229 Cal. App. 4th 1432
Cal. Ct. App.2014Background
- Mercury issued a policy to Chu for a 1995 Honda Accord; Pham was a roommate and passenger in the same household at Lampson Avenue when Chu caused an accident injuring Hoang.
- Pham sued Chu; a jury awarded Pham $333,300; Mercury denied coverage for Pham’s judgment under the policy’s exclusion for residents.
- Mercury sought declaratory relief that Pham’s judgment was not covered and requested reimbursement of defense costs incurred defending Chu.
- The policy defined insureds broadly and included a resident exclusion (g) purporting to exclude bodily injury to insureds who are residents in the same dwelling.
- Chu and Pham sought to defeat summary adjudication; Mercury sought relief on its cross-claims; the trial court granted summary adjudication that Mercury had no duty to indemnify Pham and ruled on defense-cost issues via a judgment on the pleadings.
- The appellate court reversed, concluding the nonrelative resident exclusion expanded the (c)(5) Exclusion beyond statutory permission and violated public policy; the matter was remanded for reconsideration and Mercury’s cross-appeal regarding defense costs was not addressed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Exclusion (g) may apply to nonrelatives living in the same dwelling | Mercury contends the (c)(5) Exclusion allows broad resident-based exclusions, including nonrelatives. | Chu/Pham argue the exclusion is overbroad and conflicts with insurable-interest requirements and public policy. | Exclusion (g) as applied to nonrelatives is invalid; strike the nonrelative resident exclusion. |
| Whether the policy may define an 'an insured' to include nonrelatives living with the named insured | Mercury argues statute permits broad inclusion of 'an insured'. | Chu/Pham argue the expansion lacks insurable-interest support and public-policy justification. | Nonrelative resident exclusion is unconstitutional; cannot treat nonrelatives as 'an insured' for purposes of the exclusion. |
| Public policy and statutory alignment of exclusions in auto policies | Mercury relies on §11580.1(c)(5) and Cocking to justify exclusions. | Chu/Pham assert the exclusion risks overbreadth and undermines legislative intent for insurable coverage. | Exclusion broadened beyond intent; invalid as applied to nonrelatives; strike. |
| Impact on summary adjudication and defense-cost award after invalidation | Mercury seeks reimbursement of defense costs after indemnity denial. | Chu argues the issue of defense costs was not adjudicated and cannot be awarded. | Remand with exclusion-strike; defense-cost issue no longer applicable to Pham’s claim. |
Key Cases Cited
- Farmers Ins. Exchange v. Cocking, 29 Cal.3d 383 (Cal. 1981) (public policy and equal-protection upholding of (c)(5) exclusion for insureds/family)
- State Farm Mut. Auto. Ins. Co. v. Ammar, 126 Cal.App.3d 837 (Cal. App. 1981) (explanation of permissible exclusions within §11580.1)
- Kibbee v. Blue Ridge Ins. Co., 69 Cal.App.4th 53 (Cal. App. 1999) (resident vs. nonresident interpretations; residence tied to permanency)
- Utley v. Allstate Ins. Co., 19 Cal.App.4th 821 (Cal. App. 1993) (residence/occupancy context for determining 'resident')
- Afrasiabi v. State Farm Fire & Casualty Co., 73 Cal.App.4th 1183 (Cal. App. 1999) (insurable-interest considerations with housing-related exclusions)
- Lovy v. State Farm Ins. Co., 117 Cal.App.3d 834 (Cal. App. 1981) (public policy and financial responsibility considerations)
- Anacker v. Sillas, 65 Cal.App.3d 416 (Cal. App. 1976) (statutory purpose of public liability insurance)
- Metz v. State Farm Ins. Co., 10 Cal.3d 45 (Cal. 1973) (omnibus/mandatory coverage principles and public policy)