Opinion
6-8-1955
CONTINENTAL CASUALTY COMPANY, Plaintiff and Appellant, v. PHOENIX CONSTRUCTION COMPANY, a corporation, Oilfields Trucking Company, a corporation, Transport Indemnity Company, a corporation, James E. Mason, Harvey Leming, Virginia Leming, Roger Ralph Rife, Richard Neal Rife, Lorraine Ellen Rife, Luella Rife, James Laverne Rife, and Eva Johnson as Guardian ad litem of Roger Ralph Rife, Richard Neal Rife, Lorraine Ellen Rife and James Laverne Rife, Minors, Defendants, Phoenix Construction Company, a corporation, Oilfields Trucking Company, a corporation, Transport Indemnity Company, a corporation, Harvey Leming and James E. Mason (Defendants), Underwriters at Lloyd's London, an unincorporated association (Plaintiff in Intervention in Certain Pleadings), Respondents, and Certain Underwriters at Lloyd's London, Pacific Marine Insurance Agency, Inc., E. C. Evans Agencies, Managers, and Willis Faber & Dumas, Ltd. (Plaintiffs in Intervention in Certain Pleadings). Civ. 20414.
Jennings & Belcher, Los Angeles, for appellant. Robert W. Stevenson, Los Angeles, for respondents, Oilfields Trucking Co., Transport Indem. Co. and Underwriters at Lloyd's London. Martin, Hahn & Camusi, Los Angeles, for respondent, Phoenix Const. Co. Oscar F. Catalano, Bakersfield, for respondent, Harvey Leming.
CONTINENTAL CASUALTY COMPANY, Plaintiff and Appellant,
v.
PHOENIX CONSTRUCTION COMPANY, a corporation, Oilfields Trucking Company, a corporation, Transport Indemnity Company, a corporation, James E. Mason, Harvey Leming, Virginia Leming, Roger Ralph Rife, Richard Neal Rife, Lorraine Ellen Rife, Luella Rife, James Laverne Rife, and Eva Johnson as Guardian ad litem of Roger Ralph Rife, Richard Neal Rife, Lorraine Ellen Rife and James Laverne Rife, Minors, Defendants,
Phoenix Construction Company, a corporation, Oilfields Trucking Company, a corporation, Transport Indemnity Company, a corporation, Harvey Leming and James E. Mason (Defendants),
Underwriters at Lloyd's London, an unincorporated association (Plaintiff in Intervention in Certain Pleadings), Respondents,
and
June 8, 1955.
As Modified on Denial of Rehearing July 7, 1955.
Hearing Granted Aug. 3, 1955.
Jennings & Belcher, Los Angeles, for appellant.
Robert W. Stevenson, Los Angeles, for respondents, Oilfields Trucking Co., Transport Indem. Co. and Underwriters at Lloyd's London.
Martin, Hahn & Camusi, Los Angeles, for respondent, Phoenix Const. Co.
Oscar F. Catalano, Bakersfield, for respondent, Harvey Leming.
ASHBURN, Justice pro tem.
In this declaratory relief action, the major controversy revolves around the question of liability of certain insurance companies to protect defendants Phoenix Contruction Company, Oilfields Trucking Company and James E. Mason from a judgment in favor of defendant Harvey Leming, who was injured in an accident on July 10, 1951, which the proved to have been caused by negligence of defendant Mason while driving a truck then and there owned by defendant Oilfields. Defendants Phoenix and Oilfields as joint venturers had a contract with the State Highway Department for a certain road construction job in Kern County known as Haypress Canyon job. Phoenix' business was that of highway and similar construction; that of Oilfields was the truck hauling of oil surfacing materials and heavy construction equipment. These two companies had taken the highway contract pursuant to an agreement between themselves that they should engage in certain unspecified joint ventures. Defendant Mason was found by the trial court to be a general employee of Oilfields and a special employee of Phoenix. It was also found that at the time and place of the accident, he was 'acting in the scope and course of his employment as such employee and agent.' Leming sued Phoenix, Oilfields and Mason for recovery of damages for his injuries. On a first trial he recovered judgment against all of them in the sum of $212,585.69. This judgment became final as to the driver Mason, but a new trial was granted to Phoenix and Oilfields. At the conclusion of same, a verdict was rendered against both for $213,460.02. The judgment thereon was recently affirmed by the Supreme Court, Leming v. Oilfields Trucking Co., 44 Cal.2d 343, 282 P.2d 23. Phoenix, Oilfields and Mason and their respective insurers are faced with this onerous liability and Continental Casualty Company brings this action for a determination of various questions arising under outstanding insurance policies.
The primary problems emanate from Continental's policy No. CLP5707316 and defendant Transport Indemnity Company's policy No. 46-001. The Continental policy names defendant Phoenix Construction Company, Inc., a corporation, as insured and the Transport policy names defendant Oilfields Trucking Company, a corporation, as such. Certain excess insurance policies present questions peculiar to that subject which can be solved only after determination of those arising under the policies just mentioned by number. The question most debated by counsel is whether Phoenix is covered by the Continental policy with respect to the accident in question. That policy was obtained by Phoenix, which became obligated for the premium and which as stated was named as insured, its business being given therein as 'general engineering contractor.' It was stipulated and found that Phoenix was not protected by any insurance covering the instant accident except to the extent that the Continental line of policies (No. CLP5707316 and the excess certificates related thereto) might so operate.
