State Farm Mutual Automobile Insurance v. Johnston

507 P.2d 1357, 9 Cal. 3d 270, 107 Cal. Rptr. 149, 1973 Cal. LEXIS 189

• Court: California Supreme Court
• Decided: April 3, 1973
• Docket: Sac. 7944
• Status: Published

Opinions

Opinion

McCOMB, J.

This is an appeal from a declaratory judgment that an insurance policy issued by plaintiff covered defendant Billy Milton Johnston for an accident on March 9, 1968, when he was driving a 1964 Chevrolet Impala. The trial court found coverage under the “temporary substitute automobile” provision of the policy. The record sustains the propriety of that ruling, and other points raised by the parties need not be discussed.

Facts: The facts are not essentially disputed. On March 13, 1967, plaintiff issued a policy to Milton H. Johnston covering a 1957 Chevrolet, and this policy was in full force and effect on the date of the accident here involved. Milton was the registered owner of the car and paid the premiums to plaintiff. However, the car was actually purchased for the use of his son Billy under an arrangement whereby Billy was to pay for the car, its upkeep, and insurance, while the car would remain in Milton’s name. Billy was then under 18 years of age and was living with his parents in their Lodi home.

On September 30, 1967, shortly after he was 18 years old, Billy

married and moved with his wife to Stockton. He took with him the 1957 car with the consent of his father that he would continue to use it as before when he was at his parents’ home. In December 1967, the car became inoperable by reason of a frozen engine. Sometime in January 1968, Billy found a 1964 Chevrolet Impala suitable for the same use as the 1957 car. Billy purchased the 1964 Chevrolet with his father’s approval, but this time the car was registered in Billy’s name. Billy used the 1964 car for his driving needs the same as he had previously used the 1957 car, and he then sold the inoperable 1957 car. On March 9, 1968, while driving the 1964 car, Billy collided with another vehicle driven by John Mathew Shinn. Mr. Shinn was seriously injured, and his wife was killed. This tragic accident occurred four days before expiration of the policy period. Milton had not bought another car or cancelled his 1967 policy with its coverage provisions. On March 21, 1968, Billy went to plaintiff to inquire about future coverage for his 1964 car; and it was then that plaintiff learned of the March 9th accident, Billy’s purchase of the 1964 car, and his sale of the 1957 car.

Question: Did plaintiff’s policy give defendant Billy Milton Johnston coverage for the subject accident?

Yes. Plaintiff’s policy provided coverage for the “owned automobile”—■ meaning the described vehicle and including a “temporary substitute automobile,” which was defined as “an automobile not owned by the named insured or his spouse while temporarily used with the permission of the owner as a substitute for the described automobile when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction.” This clause commonly found in automobile liability insurance policies is primarily designed for the benefit of the insured. The purpose is not to defeat liability but reasonably to define coverage by limiting the insurer’s risk to one operating vehicle at a time for a single premium. (12 Couch on Insurance (2d ed. 1964) § 45.219, p. 261.)

The policy itself fixes no limit in time during which the temporary extended coverage is to be effective. “Temporary” is a word of much elasticity and considerable indefiniteness. (Eastman v. Piper, 68 Cal.App. 554 [229 P. 1002].) It has no fixed meaning in the sense that it designates any fixed period of time. (Fleckenstein v. Citizens’ Mut. Automobile Ins. Co., 326 Mich. 591 [40 N.W.2d 733, 736].) As commonly accepted, “temporary” is an antonym of “permanent.” (McKee v. Exchange Insurance Association, 270 Ala. 518 [120 So.2d 690, 692].) Here, it is unclear whether plaintiff, in its use of the word “temporary,” was attempting to put a time limitation on the use of the substitute automo-

bile. Any doubt as to its meaning must be resolved in accord with settled rules for interpreting an insurance contract. As said in Continental Cas. Co. v. Phoenix Constr. Co., 46 Cal.2d 423, at pages 437-438 [296 P.2d 801, 57 A.L.R.2d 914]: “It is elementary,in insurance law that any ambiguity or uncertainty in an insurance policy is to be resolved against the insurer. [Citations.] If semantically permissible, the contract will be given such construction as will fairly achieve its object of securing indemnity to the insured for the losses to which the insurance relates. [Citation.] If the insurer uses language which is uncertain any reasonable doubt will be resolved against it; if the doubt relates to extent or fact of coverage, whether as to peril insured against [citations], the amount of liability [citations] or the person or persons protected [citations], the language will be understood in its most inclusive, sense, for the benefit of the insured.” (Italics added.)

