Farmers Insurance Exchange v. Harmon

42 Cal. App. 3d 805, 117 Cal. Rptr. 117, 1974 Cal. App. LEXIS 1269

• Court: California Court of Appeal
• Decided: October 29, 1974
• Docket: Civ. 42617
• Status: Published

Opinions

Opinion

HASTINGS, J.

Declaratory relief to interpret an automobile insurance policy. Defendants and appellants Harmon and Zamacona appeal from a judgment in favor of plaintiff Farmers Insurance Exchange (Farmers).

Facts

The facts are undisputed. Defendants Alvin and Doris Harmon (Harmons) are insured by plaintiff Farmers. Doris Harmon (Harmon, or where appropriate, insured) was driving a non-owned vehicle in or near Tepic, Mexico, which is approximately 800 miles south of the American border. An accident occurred and Armando Zamacona was seriously injured. Eleason Zamacona, owner of the automobile driven by Harmon, had no insurance coverage. Zamacona brought suit in the Los Angeles Superior Court against the Harmons, alleging negligence. Farmers provided the insured with a defense, but reserved its right to dispute coverage. It contends that the Harmons were not covered while driving in Mexico more than 75 miles from the border.

The policy, as relevant, provides as follows:

First, the company will “pay all damages which the insured becomes legally obliged to pay . . . arising out of the ownership, maintenance or use of the described automobile or a non-owned automobile and to defend . . . any suit against the insured. ...”

Second, various terms are defined. “(1) Automobile means a four wheel land motor vehicle. . . . (5) Described Automobile means the automobile described in this policy. ... a newly acquired automobile and/or a substitute automobile. ... (8) Non-owned Automobile means an automobile not owned by or regularly or frequently used by the named insured. . . -”¹

Third, there are five parts to the contract, each designated by a Roman numeral and at the end of each are paragraphs with the headings “Exclusions” under Part I, II, etc. These paragraphs contain specific provisions excluding coverage under the appropriate part.

Fourth, there are 22 “Conditions,” at the end of the policy including a clause captioned “(20) Policy Period, Territory. Except as otherwise provided herein, this policy applies only to accidents; occurrences; or losses which happen during the policy period and, under Parts I, II, III and IV while the automobile is within the United States of America, its territories or possessions, or Canada, or is being transported between ports thereof.

“This policy also applies, except with respect to Part 11, while the automobile is being used for trips into that part of the Republic of Mexico lying not more than 75 miles from the boundary line of the United States of America.” (Italics added.)

This sums up the insurance policy. In addition, the company relies on an “endorsement” sent with a covering form note, concerning Mexican insurance, which we discuss infra.

Issue

The sole issue in this case is whether Condition 20 of the policy excludes coverage for an accident which occurs in Mexico more than 75 miles from the United States border involving a non-owned automobile.

Argument '

Appellant’s principal argument proceeds as follows: The policy provides in Condition 20 that it does not cover accidents involving “the automobile” more than 75 miles into Mexico. A semantically permissible interpretation, if not the only reasonable interpretation, is that the phrase “the automobile” refers only to “the described automobile,” and does not include a “non-owned automobile.” Therefore, although the described automobile is not covered under the policy if the accident occurred more than 75 miles from the United States border, a non-owned vehicle is. Appellant continues his argument by contending that, if the insurance policy meant to exclude coverage for accidents occurring in Mexico involving a “non-owned” automobile as well as “the described automobile,” Condition 20 could have been clearly worded to so provide.² We conclude that this interpretation is strained to the breaking point.

While we are required to make our own independent determination of the meaning of the language in the policy (Bareno v. Employers Life Ins. Co., 7 Cal.3d 875, 881 [103 Cal.Rptr. 865, 500 P.2d 889]), a summary of the trial court’s findings bears repeating. They are in essence:

(1) The insurance contract is clear, certain and unambiguous as to (a) coverage as to location of the accident; (b) vehicle covered. (2) The term “automobile” as used in paragraph 20 includes “the described automobile” and “non-owned automobiles.” (3) the conditions in paragraph 20 as to territorial coverage are conspicious, clear and consistent with public understanding.

The trial court obviously did not concur in appellants’ strained construction, nor do we. The law cited by appellants requiring all uncertainties and ambiguities in an insurance policy to be decided against the insurer is not applicable here. The rule has application only when the policy actually presents some uncertainty or ambiguity. (Ogburn v. Travelers Ins. Co., 207 Cal. 50, 53-54 [276 P. 1004].)

An insurance policy is but a contract; and, like all other contracts, it must be construed from the language used; when the terms are plain and unambiguous, it is the duty of courts to hold the parties to such contract. (Fyne v. Industrial Acc. Com., 138 Cal.App.2d 467, 471-472 [292 P.2d 78].) The courts will not indulge in a forced construction so as to fasten a liability on the insurance company which it has not assumed. (Pacific Employers Ins. Co. v. Maryland Casualty Co., 65 Cal.2d 318, 323 [54 Cal.Rptr. 385, 419 P.2d 641].) Absent circumstances indicating a contrary intention, words in an insurance policy are to be used in their plain, ordinary and popular sense. (Burke Concrete Accessories, Inc. v. Tolson, 27 Cal.App.3d 237, 241 [103 Cal.Rptr. 513].)

Application of the above basic rules to the insurance contract involved supports the trial court’s conclusion. The policy covered the insured on three³ defined automobiles (other than a substitute vehicle) that could be driven by them while in the designated areas (United States, Canada, and part of Mexico). The pertinent provision of paragraph 20 states: “This policy also applies . . . while the automobile is being used for trips into that part of . . . Mexico lying not more than 75 miles from the boundary line of the United States of America.”

