy. I did not authorize cancellation of the Progressive policy retroactive to September 18, 2005." Brown does not say that he advised Fawcett or anyone at Norven Storrs to cancel Progressive's policy only after the subject vehicles were transferred to Williamsburg's policy. If Brown had this intent, his declaration (at least for purposes of summary judgment review) does not establish it was expressed to RSI, Norven Storrs, or anyone at Progressive.
On October 22, one of Brown's drivers, Robert Sloan, was involved in an accident with another motor vehicle while operating the subject truck and trailer.
Williamsburg points out that Progressive states in its brief that the motor vehicle accident occurred on October 21, 2005. The third party complaint alleges the accident occurred on October 22, 2005. The disparity is not consequential to the issues presented.
On October 27, RSI obtained from Norven Storrs and sent Interline documents necessary to prepare the hold-harmless agreement: a copy of the declarations page and vehicle schedule from the Progressive policy. At RSI's request, an Interline underwriter instructed an assistant to issue the hold-harmless agreement effective as of October 24. The Interline assistant, however, mistakenly drafted it effective September 18, the date Williamsburg's policy issued. Williamsburg's "Commercial Automobile Hold Harmless Agreement" dated November 7, 2005, states in part:
"Whereas, Progressive Casualty Insurance Company ("Prior Insurer") issued automobile Liability statutory Filings underneath policy(s) # 00920755-7 on behalf of Brown Bulk Transportation, Inc. [(]the "Insured"), and the Prior Insurer's policy is no longer in effect as of 12:01 a.m. on the 18th day of September 2005 (the cancellation date); and Whereas, [Williamsburg] has issued policy(s) # CA0273513 Providing coverage effective as of 12:01 a.m. on the 18th day of September 2005 (the "Effective Date").
"[Williamsburg] agrees to hold the prior insurer harmless from all losses, costs, expenses or liabilities which the prior insurer may become obligated to pay solely by reason of the automobile liability statutory filings made by the prior insurer on behalf of the insured.
"[Williamsburg] will not be liable for any losses, costs, expenses, or liabilities unless all of the following conditions are met: [¶] 1) This agreement only applies to in force automobile liability statutory filings that [Williamsburg] has made for the insured that directly replace the automobile liability statutory filings made underneath the above captioned policy(s) [sic] by the prior insurer on behalf of the insured. [¶] 2) The basis for the losses, costs, expenses, or liabilities must have occurred while the [Williamsburg] policy(s) [sic] were in force. [¶] 3) The basis for the losses, costs, expenses, or liabilities must be covered underneath the terms, conditions and limits of liability of the [Williamsburg] policy(s) [sic]."
On or about November 9, Interline forwarded Williamsburg's hold harmless agreement to RSI. On November 10, RSI sent the hold harmless agreement to Norven Storr with instructions to cancel the Progressive policy effective September 18. That same day, Norven Storr sent Progressive a request to cancel the Progressive policy effective September 18 per the hold-harmless agreement and notified Brown Bulk of its request.
Meanwhile, on November 4, about a week before Norven Storr instructed Progressive to cancel the policy, Progressive's claims department received notice of the October 22 loss and began adjusting the claim.
On November 17, Progressive began processing the cancellation request. An individual in Progressive's commercial underwriting department attempted to enter the September 18 date, but the computer would not permit entry of a retroactive date beyond the most recent policy change, which was October 24. Thus, the computer generated a cancellation date of October 24 and calculated a credit balance due to Brown Bulk. Progressive notified Brown Bulk that its policy had been cancelled as of October 24. Progressive also sent Brown Bulk checks for unearned premiums, which were deposited. On November 18, Progressive sent statutory notice of cancellation to the DMV, stating, "This cancellation shall be effective thirty (30) days after the date received by the Motor Carrier Services Branch, Department of Motor Vehicles in Sacramento, CA or on 12/23/2005 at 12:01... whichever occurs last."
Progressive's evidence indicates that on October 24, a request was made to its commercial underwriting department to add Robert Sloan as a rated driver on the Progressive policy.
On November 20, another Progressive underwriter manually entered the requested September 18 retroactive cancellation date into its computer system. Progressive then sent another letter advising Brown Bulk that there had been an "additional cancel" processed on its policy that was effective September 18, and that it would mail additional unearned premiums.
It was not until November 21 that Progressive's claims department became aware of the cancellation on its policy issued to Brown. A claims adjuster contacted Progressive's commercial underwriting department and was provided with Williamsburg's hold-harmless agreement. That adjuster then reported the motor vehicle accident to Biller Smith, Williamsburg's claims administrator. Biller Smith advised the Progressive adjuster that the Williamsburg policy was in force for the relevant date of loss and that it would assign an adjuster.
On November 28, RSI noticed the mistaken September 18 date on the Williamsburg hold-harmless agreement, and inquired about it with Interline. On November 30, Interline conceded the date was inserted in error and forwarded an amended hold-harmless agreement to Progressive, stating the previous agreement had the incorrect date. The amended agreement, dated November 30, identified October 24 as the effective cancellation date for the Progressive policy.