Phoenix having been named as insured in the Continental policy, the primary protection is thus stated in paragraph I of the 'insuring agreements': 'Coverage A--Bodily Injury Liability. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury, sickness or disease, including death at any time resulting therefrom, sustained by any person.' An endorsement required by the Public Utilities Commission of this state contains this further language: '* * * the Company agrees that within the classes of coverage provided by the policy it will pay any final judgment rendered against the insured for bodily injuries to or death of any person or persons other than the named insured, or damage to or destruction of property, or both, arising out of the ownership, maintenance or use of any vehicle operated under authority of the aforesaid statutes, although such vehicle may not be specifically described in the policy.' Two other endorsements or riders operate to name Oilfields Trucking Company as an insured. One of them, designated R6309202, reads as follows: 'It is agreed Oil Fields Trucking Company is added as an additional insured in connection with construction operations conducted as a joint venture with the Phoenix Construction Company, Inc.
'It is further agreed that this policy excludes coverage for all operations of Oil Fields Trucking Company other than construction operations conducted as a joint venture with Phoenix Construction Company, Inc.'; the other, R6309208, says: 'It is agreed that this policy does not apply to automobiles owned, maintained or used by the Oil Fields Trucking Company, even though, they might be used in a joint venture operation with other named insureds.' Appellant Continental claims that rider 208 withdrew any coverage of Phoenix as well as Oilfields with respect to the accident in question. The trial judge found to the contrary.
The language of these endorsements is ambiguous as will appear from further discussion. No parol evidence was introduced in aid of construction; but there were certain stipulations made which were not susceptible of divergent inferences. The construction of the instruments therefore becomes a question of law. Western Coal & Mining Co. v. Jones, 27 Cal.2d 819, 826, 167 P.2d 719, 164 A.L.R. 685.
Certain settled rules of interpretation are here applicable. The language of the policy and of the riders is presumed to be that of the insurer, Ogburn v. Travelers Ins. Co., 207 Cal. 50, 53, 276 P. 1004, and when ambiguous is to be construed most favorably to the insured, in such manner as to provide full coverage of the indicated risk rather than to narrow the protection. Olson v. Standard Marine Ins. Co., 109 Cal.App.2d 130, 135, 240 P.2d 379; Miller v. United Ins. Co., 113 Cal.App.2d 493, 497, 248 P.2d 113; Pendell v. Westland Life Ins. Co., 95 Cal.App.2d 766, 769, 214 P.2d 392; Fageol Truck & Coach Co. v. Pacific Indemnity Co., 18 Cal.2d 748, 751, 117 P.2d 669. If the insurer would create an exception to the general import of the principal coverage clauses, the burden rests upon it to phrase that exception in clear and unmistakable language. Pendell v. Westland Life Ins. Co., supra, 95 Cal.App.2d at page 770, 214 P.2d at page 395. If this is not done any ambiguity or uncertainty is resolved in favor of the policyholder. The courts will not sanction a construction of the insurer's language that will defeat the very purpose or object of the insurance. Miller v. United Ins. Co., supra, 113 Cal.App.2d at page 497, 248 P.2d at page 115; Narver v. California State Life Ins. Co., 211 Cal. 176, 180, 294 P. 393, 71 A.L.R. 1374. Indeed an exception must be couched in terms which are 'clear to the ordinary mind', Pendell v. Westland Life Ins. Co., supra, 95 Cal.App.2d at page 770, 214 P.2d at page 395, or any doubts as to meaning will be resolved against the insurer.
