Lead Opinion
Plaintiff Mercury Insurance Company (Mercury) appeals from judgments entered after the court granted summary judgments in favor of defendants Enterprise Rent-A-Car Company of Los Angeles (Enterprise) and California Insurance Guarantee Association (CIGA). Plaintiff sought to recover payment from defendants of the uninsured motorist (UM) bodily injury benefits it had paid to its insured. We affirm.
Factual and Procedural Synopsis
I. Underlying Action
Mercury is an insurance carrier which offers and sells to members of the general public automobile liability insurance policies which meet the requirements of Insurance Code sections
Enterprise is a corporation authorized to do business in California for, among other things, the short-term rental of automobiles to the general public. As owner of the vehicles it rents, Enterprise complies with California’s financial responsibility laws by posting a cash deposit pursuant to Vehicle Code section 16054.2.
Enterprise was the owner of a certain 1993 Nissan, which it had rented to Toyet Thi Nguyen pursuant to a rental agreement. Nguyen was insured under a policy issued by National Colonial Insurance Company (National Colonial). National Colonial was a member insured of CIGA.
On May 23, 1993, while Okamoto was a passenger in the rental vehicle operated by Nguyen, the rental vehicle was involved in an accident in Clark County, Nevada. As a result of the accident, on September 1, Okamoto brought an action against Nguyen and Enterprise alleging Nguyen had negligently operated the rental vehicle and that negligence was the cause of Okamoto’s injuries. Okamoto alleged he incurred medical expenses and suffered lost earnings totaling at least $68,673.
National Colonial was declared insolvent within one year of the accident, triggering the statutory rights, duties and protections of CIGA.
After Enterprise was served and filed its answer, it engaged in an exchange of pretrial discovery with Okamoto through July 7, after which time, it learned Mercury allegedly had made a payment in settlement of Okamoto’s claim.
Before making the payment in settlement of the claims of its insured, Mercury attempted to elicit Enterprise’s coverage position for the alleged losses from ELCO Administrative Services (ELCO), Enterprise’s in-house claims handling office.
On March 18, Mercury wrote to Enterprise requesting that Enterprise state its position in writing with respect to Okamoto’s claim. Neither Enterprise nor ELCO responded to the letter prior to June 14.
Prior to the settlement, on May 26, a Mercury representative telephoned and spoke with Ralph Thompson of ELCO. Thompson “advised that ELCO acknowledged its financial responsibility as owner of the vehicle involved in the accident, however, ELCO’s position was that it would pay on the claim only after the case had been tried to a conclusion and a judgment entered against the driver. At this time, Mr. Thompson advised, ELCO might consider paying the judgment and suing the driver for reimbursement.”
On May 27, counsel for Okamoto in the underlying action demanded in writing that Mercury settle the UM claim for the $30,000 policy limit. Counsel attached correspondence from CIGA, dated December 9, 1993, advising that pursuant to section 1063.1 et seq., the subject claim would be a “covered claim” only if there was no other insurance available, including collision and UM coverage under any other policy. CIGA’s letter stated, “If uninsured motorist coverage is provided under an automobile policy, this claim must first be presented to that carrier.” (Original italics.)
Also attached to the demand letter was a January 11, 1994, letter from Enterprise to CIGA, which requested that CIGA accept the tender of the defense of the claim, stating in part that Enterprise was “permissibly uninsured” for the loss. The letter quoted parts of the rental agreement:
“ ‘Owner does not provide, extend, or afford any insurance coverage to renter, passenger, or authorized operator through this agreement.’ ”
“ ‘Renter shall defend, indemnify, and hold owner harmless from all losses, liability, damages, injuries, claim demands, lawsuits, etc . .
The Policy required Okamoto to submit proof to Mercury that Enterprise’s ownership financial responsibility limit of $15,000 per person pursuant to Vehicle Code section 17151 had been exhausted by payment of either settlement or judgment. At no time before the settlement was concluded had Okamoto submitted such proof to Mercury.
II. This Action
In June 1996, Mercury filed this action against Enterprise, CIGA and Nguyen, asserting causes of action for declaratory relief, subrogation, equitable indemnity and negligent entrustment of the rental vehicle. Mercury sought to recover the UM benefits of $30,000 it had paid to Okamoto. An amended complaint was filed adding a breach of statutory duty cause of-action against CIGA. Enterprise later dismissed Nguyen from the action and dismissed the negligent entrustment cause of action.