On or about June 1, 2006, Progressive denied coverage for the October 22 loss on grounds it had cancelled the policy as of September 18 at the insured's request, and also pursuant to the hold harmless agreement indicating Williamsburg was providing Brown coverage as of September 18. About two weeks after Progressive denied coverage, a lawsuit was commenced against Brown and Sloan for personal injuries stemming from the accident.
Williamsburg accepted Brown Bulk's defense under a reservation of rights and filed the present action seeking a judicial declaration of its and Progressive's rights and obligations as to coverage and defense of Brown Bulk under its insurance policy, as well as equitable indemnity and equitable contribution. Thereafter, Williamsburg and Progressive filed cross-motions for summary judgment as to the coverage dispute. Williamsburg argued that an insurance policy could not be retroactively cancelled after a loss had occurred, as Progressive had done in the present case. Arguing that its policy did not cover Brown's involved vehicles on the date of the accident, Williamsburg maintained that the third parties' right to recover under Progressive's policy accrued on October 22, 2005, the accident's date, when Progressive's policy provided the only coverage for Brown's involved vehicles. Williamsburg further argued Progressive's policy was primary because it specifically described Brown's vehicles whereas Williamsburg's policy did not include them until after the loss. Williamsburg asserted there was no concurrent or duplicative coverage and the accident was not a contingent or unknown event that would fall within its policy.
In opposition, Progressive argued Williamsburg's arguments were based on an inapposite line of authority in which the courts held public policy would not permit an insured or insurer to defeat third party claims by rescinding or cancelling the policy. It maintained those principles did not apply because the Williamsburg policy provided coverage even without listing the subject vehicles, and the insured via its broker had made a definite and unconditional request for cancellation. Progressive argued Williamsburg was not entitled to equitable relief where the retroactive cancellation it challenged resulted from the mistake of Williamsburg's agent, Interline.
The trial court granted Williamsburg's motion and denied Progressive's motion. It ruled Progressive's policy was in effect as of the date of the accident; that the uncontradicted evidence showed Brown Bulk intended to cancel the policy on the same day the subject vehicles were added to Williamsburg's policy but its intent was not followed due to a mistaken cancellation that was ineffective. The court rejected Progressive's equitable estoppel and unclean hands arguments on grounds Williamsburg and its agents had not acted intentionally or inequitably, and Progressive would not suffer injury upon the insured's tender of its refunded partial premium. The court finally ruled Williamsburg did not have to provide a defense under the DMV endorsement, which was limited to indemnification of liability.
Thereafter, the parties stipulated to include additional facts as part of the summary judgment record: (1) The underlying personal injury case settled on or about November 15, 2007, for $150,000 in return for a complete general release of Brown Bulk and Sloan; (2) Williamsburg paid $4,500 to settle the second injured parties' claim; and (3) Williamsburg paid $71,933.98 in attorney fees and costs to defend that action. Following entry of that stipulation and judgment, Progressive filed the present appeal.
DISCUSSION
I. Standard of Review
The court properly grants summary judgment if the record establishes no triable issue as to any material fact and the moving party is entitled to a judgment as a matter of law. (Code Civ. Proc., 437c, subd. (c).) "[T]he party moving for summary judgment bears an initial burden of production to make a prima facie showing of the nonexistence of any triable issue of material fact; if he carries his burden of production, he causes a shift, and the opposing party is then subjected to a burden of production of his own to make a prima facie showing of the existence of a triable issue of material fact.... A prima facie showing is one that is sufficient to support the position of the party in question." (Aguilar, supra, 25 Cal.4th at pp. 850-851, fns. omitted.) Although the burden of production shifts, the moving party always bears the burden of persuasion. (Id. at p. 850.) "There is a triable issue of material fact if, and only if, the evidence would allow a reasonable trier of fact to find the underlying fact in favor of the party opposing the motion in accordance with the applicable standard of proof." (Ibid.) Our review is de novo. (Id. at p. 860; Kahn v. East Side Union High School District (2003) 31 Cal.4th 990, 1003; Troyk v. Farmers Group, Inc. (2009) 171 Cal.App.4th 1305, 1320.)
Here, the plaintiff, Williamsburg, was the prevailing moving party on its declaratory relief action regarding its duty to defend and indemnify and right to equitable indemnity or equitable contribution from Progressive. A plaintiff may move for summary judgment to establish "that there is no defense to the action or proceeding." (Code Civ. Proc., § 437c, subd. (a).) A plaintiff meets its initial burden of showing that there is no defense to a cause of action when it "has proved each element of the cause of action entitling the party to judgment on that cause of action." (Id., subd. (p)(1).) "[S]ummary judgment law in this state no longer requires a plaintiff moving for summary judgment to disprove any defense asserted by the defendant as well as prove each element of his own cause of action." (Aguilar, supra, 25 Cal.4th at p. 853.)