At the top of the Continental policy, in the first line of the first page, appears this caption in prominent letters 'Comprehensive General--Automobile Liability Policy.' Such captions are properly considered in construing the policy. Zimmerman v. Continental Life Ins. Co., 99 Cal.App. 723, 726, 279 P. 464. The word comprehensive 'means extensive or embracing much', Hemel v. State Farm Mut. Automobile Ins. Co., La.App., 25 So.2d 357, 358; or, as stated in State ex rel. Hewlett v. Womach, 355 Mo. 486, 196 S.W.2d 809, 812, it signifies "including much; comprising many things; having a wide scope; inclusive." If the responsible officer of Phoenix read as far as Coverage A, which he is presumed to have done, he would have met with no disappointment because the language is broad enough to cover the company in any and all activities pertaining to its contracting business. It is not limited to automobile accidents or any other specified type. On the contrary it embraces any and all untoward happenings incident to a construction business. In this respect it is in contrast with Coverage B which is designated 'Property Damage Liability--Automobile' and agrees to pay property damage 'caused by accident and arising out of the ownership, maintenance or use of any automobile.' And the endorsement prescribed by the Public Utilities Commission above quoted specifically defines the coverage as including automobiles 'operated under authority of the aforesaid statutes', which language refers to automobiles engaged in trucking and governed by the Highway Carriers' Act, the City Carriers' Act or the Public Utilities Act. This was the type of trucking in which Oilfields was engaged. The policy and riders 202 and 208 affirmatively show that Phoenix was engaged in the construction business and participating in a joint venture with Oilfields. The last rider, 208, raises the plain inference that the insurer Continental knew that Oilfields was in the trucking business. It is presumed that the ordinary course of business was followed in the preparation and issuance of this policy, Code Civ.Proc. § 1963, subd. 20, and hence that the insurer informed itself of the activities that were sought to be covered on behalf of the applicant Phoenix--in this case all aspects of construction work and trucking business conducted as a joint venture. As a member of that joint venture Phoenix would be liable for the negligence of any employee of Oilfields to the same extent as Oilfields itself, Leming v. Oilfields Trucking Co., supra, 44 Cal.2d 343, 282 P.2d 23; Hupfeld v. Wadley, 89 Cal.App.2d 171, 175, 200 P.2d 564; 48 C.J.S., Joint Adventures, § 14e, page 870. In procuring the coverage of Oilfields the protection against that vicarious liability would naturally be the primary consideration of Phoenix and, except for the ambiguity biguity created by rider 208, that result was clearly accomplished. But Continental says that 208 took away from Phoenix such protection so far as Oilfields' major participation in the joint venture was concerned, namely, the hauling by automobile. Clearly that phase of the insurance was subtracted as to someone, but whom?
Section 1648 of the Civil Code furnishes the key to our problem. It says: 'However broad may be the terms of a contract, it extends only to those things concerning which it appears that the parties intended to contract.' These riders add nothing to the protection given to Phoenix in the body of the policy. It covers both direct and imputed liability. The riders merely add protection to Oilfields. No. 202 in its first paragraph names it as an additional insured 'in connection with construction operations conducted as a joint venture with the Phoenix Construction Company, Inc.' and in its second paragraph by way of emphasis of the preceding limited coverage says that 'this policy excludes coverage for all operations of Oil Fields Trucking Company other than construction operations conducted' in the joint venture named. But that it was not the intention to cover all Oilfields' activities in furtherance of the joint venture is disclosed by the language of 208 which specifically says that the policy 'does not apply to automobiles owned, maintained or used by the Oil Fields Trucking Company, even though, they might be used in a joint venture operation with other named insureds.' Of course, 202 does not protect Oilfields against any accidents caused by its trucks when used in pay part of its business other than participation in the joint venture with Phoenix, and when 208 subtracted coverage on automobiles owned, maintained or used by Oilfields, it withdrew the operations of those trucks from the joint venture coverage and limited Oilfields' protection to the vicarious liability which it would incur as a result of negligence of any of Phoenix' employees while engaged in the specified joint venture. In other words, rider 208 leaves Oilfields not covered or protected in any of its own major activities though they be a part of the venture with Phoenix.
Counsel for the various parties have debated at length the meaning of the concluding phrase of 208 'even though, they might be used in the joint venture operation with other named insureds.' This phrase does not have the controlling importance which counsel seem to attach to it. If 'insured,' the singular term, had been used the meaning would seem plain that the insurance company was merely saying that Oilfields' automobiles were not covered even though used in furtherance of the Phoenix joint venture. The use of the plural 'insureds' does not forbid this construction but in our judgment it enlarges the thought and in effect says, perhaps needlessly, that Oilfields' truck operations are not covered even though they be a part of some joint venture with some other concern who might later be added to the policy as a named insured. An illustration of what might have been in the mind of the draftsman (though there is no affirmative evidence to this effect) is found in the fact that the Transport policy 46-001 has a special endorsement which adds as named insured 'P. A. Phoenix and H. E. Phoenix, as co-partners only, jointly and not severally, doing business as Phoenix Brothers Garage and Storage Company.' If a joint venture with this Phoenix Brothers partnership were later added to the Continental policy as a named insured, the language of 208 would operate to exclude from Continental coverage any of the described operations of Oilfields engaged in that joint venture as well as those engaged in the joint venture with the corporation Phoenix Construction Company.
So far as Phoenix is concerned, this 208, if construed as appellant Continental would have it (namely, as withdrawing protection of Phoenix with respect to its imputed liability for operation of Oilfields' trucks) would take from Phoenix protection against one of its major risks, one which is clearly covered by the body of the policy in Coverage A. And Phoenix had no other insurance policy which would protect it against that sort of liability. It would be unreasonable to hold that it or the insurer so intended. There is a real ambiguity in 208 and the doubt raised thereby must be resolved in favor of the insured. Properly construed, 202 and 208 embrace the subject of Oilfields' liability only, covering it as to vicarious obligations and excluding those arising from its own major activity of trucking.
