Farmers Insurance Exchange v. Harmon

KAUS, P. J.

I respectfully dissent.

The majority holds that it would be a “forced” and “strained” construction of the policy to interpret a territorial limitation for “the automobile” to refer only to the automobile described in the policy. I disagree: nothing is more natural. The long and short of this case is that Farmers wants us to hold that “the automobile” really means “whatever automobile the insured is using at the time of the accident.” If that is what Farmers meant to say, it should have given the job of saying it to a nine-year-old child, who surely would have done a better job than the draftsman of the policy under consideration. To say that “the automobile” is “clearly, certainly and unambiguously” not the car for which the Harmons bought insurance, but also one which Mrs. Harmon happened to be driving during a visit to Mexico, flies in the face of insured’s reasonable expectations, violates accepted principles of construction of insurance contracts and ignores many indicia to the contrary in the policy itself.

First, however, there is a red herring that must be exposed. There is a suggestion in the majority opinion that the policy as a whole has some kind of territorial limitation to the United States and Canada and that coverage in Mexico is furnished, if at all, by that part of Condition 20 which affords coverage “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”—a clause which the majority calls an “extension of the geographic limits.”

Reference to the 75-mile extension into Mexico for “the automobile” is quite irrelevant unless one can first point to something in the policy which denies coverage anywhere in Mexico with respect to the car Mrs. Harmon was driving at the time of the accident. If “the automobile” refers to non-owned automobiles as well as to the described automobile, then there is no coverage in Mexico, and, of course, there is no way of moving Tepic to within 75 miles of the United States border. The issue, however, is not the effect of the 75-mile extension. It is, rather, whether the basic territorial limitation for “the automobile” refers to the automobile for which the Harmons purchased insurance, or to any non-owned automobile either one might be using at the time of an accident. It is, therefore, *813not the Harmons who must somehow stretch a 75-mile extension all the way to Tepic; it is Farmers who must point to an applicable territorial limitation in the policy.

The fact is that the policy has no territorial limitation other than Condition 20 itself. Therefore, unless the clause which affords insurance only “while the automobile is within the United States of America ... or Canada . . .” denies coverage as far as the subject accident is concerned, the insured is protected without any reference to the 75-mile “extension.”

For the sake of clarity I shall quote Condition 20 in full, italicizing language which is significant in the present context:

“(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 1, 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 II, 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.)

The majority suggests that Mrs. Harmon could not reasonably expect coverage while driving a non-owned automobile in Mexico more than 75 miles south of the border. Why not? Condition 20 of the policy only applies to parts I through IV. Part V provides “Comprehensive Personal Liability Insurance” for non-vehicular torts without any territorial restriction whatever! If the policy, under Part V, protects the insured from the legal consequences of a carelessly thrown dart in a London pub, what is so unreasonable about her expecting protection in Mexico under Part I unless such coverage is clearly excepted?

The majority therefore paints an entirely false picture of Mrs. Harmon, hat in hand, asking the courts to help here in extending coverage beyond the policy’s basic territorial limits. There are no such limits except to the extent that they may be found in Condition 20. In truth, it is Farmers which is trying to carve out a Mexican sanctuary with respect to the use of non-owned cars. It attempts to do so by relying on language which *814violates every applicable precept: it is neither conspicuous,1 nor plain, and, certainly, far from clear. The effort must therefore fail. (State Farm Mut. Auto. Ins. Co. v. Jacober, 10 Cal.3d 193, 201-202 [110 Cal.Rptr. 1, 514 P.2d 953]; Steven v. Fidelity & Casualty Co., 58 Cal.2d 862, 878 [27 Cal.Rptr. 172, 377 P.2d 284].)

Actually, it is quite unnecessary to resort to any special rule of interpretation relating to exceptions to coverage. More basic is the principle that all doubts must be resolved against the insurer and all uncertainties and ambiguities construed in favor of coverage. (Gyler v. Mission Ins. Co., 10 Cal.3d 216, 219 [110 Cal.Rptr. 139, 514 P.2d 1219].)

Even if we had no other aids to interpretation at our disposal, it seems to me self-evident that the question whether “the automobile” means “the described automobile” or “the described automobile or any non-owned automobile the insured happens to be using at the time of the accident” is at least ambiguous and that, therefore, the benefit of the doubt must go to the insured. Apart from that, however, the policy contains irrefutable proof that when Farmers wants to apply a clause granting, conditioning, or excluding coverage to any automobile, described or non-owned, it knows very well how to do so, either by specific reference to each class of automobile or by referring to “an automobile” or “any automobile.” Examples are noted below.2 Thus, in examples A, C, and G, the policy *815talks of “an” or “any” automobile. More to the point, perhaps, in examples F, I and K, the policy speaks clearly and unambiguously of “the described-automobile or a non-owned automobile.” If Farmers intended Condition 20 to apply to all such automobiles, why was it suddenly at a loss for words and spoke cryptically of “the automobile”? The probable answer is that Farmers’ underwriters never intended the interpretation which the attorneys retained by its claims department are asserting.