Plaintiff argues that since Billy purchased the 1964 car to use in place of the inoperable 1957 car, and then sold the 1957 car, his use of the 1964 car was not a “temporary substitute” but rather a “permanent replacement.” In this regard, plaintiff would limit the coverage of the policy to operation of the substituted automobile during the period of repair until the automobile named in the policy is restored to use. But this argument adds a requirement not found in plaintiff’s policy and relates the word “temporarily” to the insured car rather than to use of the substitute car. Certainly, plaintiff’s policy contemplated that the insured car might never be restored to use during the term of the policy, for it provided for a “temporary substitute” when the insured car should be withdrawn from normal use because of “breakdown . . . loss or destruction.” Here, the breakdown of the 1957 car apparently was such that it did not warrant repair but rather replacement for the remainder of the policy period. The important consideration for coverage under this provision of the policy was not the length of time of use but, rather, the purpose of the substitution and the substantial similarity between the use of the originally insured automobile and its substitute. In short, it is contemplated between the insurer and the insured that the same use of the substitute vehicle will be made as the one originally insured. (Lewis v. Bradley, 7 Wis.2d 586 [97 N.W.2d 408, 411-412].) Here, Billy used the 1964 car substitute for the same driving needs that he had used the 1957 car; Milton, his father, knew of the substitution and approved of its use for the same purposes as had applied with the 1957 car (Hemphill v. Home Ins. Co., 121 Ga.App. 323, 458 [174 S.E.2d 251]); and the sale of the inoperable 1957 car would not preclude coverage for the 1964 car as a “temporary substitute automobile” for the remainder of the policy period. (Continental Cas. Co. V. Ocean Accident & Guar. Corp., 58 Del. 338 [209 A.2d 743].)

In Nelson v. St. Paul Mercury Insurance Company, 83 S.D. 32 [153 N.W.2d 397], where substantially the same “temporary substitute automobile” provision was considered, the Supreme Court of South Dakota said at page 400: “The word ‘temporarily’ relates to and is a restriction on the use of the substitute vehicle. The policy does not similarly require that the insured vehicle be ‘temporarily’ withdrawn from normal use. This phase of the insurance contract is without time limit. Harte v. Peerless Insurance Company, 123 Vt. 120, 183 A.2d 223. Furthermore, the policy does not require the replacement, or an intention to replace, the insured vehicle in use after being withdrawn from normal use. A breakdown, repair, loss or destruction might be permanent in nature. Obviously, there would never be an intention to replace in use an automobile damaged beyond repair, as in the present case, or one that has been lost or destroyed. Nevertheless, the substitute automobile clause is clearly designed to extend coverage to an insured in those cases during the remainder of the policy period. The insured is thereby afforded protection paid for and the insurer’s risk is confined to one operating vehicle at a time.”

Here, if plaintiff’s policy, for which a premium was paid, be held to apply to any risk at all, it could apply only to the operation of the 1964 car operated by Billy when the accident occurred. No other risk existed at that time. Plaintiff's risk with respect to the use and operation of the 1957 car ceased with its breakdown and sale. (Veh. Code, § 5602.) An insurer charges a premium for assuming a risk covered by the policy. An insurer earns a premium only when there is a risk involved. (Ins. Code, § 481, subd. 1.) The risk to plaintiff under the policy was the same whether Billy operated the 1957 car or the later substituted 1964 car for the same basic purposes—only one operating vehicle was covered at the given time. The policy makes clear that its purpose was to extend coverage, without payment of additional premium, to a “temporary substitute automobile” used in place of the insured automobile withdrawn from normal use for reasons stated in the policy.