This construction is in harmony with the definition of 'insured' found in III of the insuring agreements, viz., 'The unqualified word 'insured' includes the named insured and also includes (1) under coverages A and C, any partner, executive officer, director or stockholder thereof while acting within the scope of his duties as such, except with respect to the ownership, maintenance or use of automobiles while away from premises owned, rented or controlled by the named insured or the ways immediately adjoining * * *.' If Oilfields were a partner (which, as later appears, we hold it was not) this language would clearly except from the coverage the use of its automobiles while on the highway between the Phoenix yard and the site of the job.
It follows that Phoenix Construction Company, a corporation, but not Oilfields Trucking Company, a corporation, is protected by the Continental policy with respect to the accident in question.
Oilfields is specifically covered by the Transport policy 46-001. Does it protect Phoenix? Appellant Continental and respondent Phoenix argue that it does. That policy does not name Phoenix Construction Company at all and there is no claim that it was included therein except through the use of the word 'partner' in paragraph (3)(b) of the conditions: 'The unqualified word 'insured' includes the named insured and also includes as respects Coverage Clause 1: (1) any partner, executive officer, managing employee, director or stockholder thereof while acting within the scope of his duties as such or in so far as he is or may be liable by reason of his occupying such position.' The trial judge found that Phoenix and Oilfields were engaged in a joint venture and by implication that they were not partners.
The agreement between the two companies provided for a series of separate joint ventures and the Haypress job became one of them. The distinction between joint venture and partnership has not entirely disappeared from our law, 14 Cal.Jur., § 2, p. 760. While ordinarily a joint venture embraces only one transaction the fact that it may continue for years does not change its character. Tufts v. Mann, 116 Cal.App. 170, 177, 2 P.2d 500. In this instance there was no joint ownership of the properties used on the job, no express agreement for sharing of losses, no general sharing of profits. Each party supplied its own men and equipment and operated the latter. Oilfields' participation in profits is restricted to 'services they render' and 'participation on items in which they have engaged.' The primary object of the agreement was that of 'increasing the bidding capacity by the combination of said corporations and equipment of each' and Oilfields' participation was to be 'to such extent as they so desire--on jobs or contracts such as the purchasing of road oil, transportation of equipment and materials, transportation of road oil, etc.' The parties specifically designated themselves as joint venturers and that fact has persuasive force. Blumenthal v. Greenberg, 130 Cal. 384, 388, 62 P. 599; Singh v. Kashian, 124 Cal.App.2d Supp. 879, 884, 268 P.2d 768. 'Whether the parties to a particular contract have thereby created, as between themselves, the strict relation of joint adventurers or some other relation involving cooperative effort, depends upon their actual intention, which is determined in accordance with the ordinary rules governing the interpretation and construction of contracts.' Universal Sales Corp. v. California, etc., Mfg. Co., 20 Cal.2d 751, 764, 128 P.2d 665, 673. While not separately determinative, the above mentioned factors point to a joint venture rather than a partnership. See Smith v. Moynihan, 44 Cal. 53, 61. And our function is not to determine the matter at large but to ascertain what this policy means by the use of the word 'partner.' It is to be noted that although many other firms are named in riders of one sort or another attached to the Transport policy, the name of Phoenix Construction Company does not appear but on the contrary P. A. Phoenix and H. E. Phoenix as partners, doing business as Phoenix Brothers Garage and Storage Company, are covered by a special endorsement. Incidentally, P. A. Phoenix was Vice-President and H. E. Phoenix was President of the Phoenix corporation. The word 'partner' as used in the policy might well apply to either or both of them depending upon their actual relationship to Oilfields. Moreover, this definition of insured found in paragraph (3)(b) of the conditions of the Transport policy operates only 'as respects coverage Clause 1,' which is limited to damages 'arising out of the occupation of the named insured' i. e. 'motor carrier for hire' as stated in the declarations; and in no real sense was Phoenix a partner in that activity. The trial judge correctly concluded that Phoenix was not a partner and not covered by the Transport policy.
The next question is what, if any, insurance coverage does defendant Mason have with respect to liability upon the final judgment against him in the sum of $212,585.69.
Mason was an employee of Oilfields. There is no contest over this finding and could be none. The court found that the Transport policy afforded him no protection. He is not named as an insured, but paragraph (6) of the policy conditions, headed 'Financial Responsibility Laws' says: 'Such insurance as is afforded by this policy shall comply with the provisions of the motor vehicle financial responsibility law of any state or province which shall be applicable with respect to any such liability arising out of the existence, ownership, maintenance or use of any automobile during the policy period, to the extent of the coverage and limits of liability required by such law.' As will become apparent this operates to insure Mason as well as his employer Oilfields.