We asked the parties to brief Williamsburg's threshold summary judgment burdens on its causes of action for equitable indemnity and equitable contribution. The parties agree that Williamsburg's burden differed as to the two causes of action. Williamsburg sought judgment as a matter of law based on a judicial declaration that only Progressive owed Brown Bulk a duty to defend and indemnify in connection with the third party claim; Williamsburg sought to shift the entire burden of the loss to Progressive under principles of equitable indemnity. To meet its threshold burden for such a judgment in its favor, it was required to make a prima facie showing justifying such a declaration: i.e., that a potential for coverage existed under the Progressive policy because it was not effectively or validly cancelled as of September 18, and, importantly, that Williamsburg's policy (which it issued for a one-year period beginning on September 18, 2005, before the loss) did not potentially cover the October 22, 2005 loss or impose on Williamsburg a concurrent duty to indemnify or defend the insured. (See Powerine Oil Co., Inc. v. Superior Court (2005) 37 Cal.4th 377, 390; Standard Fire Ins. Co. v. Spectrum Community Assn. (2006) 141 Cal.App.4th 1117, 1124 [plaintiff insurer in declaratory relief action seeking summary judgment is required to show no potential for indemnity under its policy by establishing as a matter of law that there is no coverage under its policy]; Safeco Ins. Co. of America v. Superior Court (2006) 140 Cal.App.4th 874, 881 [settling insurer moving for summary judgment in action for equitable contribution against nonparticipating insurer has met its burden of proof when it makes a prima facie showing of coverage under the nonparticipating insurer's policy, then burden of proof shifts to nonparticipating insurer to prove absence of actual coverage].)
With respect to the defendant's burden, "[o]nce the plaintiff... has met [its] burden, the burden shifts to the defendant... to show that a triable issue of one or more material facts exists as to that cause of action or a defense thereto." (Code Civ. Proc., § 437c, subd. (p)(1).) When a plaintiff moving for summary judgment has met its initial burden of production, "[t]he defendant... may not rely upon the mere allegations or denials of its pleadings to show that a triable issue of material fact exists but, instead, shall set forth the specific facts showing that a triable issue of material fact exists as to that cause of action or a defense thereto." (Ibid.) Where summary judgment is appropriate on the plaintiff's behalf in a declaratory relief action, the court should decree that the plaintiff is entitled to judgment as a matter of law based on a declaration in its favor. (See, e.g., Gafcon, Inc. v. Ponsor & Associates (2002) 98 Cal.App.4th 1388, 1401-1402 [describing summary judgment burdens in declaratory relief action where the defendant is the moving party].)
Because Williamsburg prevailed on the motions, we view the evidence in the light most favorable to Progressive; we strictly construe Williamsburg's evidence and liberally construe Progressive's, resolving doubts concerning the evidence in Progressive's favor. (Conroy v. Regents of University of Cal., supra, 45 Cal.4th at pp. 1249-1250.)
II. Progressive's Policy Was Not Effectively Canceled as of September 18, 2005
Repeating its arguments below (and apparently conceding that Williamsburg met its threshold summary judgment burden to show a potential for coverage under the Progressive policy), Progressive contends its policy does not cover Brown's loss because Brown, through its authorized agent RSI, made an unconditional and definite request that its policy be cancelled to a date before the October 22 loss. Relying on Glens Falls Ins. Co. v. Founders' Ins. Co. (1962) 209 Cal.App.2d 157 (Glens Falls) and Spott Electrical Co. v. Industrial Indemnity Co. (1973) 30 Cal.App.3d 797 (Spott Electrical), Progressive maintains that such an unequivocal and absolute request effects cancellation even when cancellation is retroactive to a loss. Progressive faults the trial court's reliance on Jerry Brown's assertion that he did not subjectively intend retroactive cancellation and the court's reasoning, based on that assertion, that Interline's drafting mistake prevented Progressive's and Brown's mutual assent to cancellation. It argues Jerry Brown's intent is irrelevant in view of evidence he unambiguously decided to cancel Progressive's policy and relied on his company's agent, RSI, which had ostensible authority to request the retroactive cancellation. Progressive distinguishes Williamsburg's authorities as irrelevant and based on public policy not applicable to the present case because Williamsburg's policy provides coverage and thus there is no prejudice to the injured third parties by enforcing the cancellation request.
Progressive invokes the following "general rule" expressed in Glens Falls regarding an insured's cancellation of an insurance policy: "The sole requirement to effect a cancellation by the insured is a definite and unconditional request for cancellation actually communicated to the company. [Citations.] While the insured can cancel forthwith at any time by request, the request for cancellation must be unequivocal and absolute. [Citations.] No formal or written notice of cancellation is required [citations]; the surrender of the policy is not a prerequisite to cancellation [citations]; nor is the return of the unearned premium a condition precedent to cancellation." (Glens Falls, supra, 209 Cal.App.2d at p. 165; see also Coe v. Farmers New World Life Insurance Company (1989) 209 Cal.App.3d 600, 606-607 [quoting Glens Falls with approval]; Knox-Seeman Motor Parts, Inc. v. American Ins. Co. (1969) 2 Cal.App.3d 173, 179 [same].) This rule is supplemented by the principle that an insured must strictly comply with express conditions for cancellation in an insurance policy to effectuate cancellation. (Pacific National Ins. Co. v. Webster (1985) 174 Cal.App.3d 779, 782-783 (Webster); see, e.g., Lee v. Industrial Indemnity Co. (1986) 177 Cal.App.3d 921, 924.) Likewise, insurers must comply with statutory mandates for transmitting cancellation notices. (Lee, at pp. 924-925.)