The parties stipulated to a set of facts, and each party filed a summary judgment motion. The court denied all three motions.
Subsequently, Enterprise and CIGA filed separate second motions for summary judgment based on the same stipulated facts. The court granted both motions. As to Enterprise, the court ruled the loss vehicle was insured by Enterprise, and as such, was an “insured vehicle” pursuant to section 11580.2, subdivision (p)(1) and an “underinsured” vehicle pursuant to section 11580.2, subdivision (p)(2) in that Enterprise’s financial responsibility was for an amount less than the UM limits provided in the Mercury policy, and as Mercury’s insured “failed to exhaust, or file proof of the exhaustion of, [Enterprise’s] financial responsibility limits, . . . ffl] [Mercury] had no obligation to make payment to its insured” pursuant to section 11580.2, subdivision (p)(3). As a result, Mercury was not entitled to any rights of subrogation, equitable indemnity or contribution.
In respect to CIGA, the court ruled that Mercury’s claim was an obligation to an insurer excluded from “covered claims,” pursuant to section 1063.2, former subdivision (e) and section 1063.1, former subdivision (c)(4). The claim was not a “covered claim” pursuant to section 1063.1, former subdivision (c)(5), which excludes the portion of any claim in excess of any
After the court entered judgments on both motions, appellant filed a timely notice of appeal from those judgments.
Discussion
I. Introduction
In this action, Mercury sought to recover from Enterprise and CIGA the UM benefits it had paid its insured. The trial court granted summary judgments in favor of Enterprise and CIGA. Summary judgment motions are subject to independent review. (Buss v. Superior Court (1997)
Mercury posits its payment was made in good faith and it was not a volunteer. Mercury contends the law is unresolved regarding whether UM coverage is triggered solely on the status of the driver or whether both the owner and driver must be uninsured for UM coverage to apply. Mercury further contends that the lack of resolution in the law could have subjected it to a bad faith action if it had not paid its insured.
In support of its position, Mercury cites a treatise in which the authors opine that the Legislature intended for uninsured protection to apply when either one of the responsible parties lacked the requisite coverage so that if either the owner or operator is not insured, the vehicle is uninsured, and the car qualifies as an uninsured motor vehicle under the section 11580.2, subdivision (b). (Clifford & Eisler, Cal. Uninsured Motorist Law (5th ed. 1993) § 6.40, pp. 6-10 to 6-12.)
However, another treatise defines an “uninsured motor vehicle” as including “one for which no bodily injury liability insurance is.available.” (Croskey et al., Cal. Practice Guide: Insurance Litigation (The-Rutter Group 1999)
II. Claim Against Enterprise
Mercury contends its payment entitled it to subrogation against Enterprise pursuant to section 11580.2, which Mercury claims grants a broad right of subrogation. (Mills v. Farmers Ins. Exchange (1964)
Section 11580.2, subdivision (g) provides in part: “The insurer paying a claim under an uninsured motorist endorsement or coverage shall be entitled to be subrogated to the rights of the insured to whom the claim was paid against any person legally liable for such injury or death to the extent that payment was made.”
As owner of the rental vehicle, Enterprise was liable and responsible for the injuries sustained by Mercury’s insured due to the negligence of Enterprise’s permissive driver. (Veh. Code, § 17150.) Generally, where a rental car company complies with Vehicle Code section 16054.2 by providing a cash deposit, the driver’s automobile policy is primary, and the rental company’s financial responsibility is secondary. (Enterprise Rent-A-Car Co. v. Workmen's Auto Ins. Co. (1997)
In part, section 11580.2, subdivision (a) requires UM coverage be provided whenever the insured is entitled to recover damages “from the owner or operator of an uninsured motor vehicle.”
In the instant case, the superior court determined the rental vehicle was an “insured vehicle” because of Enterprise’s cash deposit. (§ 11580.2, subd. (p)(1).) The court also determined the vehicle was “underinsured” because Enterprise’s financial responsibility (of $15,000) was for an amount less than the $30,000 UM limit in Mercury’s Policy. (§ 11580.2, subd. (p)(2).) Accordingly, the court concluded as the insured had failed to exhaust, or file proof of exhaustion, of Enterprise’s financial responsibility limits, Mercury had no obligation to pay its insured.