California's financial responsibility law comprises sections 410-422.7 Vehicle Code. Chapter 2 of Division 7 (sections 410-418) is headed 'Financial Responsibility Law' in the code; Chapter 3 (sections 419-422.7) is captioned 'Security Following Accident' but its provisions are such as to bring it within the common acceptation of 'financial responsibility laws' and it is so termed in Escobedo v. State of California, etc., 35 Cal.2d 870, 878, 222 P.2d 1; see also annotation in 35 A.L.R.2d 1012. Chapter 2 covers the matter of establishing responsibility after an accident and an unpaid judgment. Chapter 3 provides for such showing after the accident and before any judgment as a means of forestalling suspension of driver's license and the registration of the vehicle. Under chapter 2, the unpaid judgment provisions, the owner of a vehicle which has been driven with his consent (e. g., master and servant) suffers suspension of his vehicle registration, Vehicle Code § 410(c); Sheehan v. Division of Motor Vehicles, 140 Cal.App. 200, 205, 35 P.2d 359, unless he files an affidavit showing 'that at the time of the accident * * * he was insured, that the insurer is liable to pay such judgment' and that he does not know why the insurer has not paid the judgment, § 411.5. He also files the original or certified copy of the policy and if his showing is satisfactory his certificate of registration is not suspended. Section 415 prescribes certain requisites for the policy. '(a) [Definition: Requirements.] A 'motor vehicle liability policy,' as used in this code means a policy of liability insurance issued by an insurance carrier authorized to transact such business in this State to or for the benefit of the person named therein as assured, which policy shall meet the following requirements: (1) [Designation of vehicles.] Such policy shall designate by explicit description or by appropriate reference all motor vehicles with respect to which coverage is thereby intended to be granted. (2) [Persons insured.] Such policy shall insure the person named therein and any other person using or responsible for the use of said motor vehicle or motor vehicles with the express or implied permission of said assured. * * * (c) [Excess or additional coverage: Permissible agreements, provisions or stipulations.] Any such policy may grant any lawful coverage in excess of or in addition to the coverage herein specified or contain any agreements, provisions or stipulations not in conflict with the provisions of this code and not otherwise contrary to law. * * *' Section 411 makes the procedure applicable to successive accidents and judgments. While it is true, generally speaking, that the procuring of the policy is optional, not mandatory, prior to the first accident and judgment, the businessman-employer in practice must have a policy in form prescribed by section 415 in order to be free of the threat of suspension in the event of nonpayment of any judgment rendered against him and his employee; he must be able to make proof that he was so insured at the time of the accident.
When chapter 3 re 'Security Following Accident' is digested it appears that it is the duty of both driver and owner (employer) to report to the Department of Motor Vehicles any accident causing personal injury or death and to do so within a specified time, except that an employer need not make a report if the vehicle involved in the accident 'is owned or operated by any person or corporation who has filed with the department a certificate of an insurance carrier * * * that there is in effect a policy * * * meeting the requirements of Section 422.6 and when such insurance policy * * * was in full force and effect in respect to such vehicle at the time of the accident.' Unless conditions for exemption are fulfilled the employer is required to deposit security; the penalty for failure being suspension of registration of all of the employer's vehicles not covered by insurance, § 420. Under section 422.5 exemption may be established by satisfactory proof to the department (a) that the owner had an automobile liability policy in effect at the time of the accident with respect to the driver or vehicle involved in the accident, a policy complying with requirements of section 422.6; (b) that the driver, if not the owner, had in effect a policy covering him; '(c) That such liability as may arise from the driver's operation of the motor vehicle involved in the accident is, in the judgment of the department covered by some form of liability insurance or bond which complies with the requirements set forth under Section 422.6.' Section 422.6 relates to the qualifications of the insurance company and requires policy limits of not less than the familiar $5,000 and $10,000 for personal injury or death and $1,000 for property damage. Sub-paragraph (c) of 422.5, just quoted, seems designed to operate where the non-owner driver has not covered himself; for, if (a) and (b) have been complied with there is no separate area for (c) to cover. If the driver has not insured his own operation the employer, in order to avoid suspension of registration of all his uninsured vehicles must show that he himself has covered the activities of the driver and any liability arising therefrom. Under section 422.6(c) the insurance company named in the report of accident is required to notify the department 'whenever such a policy or bond was not in effect at the time of such accident', and it seems that in that event the policy does not establish an exemption and the employers' registrations are suspended.
In short (if it be not too late for such an expression) the employer must have in effect at the time of accident an insurance policy satisfactory to the department or he is soon out of any business which depends on motor transportation. While the exact terms of the policy are not prescribed by chapter 3, it does seem to say in section 422.5(c) that any and all liability growing out of the driver's conduct must be covered. And, for want of better definition in chapter 3, we must turn to chapter 2 (in pari materia) where section 415(a)(2) specifically says that 'Such policy shall insure the person named therein and any other person using or responsible for the use of said motor vehicle or motor vehicles with the express or implied permission of said assured.' The introductory matter in section 415 is this: 'A 'motor vehicle liability policy,' as used in this code means a policy * * * which policy shall meet the following requirements:' which include that of sub-paragraph (2) just quoted. Chapter 3 does not specifically mention a 'motor vehicle liability policy' but it does refer to an 'automobile liability policy'. And we conclude that its requirements embrace those of section 415.