Here, Progressive's policy allowed Brown Bulk to cancel "by mailing or delivering to [Progressive] advance written notice of cancellation." (Italics added.) Glens Falls and Webster require Progressive to show that Brown Bulk's November 10 notice of cancellation to Progressive (via RSI and then Norven Storrs) purporting to cancel the policy to the earlier date of September 18, 2005, met that policy condition. Interpreting the plain and unambiguous policy language as a matter of law (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18; Safeco Ins. Co. of America v. Robert S. (2001) 26 Cal.4th 758, 762-763), we conclude Progressive cannot demonstrate Brown Bulk's November 10, 2005 notice was effective to cancel the policy because "[s]trict contractual requirements for cancellation of the policy were... in effect" (Webster, supra, 174 Cal.App.3d at p. 783)and Brown Bulk's notice was not advance written notice of the cancellation date.
Webster compels this result. There, an insured appealed a declaratory judgment that Pacific National Insurance Company had obtained in its favor declaring that its policy had been retroactively cancelled and did not provide coverage for a third party personal injury claim. (Webster, supra, 174 Cal.App.3d at p. 780.) Pacific National had issued a liability insurance policy covering property owned by the policy holders, who sold the property on December 17, 1981. That same day, an insured asked the insurance agent who had procured their policy what to do with it; the agent recommended they cancel it and the policy holder agreed. (Id., at p. 781.) The policy contained an endorsement stating it could be cancelled by the insured by surrender of the policy to the company or its authorized agents, or "by mailing to the Company written notice stating when thereafter the cancellation shall be effective...." (Id. at pp. 781, italics added, 782.) On December 19, 1981, two days after the insured's oral request for cancellation to the agent, an accident occurred on the property resulting in allegations of liability against the policy holders. The insured's agent was advised of the accident on December 22, 1981. (Id. at p. 781.) On December 29, 1981, the agent sent written note of cancellation to Pacific National, asking that the policy be cancelled effective December 17, 1981. (Id. at pp. 781-782.)
The Court of Appeal reversed the judgment granting Pacific National declaratory relief. (Webster, supra, 174 Cal.App.3d at p. 783.) It held under the strict terms of the contractual provisions — in which written notice was required to state when thereafter the cancellation shall be effective — the proposed retroactive cancellation on December 17, 1981, based on the agent's December 29, 1981 note, was of no effect. (Ibid.) Thus, under the policy's terms and conditions, Pacific National covered the insureds as to the December 19, 1981 accident. (Ibid.)
Though the Progressive policy's cancellation clause is not identical to that in Webster, it nonetheless compels the same result. Brown Bulk's notice was simply not advance notice — that is, notice given before the requested cancellation date — and it cannot constitute "advance written notice of cancellation" within the plain and ordinary meaning of the policy.
Our construction of the Progressive policy language as to notice requirements gives effect to the parties' mutual expectations. (Safeco Ins. Co. of America v. Robert S., supra, 26 Cal.4th at pp. 762-763; Fireman's Fund Ins. Co. v. Allstate Ins. Co. (1991) 234 Cal.App.3d 1154, 1169 (Fireman's Fund)[in construing an insurance policy it is proper to consider the parties' expectations as well as business of the parties, the circumstances surrounding the making of the contract, and all other conditions that have a legitimate bearing on the parties' intentions].) There is an important reason why Progressive would reasonably expect its insured to send written notice prior to any effective cancellation: Brown Bulk, as a commercial trucking company, is regulated under the statutory scheme of the Motor Carriers of Property Permit Act (Vehicle Code section 34600 et seq. or the Act), the purpose of which is designed to " 'protect the public from a broad range of potential problems incidental to the transportation of property.' " (Transamerica Insurance Company v. Tab Transportation (1995) 12 Cal.4th 389, 397, quoting Samson v. Transamerica Ins. Co. (1981) 30 Cal.3d 220, 233 [holding under former provisions of the Highway Carriers' Act, Public Utilities Code, §§ 3501-3511, which regulatory authority was transferred to the DMV in 1996 as stated in Croskey, et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2008), ¶¶ 7:1188.20-7.1188.26]; Condor Ins. Co. v. Williamsburg National Insurance Company (1996) 49 Cal.App.4th 554, 559; see Pub. Util. Code, § 212, subd. (e); Stats. 1996, ch. 1042, § 28 [repealing former Pub. Util. Code, § 3631, et seq.].) Under this scheme, Brown Bulk was required to maintain liability protection in a specified amount and comply with the Act's statutory requirements for highway carriers, which prohibits cancellation of mandated insurance on less than 30 days written notice from the insurer to the DMV. (Veh. Code, §§ 34630, subd. (b) ["The certificate of insurance shall not be cancelable on less than 30 days' written notice from the insurer to the department except in the event of cessation of operations as a permitted motor carrier of property"], 34631.5, subd. (b)(3); see also Transamerica Ins. Co. v. Tab Transportation, Inc., supra, 12 Cal.4th at pp. 398-400; Fireman's Fund, supra, 234 Cal.App.3d at p. 1157.) There is no dispute the Progressive policy was intended to meet Brown Bulk's mandatory insurance coverage requirement and that in July 2005 Progressive filed the required certificate of insurance with the DMV.