Mercury argues it was required to make the UM payment because Enterprise and CIGA refused to accept responsibility for the loss, and pursuant to section 11580.2, subdivision (b), an uninsured vehicle is defined as including a vehicle where “there is the applicable insurance or bond but the company writing the insurance or bond denies coverage thereunder or refuses to admit coverage thereunder except conditionally or with reservation, or an ‘underinsured motor vehicle’ as defined in subdivision (p).”
The Supreme Court held “the right to subrogation in the underinsured motorist context is not consistent with the plain meaning of the [UM] statute.” (Hartford Fire Ins. Co. v. Macri (1992)
Mercury cites several cases to support its argument it was not a volunteer such that it was entitled to subrogation. (See, e.g., State Farm Fire & Casualty Co. v. East Bay Municipal Utility Dist. (1997)
Accordingly, as Mercury’s payment was for an underinsured vehicle, it is not entitled to subrogation from Enterprise as it was not obligated to make the payment because its insured had not exhausted Enterprise’s coverage.
This holding seems harsh as Mercury was the insurer with the least responsibility for Okamoto’s injuries. However, although in a slightly different context, a recent Court of Appeal decision reached a similar ruling based on the language of-the statute. (Farmers Ins. Exchange v. Hurley (1999)
We note the reluctance of that court to reach its conclusion and also the invitation to the Legislature to consider a modification of the statute, as stated in the separate concurring opinion of two justices.
III. Claim Against CIGA
Although “CIGA’s general purpose is to pay the obligations of an insolvent insurer, it is not itself an insurer and ‘does not “stand in the shoes” of the insolvent insurer for all purposes.’ ” (R. J. Reynolds Co. v. California Ins. Guarantee Assn. (1991)
“CIGA is an insurer of last resort and does not assume responsibility for claims where there is any other insurance available.” (R. J. Reynolds Co. v. California Ins. Guarantee Assn., supra,
Equitable and legal claims for contribution, indemnity, and subrogation by solvent insurers, such as Mercury, are prohibited by section 1063.1,
The court determined that Mercury did not fall within that exception. Mercury argues this section provides broader coverage than section 11580.2 and applies where the injured person proceeds under his own UM coverage when either the tortfeasor-driver’s liability insurer becomes insolvent or the tortfeasor-vehicle owner’s liability insurer becomes insolvent.
The rental vehicle was not an “uninsured motor vehicle” because, at the time of the accident, Enterprise had posted a statutory cash deposit, which is deemed to be a policy of automobile liability insurance covering the owner’s statutory financial responsibility for the vehicle. (§ 11580.9, subd. (h).) A self-insured vehicle is excluded from the definition of an “uninsured motor vehicle.” (§ 11580.2, subd. (b)(2).)
The UM limit on the Policy issued to Okamoto was $30,000. Enterprise insured the rental vehicle for $15,000. Hence, the rental vehicle was under-insured as it was insured for an amount less than the UM limits carried on the motor vehicle of the injured person. (§ 11580.2, subd. (p)(2); Lopez v. Allstate Ins. Co. (1993)
CIGA is subject to an insurer’s subrogation claim only for bodily injury UM payments “and nothing for payment for anything else.” “[W]here exceptions to a general rule are specified by statute, other exceptions are not to be implied or presumed.” (Wildlife Alive v. Chickering (1976)
Disposition
The judgments are affirmed. Respondents to recover costs on appeal.
Neal, J., concurred.
Notes
Unless otherwise noted, all statutory references are to the Insurance Code.
In 1997, subdivision (c)(2)-(6) of section 1063.1 was renumbered. (See amendments, Deering's Ann. Ins. Code, § 1063.1 (1999 pocket supp.) p. 57.) The subdivisions referred to in the opinion are those in existence at the time the case was heard.
This title assigned to section 11580.2 by one publisher is “Uninsured motor vehicles; Underinsured motor vehicles.” (Deering's Ann. Ins. Code (1996 ed.) § 11580.2, p. 361.)
Mercury was aware before it made the payment that Enterprise had acknowledged its financial responsibility as owner of the rental vehicle.
Mercury suggests that Enterprise and CIGA cannot avoid its right to subrogation by arguing the rental vehicle was an underinsured vehicle, as they stipulated its insured’s claim was a UM claim. That the vehicle was underinsured was not only argued in the superior court without objection, but also was part of the basis of the court’s ruling.
The Policy echoes this definition.
The Policy echoes this definition.
The Policy echoes this condition.
Dissenting Opinion
I respectfully dissent.