This case does not present any question of whether these statutes are automatically incorporated into liability policies or when or whether the insurer's liability becomes absolute in given circumstances. Such are the cited cases of State Compensation Ins. Fund v. Bankers Indemnity Ins. Co., 9 Cir., 106 F.2d 368; Rasinski v. Metropolitan Casualty Ins. Co., 117 N.J.L. 490, 189 A. 373; American Lumbermen's Mut. Casualty Co. v. Trask, 238 App.Div. 668, 266 N.Y.S. 1; and they do not assist us. The present problem is one of interpretation of the Transport policy, condition (6). 'Such insurance as is afforded by this policy shall comply with the provisions of the motor vehicle financial responsibility law of any state or province which shall be applicable with respect to any such liability arising out of the existence, ownership, maintenance or use of any automobile during the policy period, to the extent of the coverage and limits of liability required by such law.' This language seems plain. Its normal import is an agreement that any provision required by such financial responsibility law shall constitute an implied term of the policy. The rule of interpretation in favor of the insured emphasizes the soundness of this view. And the practical considerations do likewise. The declarations of the policy show Oilfields to be a 'motor carrier for hire.' It could not afford to have its business tied up by suspension of registrations because of failure to have in force at the time of accident a policy covering all risks necessary to satisfy the department. As a practical matter it must be in position to make that showing at once. It would not be reasonable to assume that the insurer did not intend to place the insured in that position or to leave it where it would have to make a deposit of security in the case of each personal injury. We hold that this language of condition (6) did incorporate into the Transport policy the terms required by section 415 Vehicle Code and that Mason was and is insured thereby.
The next question is the extent of coverage of Mason. Condition (6) concludes with this phrase: '* * * to the extent of the coverage and limits of liability required by such law.' The primary Transport policy, No. 46-001, carries limits of $5,000 for injury or death of one person and $10,000 for all persons injured or killed in one accident. Lloyd's London certificate 46-C3-32 affords $40,000 excess insurance 'against the hazards and perils of Comprehensive Bodily Injury, Property Damage and Cargo Liability Coverage as insured under policies issued by the Transport Indemnity Company of Los Angeles * * * to Oilfields Trucking Company, et al and other persons, firms and corporations named as insureds under said policies, all hereinafter called the Assured.' It also provides: 'It is the intention of the parties that under this Policy the assured is to be indemnified up to $40,000.00 as aforesaid, against all liability in excess of the liability of the Primary Insurer under its policies.
'It is agreed that this Policy is subject to the same Warranties, Terms and Conditions (except as regards * * * the amount and limit of Liability * * *) as are contained in, or as may be added to said Policy of the Primary Insurer.' Mason having been included in the primary Transport policy, the quoted language increases his coverage to the extent of $40,000. Transport policy 46-002 furnishes additional excess coverage, 'excess over $50,000.00' in an amount of $950,000. The 'special excess endorsement' provides: 'Notwithstanding anything in the policy to the contrary, it is further agreed that this policy is subject to the same warranties, terms and conditions (except as regards * * * the amount and limit of liability * * *) as are contained in or as may be added to the primary policy issued by the Transport Insurance Exchange.' This policy increased Mason's coverage to a total of a million dollars.
So far as the Continental policy is concerned rider 208 excepts the automobiles of Mason's employer Oilfields from coverage, referring of course to liability arising from operation of the same. In the absence of some language specifically applicable to Mason, this exclusion of his employer rules him out of Continental coverage also assuming, as will be shown, that he was not an employee of Phoenix. Certain respondents contend that within the purview of the policy the truck involved in the accident was a 'hired automobile' operated by or with the consent of Phoenix. This contention is based upon paragraph III of the insuring agreements which, reduced to its simplest terms, provides 'The unqualified word 'insured' includes the named insured and also includes * * * (2) under Coverages A and B, any person while using an owned automobile or a hired automobile, * * * provided the actual use of the automobile is by the named insured or with his permission. * * *' Hired automobile is defined in paragraph 3(b)(2) of the Conditions as follows: '[A]n automobile used under contract in behalf of, or loaned to, the named insured provided such automobile is not owned by or registered in the name of (a) the named insured or (b) an executive officer thereof or (c) an employee or agent of the named insured who is granted an operating allowance of any sort for the use of such automobile.' It would be possible to hold the Oilfields' truck to be a hired automobile if we were disposed to apply this language literally and without reference to context,--that it was being 'used under contract in behalf of' the named insured Phoenix. But the 'Annual Contractual Endorsement,' No. R6309210, restricts the definition of 'contract' so that it 'shall not mean such agreements entered into and dated prior to effective date of below mentioned policy, and shall not apply to contracts entered into and dated after the expiration date of said policy.' The effective date of that policy was April 1, 1951 and the joint venture agreement was dated January 27, 1949 and found to have been made on that date. So we do not deal with a 'hired' automobile.
Said respondents in order to bring Mason within the quoted definition of 'insured' (insuring agreements III(2)) rely upon the trial judge's finding that he was a special employee of Phoenix at the time and place of the accident and contend that therefore the truck was being used by the named insured (Phoenix) or with its permission. It is doubtful if this is sufficient, for paragraph III of the insuring agreements contains this: 'The insurance with respect to any person or organization other than the named insured does not apply under division (2) of this insuring agreement: * * * (d) with respect to any hired automobile, to the owner thereof, or any employee of such owner.' But be that as it may, the evidence as a matter of law does not warrant the finding of a special employment of Mason by Phoenix.