"Where insurance coverage is required by law, the statutory provisions are incorporated into the insurance contract" and " '[t]he obligations of such a policy are measured and defined by the pertinent statute, and the two together form the insurance contract.... Any provisions of such a policy which are in conflict with the pertinent statutes are nullified and superseded to that extent, particularly where the policy itself[] expressly so provides.' " (Samson v. Transamerica Ins. Co., supra, 30 Cal.3d at p. 231; Transamerica Insurance Company v. Tab Transportation, supra, 12 Cal.4th 389, 398-399; see also Empire Fire and Marine Insurance Company v. Bell (1997) 55 Cal.App.4th 1410, 1420-1421.) Both Progressive and Brown Bulk were subject to the Act's requirement that Progressive provide the DMV with 30 days notice of policy cancellation.
Progressive could not reasonably expect to effectively retroactively cancel its policy (even at its insured's request) in contravention of the Act. Indeed, Progressive's policy endorsement states: "Insurer agrees that the Certificate of Insurance shall not be canceled on less than thirty (30) days notice from the Insurer to the DMV, written on an authorized Notice of Cancellation form and that the thirty (30) day period commences to run from the date of the Notice of Cancellation was actually received [sic] at the office of the California Department of Motor Vehicles, Motor Carrier Permit Branch in Sacramento, California." Progressive's cancellation notice to the DMV was not sent until November 18, 2005, and thus its policy remained in effect until 30 days after receipt of the cancellation notice by the DMV, which must have occurred at the earliest within the month of December, well after the occurrence of the October 22, 2005 loss.
Progressive also relies on the principle, reflected in Glens Falls and Spott Electrical, that parties to an insurance contract may cancel the contract by mutual consent, including in the event where one policy is substituted for another. (Glens Falls, supra, 209 Cal.App.2d at p. 169; Spott Electrical, supra, 30 Cal.App.3d at pp. 805-806, 808). But again, this principle is subject to statutory limitations. "[P]arties to an insurance policy are free, subject to legislative restriction, to arrange the occasions, method, and means of cancellation by private agreement." (Jensen v. Traders & General Ins. Co. (1959) 52 Cal.2d 786, 790, italics added, citing Ohran v. National Automobile Ins. Co. (1947) 82 Cal.App.2d 636 (Ohran); Fireman's Fund, supra, 234 Cal.App.3d at pp. 1163-1164; see also Preis v. American Indemnity Co. (1990) 220 Cal.App.3d 752, 758; Ohio Cas. Ins. Co. v. Northwestern Mut. Ins. Co. (1971) 17 Cal.App.3d 204, 208-209.)
In Glens Falls, supra, 209 Cal.App.2d 157,the Court of Appeal rejected the respondent insurance company's argument that mutual consent between insurer and insured was not necessary when a policy was cancelled by substitution of new insurance. It held that, except for rights of rescission due to fraud or mistake, "an insurance contract can only be cancelled pursuant to its terms or by mutual consent"; it gleaned from relevant authorities that "in order for cancellation to take place by the substitution of one policy for another it must be done by mutual consent or agreement." (Id. at pp. 169-170, citing Apparel Mfrs' Supply Co. v. National Auto & Cas. Ins. Co. (1961) 189 Cal.App.2d 443.) Spott Electrical, supra, 30 Cal.App.3d 797 does not involve any type of compulsory or mandatory insurance.
Thus, in Ohran, an insured with compulsory motor vehicle liability insurance could not agree with its insurer to cancel its policy prior to the date of a March 22 accident, even though the insured intended to replace it with another policy effective on March 15, because the insurer's 10-day notice of cancellation did not take effect until March 26. (Ohran, supra, 82 Cal.App.2d. at pp. 638-643, 644.) Ohran distinguished cases involving noncompulsory insurance where the parties' procurement of new insurance effectively cancelled existing insurance, finding the rule in those cases "can have no unrestricted application where the effectiveness of voluntary cancellation of a compulsory insurance depends on the compliance with statutory requirements. Where such requirements exist, a voluntary cancellation can no more be effectuated by attempted substitution without compliance than by mutual consent or surrender without it." (Id. at p. 643.) Consequently, Ohran held that "the parties could not as between themselves cancel or terminate the compulsory insurance contract in any manner by consent, surrender or otherwise without compliance with the 10 days' notice provision...." (Id. at p. 644.)