I would agree with the majority’s analysis, reluctantly, were this truly an “undeñasmed. motorist” case.
If so, that would bring this case squarely within the definition of an “uninsured motor vehicle” in Insurance Code section 11580.2, subdivision (b). This definition reads in pertinent part: “As used in this section, ‘uninsured motor vehicle’ means a motor vehicle with respect to the ownership, maintenance or use of which there is no . . . bond applicable at the time of the accident, or there is the applicable . . . bond but the company writing the . . . bond denies coverage thereunder or refuses to admit coverage thereunder . . . .” (Italics added.)
Here, there is at least a triable issue Enterprise Rent-A-Car Company of Los Angeles in essence refused to admit coverage under its $15,000 cash deposit and thereby converted this vehicle from an underinsured motor vehicle to an uninsured motor vehicle. What Enterprise did was the substantial equivalent of an insurer or a company writing a bond “refusing to admit coverage thereunder.” As the majority opinion itself recites, when the injured person’s lawyer contacted Enterprise, Enterprise claimed to be “permissibly uninsured” (not underinsured) and because of this status claimed it
The majority opinion contends the definition of an “uninsured motorist” in Insurance Code section 11580.2, subdivision (b) is somehow superceded by section 11580.2, subdivision (p). The latter provision states: “If the provisions of this subdivision conflict with subdivisions (a) thorough (o), the provisions of this subdivision shall prevail.” But my colleagues assume a conflict where one does not exist. Subdivision (p) defines an “insured motor vehicle” and it defines an “underiasured motor vehicle.” The former is one which is insured, self-insured or for which a financial responsibility bond is posted. The latter is one which is insured but for less than the insured’s uninsured motorist coverage. But nowhere does this subsection define the third category—an uninsured motor vehicle. Subdivision (b) does so and, more importantly, is the only subdivision dealing with the situation where the vehicle is insured, but the insurer refuses to admit coverage. And it deals with that situation by moving the vehicle from the insured category to the uninsured motor vehicle category.
This has implications for both respondents, since uninsured motor vehicles are treated differently from underinsured motor vehicles. When a vehicle is uninsured either because neither the vehicle owner nor the driver had insurance (or posted a bond or cash deposit) or because the insurer or entity posting the bond or cash deposit refused to admit coverage or because the insurer has become bankrupt, the uninsured motorist carrier is entitled, indeed duty bound, to pay its injured insured the full amount of his uninsured motorist coverage. The uninsured motorist carrier can then proceed in subrogation against the owner and/or driver, or against the recalcitrant insurer of either, or against an owner or driver who refused to honor its financial responsibility deposit. That carrier also can proceed in subrogation against CIGA for one-half of the amount it paid out on account of the bankruptcy of the driver’s insurer. (Ins. Code, § 1063.2, subd. (c)(1), quoted in maj. opn., ante, at p. 52.)
In my view, triable issues exist whether Enterprise as the vehicle owner refused to admit coverage under its cash deposit. That denial, coupled with
On April 24, 2000, the opinion was modified to read as printed above.
Were I to agree this is properly characterized as an underinsured motorist case, I would still write separately to add my support to a recent call from two of the justices in another district for legislative attention to the current provisions governing underinsured motorist coverage.
In their concurring opinion to Farmers Insurance Exchange v. Hurley (1999)
The instant case illustrates some of the further mischief the present scheme can visit—not only on injured people and insureds, but also insurance companies. Here the injured party’s insurance company tried to do the right thing, only to learn “no good deed goes unpunished.”
Confronted with a vehicle owner who had refused to pay over its $15,000 cash deposit to the injured party, claiming it was “permissibly uninsured,” and with an equally recalcitrant GIGA (California Insurance Guarantee Association) the only other recourse, Mercury Insurance Company considered it had an uninsured motor vehicle on its hands. For reasons explained in this dissent, I believe Mercury was correct in that legal assessment. But at a minimum it ran the risk some court and jury would arrive at that conclusion and award
Because of the present language of the code and the majority’s conclusion this is an underinsured rather than uninsured claim, the vehicle owner and CIGA are able to shift the entire burden of their liability to the injured party’s insurance company. The statutory language, criticized by our colleagues in the Fourth District, requires an injured party to prove actual payment by the tortfeasors’ insurance companies before having any entitlement to the balance owed under his underinsured motorist coverage. That this statutory provision skewered the injured party’s insurance company in this case, rather than the injured party himself, is small consolation.