There are, indeed, very logical reasons why Farmers should extend coverage to its insureds for the use of non-owned automobiles outside of the United States. Farmers might have been reluctant to underwrite the risks involved in driving the described automobile far into Mexico and its use there, possibly on a continuing basis. On the other hand, the use of a non-owned automobile outside of the United States and Canada is actuarially far more likely to be of short duration—such as to meet the temporary needs of the traveler who arrives in Guadalajara or Mexico City by airplane—purely local and, most importantly, divorced from the risks involved in driving the described automobile to a distant city.3

The “endorsement” relied upon by Farmers only strengthens the insured’s position. First, a cover note sent with the endorsement tells the policy holder 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.” (Italics added.)

Below the cover note we find the following:

*816“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.[4]
“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.”

This endorsement, at best, compounds the ambiguities of Condition 20. Assuming that the insured has any doubt about having coverage in Mexico, the cover note tells him that he is receiving the endorsement precisely because his policy provides for such coverage. The endorsement itself tells him about certain unpleasant consequences if he has an accident in Mexico and is not insured with a company licensed under the laws of Mexico; however, it contains no hint that the financial obligations of Farmers under its policy are in any way affected by his failure to secure such additional coverage. What the Mexican authorities might or might not have done to Mrs. Harmon is not the question here. What we are concerned with is whether Farmers is going to honor its promises in a California state court. I think that it should.5

Appellants’ petition for a hearing by the Supreme Court was denied December 26, 1974. Tobriner, J., was of the opinion that the petition should be granted.

That Condition 20 is not conspicuous in the accepted sense of the word is beyond argument. It appears in the usual small print on the last of five legal size, double-columned pages. It is tucked away half way down the right-hand column.

The list is by no means exhaustive. (The italics are mine.)

A. The policy excludes from coverage under Part I “bodily injury to any fellow employee of the insured injured in the course of his employment if such injury arises out of the use of an automobile in the business of his employer, . .

B. Also under Part I, the policy excludes “liability assumed by the insured under any contract or agreement except liability of others assumed under a written contract relating to the use of a non-owned or a substitute automobile.”

C. Still under Part I, the policy does not apply “to any automobile while used as a public or livery conveyance, but this exclusion does not apply to the named insured or his relatives if occupying but not operating a non-owned automobile.”

D. Nor does Part I apply “while the described automobile is being used in the automobile business . . .”

E. The exclusions under Part I further provide that the policy does not apply to "any non-owned automobile |>¡c] arising out of its use (a) in the automobile business by the insured, or (b) in any other business or occupation of the insured except a private passenger automobile operated or occupied by the named insured or a servant.”

F. Part III—Medical Expense Insurance—protects the named insured and relatives “while occupying the described automobile ... or a non-owned automobile

G. Under Part III, the policy does not apply to “any person while occupying any automobile while used as a public or livery conveyance, but this exclusion does not *815apply to the named insured or a relative if occupying but not operating a non-owned automobile.”

H. Nor does Part III apply in certain cases to bodily injury sustained by “any person resulting from the use of a non-owned automobile. . . .”

I. Part IV extends comprehensive and collision coverage “to the described automobile or a non-owned automobile used by the insured.”

J. Part IV also provides that the deductible feature of the coverage does not apply “with respect to a collision involving the described automobile and another automobile insured by the Company.”

K. Farmers’ promise to pay for towing charges under Part IV applies expressly to “the described automobile or a non-owned automobile.”

L. The policy expressly provides that with respect to non-owned automobiles certain coverages shall be excess over any other collectible insurance available to the insured.

With deference to the views of appellant’s counsel, this seems a far more cogent reason for the differentiation between the described and non-owned automobiles than the one quoted in footnote 2 of the majority opinion. The trouble with that rationale is that it fails to take into account that Part IV of the policy, which provides for collision coverage, applies expressly to loss “to the described automobile, or a non-owned automobile used by the insured.” The supposed reluctance of Farmers to pay for repairs in Mexico cannot be assumed to evaporate when it becomes obligated to pay for the cost of repairing non-owned cars.

The endorsement required by section 11580.6 of the Insurance Code ends here.

The endorsement proper is followed by a sales pitch informing the insured that Farmers’ agents would be “happy” to assist him in obtaining coverage which would satisfy the Mexican authorities; further, it tells him that the policy provides protection when he drives “an”—rather than “the”— automobile in Mexico within 75 miles of the border.

It is obvious that nothing in this commercial message can detract from such coverage as the policy affords. If, however, the apparently inadvertent shift from “the” to “an” has any legal significance, it, too, is subject to interpretation in the assured’s favor. Since the 75-mile extension in the policy only speaks of “the” automobile, coverage for the use of automobiles other than the described automobile must derive from some other source. That source, of course, is the basic insuring agreement for non-owned automobiles and the absence of any provision denying Mexican coverage for such cars.