Mason was initially hired by John T. Butler of Oilfields two or three months before the accident. He was hired as a truck driver and truck 382 was assigned to him. It was equipped with a trailer on which was installed a concrete spreader. The truck and trailer were owned by Oilfields and the spreader by Phoenix. When at the site of the construction work, Mason would receive no specific orders from Butler or other Oilfields' representatives. Waldo Flamm and Aubrey Webb were employees of Phoenix working on the job and they would tell Mason where and when to manipulate his truck in the process of spreading the cement. No other directions were given him by Phoenix men at the construction job or anywhere else. Butler was in charge of all Oilfields truck drivers. On the night of the accident he told Mason to have truck 382 at the job to unload cement between 5:00 and 6:00 o'clock the next morning. This order was given about 7:00 p. m. Mason went to the Oilfields' yard, arriving at about 9:00 to 9:30 p. m., hitched the trailer on to his truck and started for Haypress Canyon. The accident occurred on the way there at about 10:00 p. m. The yard was in Bakersfield about 17 miles from the job and adjoined that of Phoenix. Mason had nothing to do about the spreader that night except to haul it to the job and get it there by 5:00 or 6:00 o'clock in the morning. As to Flamm and Waldo, Mason testified without contradiction that all he did was to drive the truck for spreading cement, they controlled the poundage they wanted per square foot or cubic foot or however they put it down, that they controlled the backend, that all he did was to drive the truck and that they dumped it. Also that when the job was first started they told him how fast to drive and that's the say he drove the truck; that they took care of the rest of it from the rear, spreading the cement from the rear; that after the first load neither Flamm nor Waldo told him how fast to drive the truck; that after that the only instructions given him on the job were as to where to dump the cement. While on the job Mason also helped to load cement into the spreader at times. Between the time that Butler gave him the order to have the truck on the job the next morning and the time of the accident, Mason had no function to perform for Phoenix in any sense of the word. He was merely hauling its spreader to the job and hauling was the specific function of his employer Oilfields. Phoenix had considerable valuable equipment on the job, as did Oilfields. It does appear that Mason customarily stayed on the job through the night, and that he was the only one who did so; the nature or extent of his duties at such times is not disclosed by the record. Mr. Bartlett, Secretary-Treasurer of Phoenix, testified that 'we didn't have a night watchman in the true sense of the word.' There is no evidence that any Phoenix representative ever gave him any instruction or direction during or with respect to this night duty, if duty it was. And the only inference deducible from the evidence is that none was given. Certainly there was no relinquishment of control to Phoenix covering these night vigils, if vigils they were. Mr. Mason said he had no keys to any of the buildings and that he 'slept' in his car. The proof falls substantially short of establishing a special employment by Phoenix.
To effect a special employment such as that found by the trial judge, Oilfields must have surrendered to Phoenix the right to control Mason with respect to the acts he was doing at the time and place of the accident. There is no such evidence here. The case is governed by Billig v. Southern Pacific Co., 189 Cal. 477, 485, 209 P. 241, 244. The court there said: 'It would appear, therefore, to be the rule in this state that, when a master hires out, under a rental agreement, the services of an employe for the operation of an instrumentality owned by the master, together with the use of the instrumentality, without relinquishing to the hirer the power to discharge such servant, to go where and perform such work as the hirer directs, the legal presumption is that, although the hirer directs the servant where to go and what to do in the performance of the work, the servant, as the operator of the instrumentality employed in the doing of the work, remains, in the absence of an agreement to the contrary, the servant of the general employer in so far as concerns the manner and method of operating the instrumentality, and the negligence of the servant must be held to be that of the owner, and not that of the hirer, of the instrumentality. Stewart v. California Improvement Co., supra [131 Cal. 125, 63 P. 177, 52 L.R.A. 205]; Garven v. Chicago, Rock Island and Pacific Railway Company, 100 Mo.App. 617, 620, 75 S.W. 193; note to Hardy v. Shelden Co., 37 L.R.A., p. 71.'; Also at page 483 of 189 Cal., at page 243 of 209 P., the court said: 'In such a situation, however, it is obvious that it is necessary to ascertain who was the master at the very time of the negligent act complained of. This is so, for the doctrine of respondeat superior applies only when the relation of master and servant is shown to exist between the wrongdoer and the person sought to be charged for the result of some neglect or wrong at the very time and in respect to the very thing out of which the injury arose.' Gavel v. Jamison, 116 Cal.App.2d 635, 637, 254 P.2d 47, 48: 'The doctrine of respondeat superior applies only when the relation of master and servant is shown to exist between the wrongdoer and the person sought to be charged for the result of some neglect or wrong at the very time and in respect to the very thing out of which the injury arose. (Billig v. Southern Pac. Co., supra, 189 Cal. 477, 483 ff., 209 P. 241.)' To the same effect, see Doty v. Lacey, 114 Cal.App.2d 73, 77-79, 249 P.2d 550; Carlson v. Sun-Maid Raisin Growers Ass'n, 121 Cal.App. 719, 727, 9 P.2d 546; Lowell v. Harris, 24 Cal.App.2d 70, 76-77, 74 P.2d 551; McComas v. Al. G. Barnes Shows Co., 215 Cal. 685, 691-696, 12 P.2d 630; Shaff v. Baldwin, 107 Cal.App.2d 81, 88, 236 P.2d 634.