In Fireman's Fund, supra, 234 Cal.App.3d 1154, the Court of Appeal held that an insurer's failure to give notice of cancellation to the Public Utilities Commission under the mandatory 30 days' written notice provisions then in place (now supplanted by Vehicle Code section 34630) resulted in its insurance policy's continued, uninterrupted coverage even though the insured highway carrier had purchased replacement insurance. (Id. at p. 1162.) The Court of Appeal reasoned: "[O]ur reading of the statute and regulations compels the conclusion [that] notice of cancellation is needed for effective regulation of highway carriers — whether to guarantee the public records contain accurate, reliable, and up-to-date information on the carrier's insurance or bond, or to enable the PUC to suspend operating permits for carriers that are uninsured." (Id. at p. 1165.) The California Supreme Court expressly agreed with this outcome in Transamerica Ins. Co. v. Tab Transportation, Inc., supra, 12 Cal.4th at pages 402-403: "We agree with the [Fireman's Fund] Court of Appeal... that the regulatory scheme governing highway carriers imposes the 'notice of cancellation' requirement on an insurer irrespective of the insured's purchase of replacement insurance. An insurer that files with the PUC a 'certificate of insurance' as proof that a highway carrier has insurance, as was done here, remains liable on its policy until that policy is canceled by giving the requisite 30 days' written notice to the PUC. This interpretation of the statutory notice requirement is most consistent with the Act's regulatory scheme for highway carriers.... "
We conclude, as in Ohran, and consistent with Fireman's Fund and Transamerica Ins. Co. v. Tab Transportation, Inc., that when the Legislature enacted Vehicle Code section 34630 prohibiting cancellation of a mandatory liability insurance policy without less than 30 days notice to the DMV, it was "with full contemplation of the practice and use of cancellation clauses generally as between insurer and insured and that it intended therein to limit this right of cancellation according to the strict terms of the statute, making such notice indispensable for an effective termination both as to the parties and to the public." (Ohran, 82 Cal.App.2d at p. 643; see Fireman's Fund, supra, 234 Cal.App.3d at pp. 1163-1164; Transamerica Ins. Co. v. Tab Transportation, Inc., supra, 12 Cal.4th at pp. 402-403.)
Thus, on these undisputed facts, the Progressive policy was in effect on October 22, 2005, and required Progressive to provide defense and indemnity to Brown Bulk for the October 22, 2005 loss. This conclusion by itself does not, however, warrant summary judgment in Williamsburg's favor, because Williamsburg likewise issued a mandatory policy of liability insurance to Brown Bulk effective on September 18, 2005, before the loss, and also issued a hold harmless agreement in Progressive's favor acknowledging its coverage.
III. Williamsburg's Policy Provided Excess Coverage to Progressive's Primary Coverage Under Insurance Code Section 11580.9 , Subdivision (d)
There is no dispute that, having urged Brown Bulk to transfer its liability coverage from Progressive to Williamsburg, Williamsburg issued an insurance policy to Brown Bulk effective September 18, 2005, prior to the accident, with the same DMV endorsement. Thus, we decide whether the Williamsburg policy provided identical liability coverage for Brown Bulk on the date of the accident.
Williamsburg argues its policy did not provide coverage for Brown Bulk's subject vehicles on the date of the accident because those vehicles were not added to its policy until October 24, 2005. Williamsburg recognizes that its DMV endorsement extended coverage to any vehicle used in Brown Bulk's business even if it was not scheduled on the policy. However, it maintains its obligations to pay judgments under the DMV endorsement is not the equivalent to providing coverage under the terms of its policy. Specifically, Williamsburg argues (1) defense costs and expenses are not included under the DMV endorsement, and therefore Progressive had the sole obligation to defend Brown Bulk and its driver in the underlying action; (2) Progressive's policy is primary under Insurance Code section 11580.9 because it specifically described the subject vehicles; and (3) the Williamsburg policy only covers "fortuitous" events and thus cannot cover a loss that occurred before the date on which its policy listed the subject vehicles.
We agree with Williamsburg's assertion that there is no coverage under its policy because at the time of the accident, its policy was excess and the Progressive policy primary under Insurance Code section 11580.9, subdivision (d). Insurance Code section 11580.9 establishes certain conclusive presumptions when two or more automobile liability policies apply to the same motor vehicle. As relevant here, subdivision (d) of Insurance Code section 11580.9 provides that "where two or more policies affording valid and collectible liability insurance apply to the same motor vehicle or vehicles in an occurrence out of which a liability loss shall arise, it shall be conclusively presumed that the insurance afforded by that policy in which the motor vehicle is described or rated as an owned automobile shall be primary and the insurance afforded by any other policy or policies shall be excess."