The Mexican coverage provision was merely an extension of the geographic limits. Reference to the automobile is clearly to automobiles insured, and can apply only to one of the types defined in the policy. There is no ambiguity.⁴ A rule frequently used in interpreting insurance policies is the reasonable expectation test. In Gray v. Zurich Insurance Co., 65 Cal.2d 263 [54 Cal.Rptr. 104, 419 P.2d 168], the court, at page 269, indicated that in an insurance contract written by the more powerful bargainer (the insurer) to meet its own needs, and offered to the weaker party (the insured) on a “take it or leave it” basis, the reasonable expectations of the latter may have significance in determining whether the former owes coverage greater than it contends because the language would lead to such a conclusion. The language in Harmons’ policy does not supply such expectation. It would be unreasonable for the insured to expect she could drive a non-owned vehicle in Mexico more than 75 miles from the United States border when she could not do so in her own automobile, particularly in light of the well known hazards of Mexican driving.⁵ The rationale for the speculation stated by appellants in footnote 2, supra, is that “the insurance company did not want to have the obligation to repair in Mexico ‘the described automobile.’ ” We do not subscribe to this suggestion;⁶ however, it strengthens Farmers’ position because the reason does not support an expectation of appellants but is founded upon a concern of Farmers. No rationale is given by appellants as to why the Harmons expected different and more inclusive coverage in a non-owned vehicle in Mexico than in an owned automobile.

There remains no possible doubt on this issue when we consider an “endorsement” to the policy. First, a covering note sent with the endorsement tells the policyholder that the “State of California requires all automobile liability policies containing a provision extending coverage in Mexico be endorsed with a ‘Warning’ notice of the requirements of the Mexican Law.”⁷ Attached to the cover note is the following:

“Endorsement

“(Please attach to your policy if it affords automobile liability insurance.)

“Warning

“Unless you have automobile insurance written by a Mexican insurance company, you may spend many hours or days in jail, if you have an accident in Mexico. Insurance coverage should be secured from a company licensed under the laws of Mexico to write such insurance in order to avoid complications and some other penalties possible under the laws of Mexico, including the possible impoundment of your automobile.

“This endorsement becomes part of the policy to which it is attached and supersedes and controls anything in the policy contrary hereto but is otherwise subject to the declarations, insuring agreements, exclusions and conditions thereof.”

Below the endorsement is:

“Please Note

“Your policy does provide protection when you drive an automobile in Mexico within 75 miles of the boundary line of the United States. However, because of the requirements of Mexican law, the California State Legislature has asked the insurance industry to give you the above warning.

If you plan to drive an automobile in Mexico, please consult your Farmers Insurance Group Agent, who will be most happy to assist you in obtaining the necessary Mexican insurance.” (Italics added.)

The warning speaks out loud and clear that Harmons knew the insurance covered them only when they drove an automobile in Mexico within 75 miles of the United States border. Clearly the endorsement merely seeks to, and does, warn the policy holder that he is only covered in a limited area in Mexico, and warns him to obtain Mexican insurance. There is little more, if anything, that Farmers could have done to help its insured.⁸

In sum, the position of the insurer is irrefutable in that no special or different connotation is being placed on the words “the” and “an” in front of “automobile.” They merely reiterate that the coverage is of the various defined automobiles; i.e., “an automobile” in the endorsement is the same as “the automobile” in paragraph 20.

Appellants contend the insurance contract was one of adhesion; therefore, the exclusionary clause must be conspicuous, plain and clear, and since it was not, it therefore cannot be enforced as a matter of public policy. There is no merit to this argument. The 22 “Conditions” and paragraph 20 were conspicuous, and set forth with capitalized headings and standard printing. We have explained why we believe the language was plain and clear earlier in this opinion.

The judgment is affirmed.

Ashby, J., concurred.

1 Also, “(7) Newly Acquired Automobile means an automobile, ownership of which is acquired by the named insured, (a) if it replaces the described automobile . . . or (b) if it is an additional automobile and the Company insures all automobiles owned by the named insured. . . .

“(11) Substitute Automobile means an automobile not owned by the named insured . . . while temporarily used ... as a substitute for the described automobile when withdrawn from normal use. ...”

2 Appellants speculate on the reason for the difference thusly:

“The rationale or purpose of such seems company did not want to have the obligation to repair in Mexico ‘the described automobile’ because of the possibility of the- Mexican government impounding the car and/or making it difficult if not impossible to have the car returned to the United States.”

3 The described automobile, a newly acquired automobile, a non-owned automobile.

4 The dissent, in claiming there is ambiguity, maintains Farmers could have resolved the problem by specific reference to each class of automobiles or by referring to “an automobile” or “any automobile,” and then footnotes examples. This is totally unrealistic. There can be no doubt that the automobile referred to in Paragraph 20 is the vehicle involved in the accident, and if it is more than 75 miles in Mexico below the United'States border, it is not covered.

5 If not “commonly known," insureds were clearly put on notice by the endorsement and warning from Farmers, discussed infra.

6 Interestingly the dissent is not impressed by this argument but suggests the insured could expect the right to use a non-owned automobile in Mexico City or Guadalajara (cities deep in Mexico) on a temporary-basis. But this contention is untenable because the policy denies coverage 75 miles below the United States border.

7 Section 11580.6 of the Insurance Code.

8 The dissent, which uses 5 pages in trying to explain why the language in the policy is ambiguous, claims the endorsement compounds the ambiguities of Condition 20. Of course we do not agree. There are no ambiguities to compound; and assuming, arguendo, the insured is in doubt about Mexican coverage, the endorsement and warning clarify the coverage instead of confusing it.