Plaintiff unavailingly relies on Travelers Indemnity Co. v. American Cas. Co. of Reading, Pa., 226 F.Supp. 354, and Hays v. Robertson, 20 Utah 2d 186 [435 P.2d 925], for the proposition that a newly acquired car cannot qualify for coverage as a “temporary substitute automobile.” The two cases actually concerned automobiles which were withdrawn from normal use for distinguishable reasons—repossession in Travelers and failure to make financial payments in Hays, not by reason of “breakdown, repair, servicing, loss or destruction.” Therefore, in neither case was the described car in the policy withdrawn from normal use for the specified reasons allowing for a “temporary substitute automobile,” and consequently in neither case could the later acquired car qualify for coverage on that basis. Here, the 1957 Chevrolet, the described car, was unquestionably “withdrawn from normal use” by reason of its “breakdown,” as specified in plaintiff’s policy.

The applicable principle in the case of a “temporary substitute vehicle” is well stated by the Supreme Court of Minnesota in St. Paul Fire & Marine Insurance Company v. Nyquist, 286 Minn. 157, at pages 159-160- [175 N.W.2d 494]: “In the replacement-automobile cases the courts are usually willing to allow coverage under the policy as long as there is only one operable car. It makes no difference that the replacement car is purchased before the replaced car is sold as long as the replaced car is sold or is not operable at the time of the accident. In this way other users of the highways are protected and the insurance company’s liability is limited to the operation of one car by the insured.” [Citing numerous authorities.]

While plaintiff’s introduction of the word “temporary” into its “substitute automobile” provision appears to have created an ambiguity, it is the plaintiff’s language; and plaintiff cannot avoid the effect of its choice of terminology. As was said in Allstate Ins. Co. v. Roberts, 156 Cal.App.2d 755, at page 758 [320 P.2d 90]: “ ‘The provision for coverage of a substituted vehicle “is for the insured’s benefit” and is to be “construed liberally in favor of the insured, if any construction is necessary.” ’ ” In accord: State Farm Mut. Auto. Ins. Co. v. Allstate Ins. Co., 9 Cal.App.3d 508, 518 [88 Cal.Rptr. 246]. Here, it must be concluded that Billy was using the 1964 car as a “temporary substitute automobile” under the terms of plaintiff’s policy.

An argument has been made that the 1964 Chevrolet cannot be regarded as a temporary substitute automobile, because the requirement that the automobile be “temporarily used with the permission of the owner” suggests that the automobile must belong to someone other than the person using it; and Billy owned the 1964 Chevrolet and was using it. Since, however, we must give the policy provisions a liberal interpretation in favor of the insured (see State Farm Mut. Auto. Ins. Co. v. Allstate Ins. Co., supra, 9 Cal.App.3d 508, 518; Allstate Ins. Co. v. Roberts, supra, 156 Cal.App.2d 755, 758), we find this factor not determinative. Had the 1964 Chevrolet been purchased by Billy’s father, the named insured, or the father’s spouse, it would clearly have been a newly acquired automobile¹. and, could not be regarded as a temporary substitute automobile, the policy specifically providing that temporary substitute automobile may not be one owned by the named insured or his spouse. But the 1964 car was not acquired by Billy’s father or' the father’s spouse, as a result of which the provisions regarding a newly acquired automobile are inapplicable. At the same time, since the 1964 Chevrolet was owned by someone other than the named insured or his spouse, it can qualify as a temporary substitute automobile.

Billy was unquestionably given unrestricted permission to use the 1957 Chevrolet in order to go to work and run errands; and, as hereinabove pointed out, the 1964 Chevrolet was acquired for use as a temporary substitute for the 1957 Chevrolet after breakdown of the latter. Under the circumstances, since Billy was using the 1964 Chevrolet for the same purposes for which he had been given permission to use the 1957 Chevrolet, he must be regarded as a permissive user of the 1964 Chevrolet and hence covered as an insured under plaintiff’s policy.

The judgment is affirmed.

Tobriner, J., Mosk, J., and Burke, J., concurred.

1 Under the policy, “Owned Automobile” includes a newly acquired automobile, which is defined as “an automobile, ownership of which is acquired by the named insured or his spouse, if a resident of the same household, if (1) it replaces an automobile owned by either and covered by this policy . . . and (2) the named insured within 30 days following such delivery date applies to the company for insurance on such newly acquired automobile . . , .”