The California Supreme Court recently observed that "[t]he public policy behind section 11580.9 is to avoid conflicts, litigation, and resulting court congestion in the determination of which liability policies covering multiple vehicles in an accident will provide primary, excess, or sole coverage for the resulting personal injury and property damage." (Sentry Select Ins. Co. v. Fidelity & Guar. Ins. Co. (2009) 46 Cal.4th 204, 206-207.)
Here, both Progressive's and Williamsburg's policies were in effect at the time of Brown Bulk's loss, and thus the circumstances present a situation 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... " (Ins. Code, § 11580.9, subd. (d).) It is undisputed that the Progressive policy described the subject vehicles at the time of the accident, whereas the Williamsburg policy did not. The statute plainly requires a specific identification of the particular vehicle in order to be considered "described or rated" under that policy. (See Ohio Cas. Ins. Co. v. Aetna Ins. Co. (1978) 85 Cal.App.3d 521, 524.)
Applying the conclusive statutory presumption to the undisputed facts, Williamsburg has shown the Progressive policy provided primary coverage while its policy provided excess coverage. Thus, looking strictly to Williamsburg's exposure under its policy of insurance, Williamsburg had no duty to participate in Brown Bulk's defense or contribute to a settlement on its behalf until Progressive exhausted its available coverage. (Signal Companies, Inc. v. Harbor Ins. Co. (1980) 27 Cal.3d 359, 366-368; Diamond Heights Homeowners Assn. v. National American Ins. Co. (1991) 227 Cal.App.3d 563, 577, criticized on unrelated grounds as stated in Fuller-Austin Insulation Co. v. Highlands Ins. Co. (2006) 135 Cal.App.4th 958, 988, fn. 11.) Progressive alone owes a duty to provide and bear all the costs of the defense until its primary policy limits are exhausted. (Diamond Heights, at p. 577.) Indeed, an excess carrier has no duty to defend even when the claims are large enough to potentially reach any applicable excess coverage. (Signal Companies, Inc. v. Harbor Ins. Co., at pp. 366-368.)
Progressive does not address the effect of Insurance Code section 11580.9 or the interrelationship between that statute and the compulsory insurance law governing both Progressive and Williamsburg's policies. It does not respond to Williamsburg's argument on this point, other than to argue that equity, rather than the terms of Williamsburg's policy, governs the outcome of the case. Progressive's arguments focus on the fact that, in order to transfer Brown Bulk's coverage, Williamsburg issued the hold harmless agreement in its favor, upon which Progressive justifiably relied to its detriment by returning unearned premiums to its customer. But Williamsburg's hold harmless agreement as a matter of law cannot modify or amend the conclusive presumption set out by Insurance Code section 11580.9. (Ins. Code, § 11580.9, subd. (f).) The presumptions under Insurance Code section 11580.9 " 'may be modified or amended only by written agreement signed by all insurers who have issued a policy or policies applicable to a loss described in these subdivisions and all named insureds under these policies.' " (Wilshire Ins. Co., Inc. v. Sentry Select Ins. Co. (2004) 124 Cal.App.4th 27, 36.)
IV. Progressive's Defenses
We further conclude Progressive has not shown triable issues of material fact on its equitable estoppel and unclean hands defenses.
A. Equitable Estoppel
Progressive argues Williamsburg should be equitably estopped from challenging Brown Bulk's retroactive cancellation because the cancellation stemmed from the actions of Williamsburg's agent, Interline. Because we are to find issues requiring a trial, not resolve them (Millard v. Biosources, Inc. (2007) 156 Cal.App.4th 1338, 1345; Melamed v. City of Long Beach (1993) 15 Cal.App.4th 70, 76), we construe Progressive's argument as a claim that it has shown triable issues of material fact on this defense. On these undisputed facts we disagree that equitable estoppel can apply.
" 'The doctrine of equitable estoppel is based on the theory that a party who by his declarations or conduct misleads another to his prejudice should be estopped from obtaining the benefits of his misconduct.' " (Cotta v. City and County of San Francisco, supra,157 Cal.App.4th at p. 1567.) It is established by showing: (1) the party to be estopped knew the facts; (2) that party intended that his or her conduct would be acted upon or acted such that the defendant had the right to believe it was so intended; (3) the party asserting estoppel was ignorant of the true state of the facts; and (4) the party asserting estoppel relied upon the conduct to his or her injury. (DRG/Beverly Hills, Ltd. v. Chopstix Dim Sum Cafe & Takeout III, Ltd. (1994) 30 Cal.App.4th 54, 59; Golden West Baseball Co. v. City of Anaheim (1994) 25 Cal.App.4th 11, 47.)
Progressive maintains the evidence supports all of the elements of equitable estoppel. It argues Williamsburg was aware of all of the relevant facts: it knew Brown Bulk had agreed to cancel the Progressive policy at Williamsburg's request, that Progressive had been asked to cancel the policy and required a hold harmless agreement from Williamsburg, that RSI provided necessary documentation to Interline, and that Interline issued the hold-harmless agreement with the September 18, 2005 effective date. According to Progressive, it received Williamsburg's hold harmless agreement from Norven Storrs via RSI, and it had "every right to believe" that Williamsburg intended to indemnify it as of September 18, 2005. Finally, Progressive argues it was unaware of Williamsburg's mistake and relied on Williamsburg's representation by processing the cancellation as of September 18, the date Williamsburg's commercial liability policy commenced.
Progressive misplaces focus on the above referenced facts. Because Progressive's and Williamsburg's respective coverage responsibilities in connection with the October 22, 2005 accident are determined as a matter of law under both the Vehicle Code and Insurance Code, Progressive cannot establish the essential element that it was not aware of the true pertinent facts. Progressive's duty to defend and indemnify arose at the time of the loss because its policy remained in effect under the Act (Veh. Code, § 34630 et seq.), not because of any conduct by Williamsburg. Williamsburg did not mislead Progressive as to the requirements of the Act or the fact that the Progressive policy could not as a matter of law be cancelled until it had given the DMV the mandated 30-days notice. Nor did Williamsburg mislead Progressive about the fact that the subject vehicles had not been identified on a schedule in the Williamsburg policy until October 24, 2005, after the subject accident. As we have explained, that fact renders Williamsburg's insurance policy excess as a matter of law. (Ins. Code, § 11580.9, subd. (d).) Though Progressive seeks to rely upon Williamsburg's issuance of a hold harmless agreement as an inducement to return premiums to Brown Bulk, that agreement does not meet the legal requirements to change the conclusive presumption determining primary and excess coverage. (Ins. Code, § 11580.9, subd. (f).)
Thus, Progressive cannot show it was misled about the true facts; at most the matter presents mutual mistakes of law on the part of both parties, which cannot create an estoppel. (See Henry v. City of Los Angeles (1962) 201 Cal.App.2d 299, 308 [when parties to a transaction labor under a mutual mistake of law, acts performed in reliance upon such mutual mistake do not, as a matter of law, create an estoppel]; 13 Witkin, Summary of Cal. Law (10th ed. 2005) Equity, § 191, p. 528.)
B. Unclean Hands
Progressive contends that each of Williamsburg's equitable causes of action should be barred under the doctrine of unclean hands. Pointing out that Williamsburg must come seeking equity with clean hands, Progressive characterizes Williamsburg as having engaged in "misconduct" via Interline by inserting the September 18, 2005 date in the initial hold harmless agreement and sending it to RSI. Progressive points out this communication directly caused it to process the cancellation request and refund all unearned premiums to Brown Bulk, and it is thus squarely related to the issues and matter before the court. Again, we decide whether — viewing Progressive's evidence liberally and Williamsburg's strictly, and resolving all doubts in Progressive's favor — there are triable issues of fact on this defense.
The doctrine of unclean hands "arises from the maxim that one who comes to court seeking equity must come with clean hands. [Citation.] 'The doctrine demands that a plaintiff act fairly in the matter for which he seeks a remedy. He must come into court with clean hands, and keep them clean, or he will be denied relief, regardless of the merits of his claim.' [Citation.] [¶] 'The unclean hands doctrine protects judicial integrity and promotes justice. It protects judicial integrity because allowing a plaintiff with unclean hands to recover in an action creates doubts as to the justice provided by the judicial system. Thus, precluding recovery to the unclean plaintiff protects the court's, rather than the opposing party's, interests. [Citations.] The doctrine promotes justice by making a plaintiff answer for his own misconduct in the action. It prevents "a wrongdoer from enjoying the fruits of his transgression." ' " (Jay Bharat Developers, Inc. v. Minidis (2008) 167 Cal.App.4th 437, 445.)
For purposes of the unclean hands doctrine, " '[t]he misconduct that brings the unclean hands doctrine into play must relate directly to the cause at issue.... [It] must " ' "prejudicially affect... the rights of the person against whom the relief is sought so that it would be inequitable to grant such relief." ' " ' " (Jay Bharat Developers, Inc. v. Minidis, supra, 167 Cal.App.4th at p. 445.) Whether particular misconduct is a bar to the alleged claim for relief depends on (1) analogous case law, (2) the nature of the misconduct, and (3) the relationship of the misconduct to the claimed injuries. (Id. at pp. 445-446.) Because the parties' duties and obligations in connection with their insured are determined solely by law and not by Williamsburg's actions, we cannot say it is inequitable to grant Williamsburg relief based on any asserted "misconduct" on its part. Williamsburg's hold harmless agreement (whether effective September 18, 2005, or October 24, 2005) did not prejudicially affect Progressive's rights or obligations because it is undisputed Williamsburg did not identify Brown Bulk's subject vehicles on its policy until October 24, 2005, after the loss. Thus, as of the date of the loss, the parties' rights and obligations were fixed by operation of the Act and the Insurance Code provisions as to concurrent automobile liability insurers; Progressive's coverage being primary and Williamsburg's excess. We conclude as a matter of law under these circumstances, Progressive cannot demonstrate it is entitled to present an unclean hands defense.
DISPOSITION
The judgment is affirmed.
WE CONCUR: NARES, Acting P. J., McDONALD, J.