Moreover, 'It is a well-recognized principle that where the servants of two parties are jointly engaged in a work of mutual interest, each employee is the servant of his own master and neither of the employees is the servant of the other's master.' Moss v. Chronicle Pub. Co., 201 Cal. 610, 613, 258 P. 88, 89, 55 A.L.R. 1258. The cited case also says: 'Under the principle announced above, the fact that one servant may have taken orders as to details from the servant of the other employer would not affect this rule. 'A servant of one employer does not become the servant of another for whom the work is performed merely because the latter points out the work to the servant, or gives him signals calling the service into activity, or gives him directions as to the details of the work and the manner of doing it.'' 201 Cal. at page 615, 258 P. at page 90. Cf. Valdick v. LeClair, 106 Cal.App. 489, 495-497, 289 P. 673; Entermont v. Whitsell, 13 Cal.2d 290, 296, 89 P.2d 392; 56 C.J.S., Master and Servant, § 330 a, page 1092. The finding that Mason was a special employee of Phoenix is not supported by substantial evidence. Nor is the conclusion that he was covered by the Continental policy.
We have not found it necessary to follow counsel through their various and divergent arguments as to the exact meaning of the detailed language of the policies and the riders thereto. The case must be decided on a higher level, that of the reasonable intention of the parties as expressed in the language of the insurer and in the light of surrounding circumstances so far as known. From what has been said it appears that the Continental policy covers Phoenix alone with respect to the accident in question and that the Transport policy protects only Oilfields and Mason. Upon this predicate we approach the questions arising under the 'other insurance' clauses of the two policies.
The trial judge, having found Phoenix, Oilfields and Mason to be covered by the Continental policy and only Oilfields protected by that of Transport, adjudged an elaborate pro-ration of liability between the Continental group of insurers on the one side and the Transport group on the other. As the pro-ration ordered by the trial court was based upon the finding that the Continental policy covers Oilfields and Mason as well as Phoenix, a concept which has been shown to be erroneous, that phase of the judgment cannot stand. The question of right to pro-ration is to be determined in the light of the terms of the various policies concerning other insurance. See Fidelity etc. Co. v. Fireman's Fund Indemnity Co., 38 Cal.App.2d 1, 100 P.2d 364. Paragraph 13 of the conditions of the Continental policy is this: 'If the insured has other valid and collectible insurance against a loss covered by this policy, the insurance under this policy shall be excess insurance with respect to such loss but shall apply only in the amount by which the applicable limit of liability stated in the declarations exceeds the total applicable limits of liability of such other insurance.' In view of our holding that Phoenix had no other insurance against the loss in question, this provision counts for naught and the coverage is unaffected by any reference to other insurance. The Transport policy says, in paragraph (11) of the conditions: 'If there is other insurance against an occurrence covered by this policy, this insurance shall be deemed excess insurance over and above the applicable limits of all such other insurance.' The Continental insurance does protect Phoenix 'against an occurrence covered by this policy,' namely, the Leming injury; and, if we adhere literally to the terms of paragraph (11), the Transport obligation to pay attaches only after Leming has collected the full amount of Continental coverage. If the courts were bound to decide according to the letter of the two policies, the insurance carriers of Phoenix would have to bear all of the loss and Transport would be exonerated. But the inquiry is not that narrow.
The reciprocal rights and duties of several insurers who have covered the same event to not arise out of contract, for their agreements are not with each other. See Offer v. Superior Court, 194 Cal. 114, 118, 228 P. 11; Fireman's etc., Co. v. Palatine Ins. Co., 150 Cal. 252, 256, 88 P. 907. Their respective obligations flow from equitable principles designed to accomplish ultimate justice in the bearing of a specific burden. As these principles do not stem from agreement between the insurers their application is not controlled by the language of their contracts with the respective policy holders. The Minnesota Supreme Court, dealing with policies covering two insured persons whose liability for an accident was primary and secondary between themselves, said in Commercial Casualty Ins. Co. v. Hartford Accident & Indemnity Co., 190 Minn. 528, 252 N.W. 434, 435: 'The two contracts of insurance and their interpretation must be the factual basis of decision. But there was no contract and so no contractual relation between the insurers. Neither was beneficiary of the other's contract. Neither having any contract right against the other, but both being under contractual obligations in respect to the same risk, it remains only to determine the respective equities. If they are concurrently liable for the same risk, it is but obvious equity that there should be contribution. Equally plain it is that, if the one paying the whole loss is primarily liable, and the other obligated only secondarily and not otherwise, there should be no contribution. In such case, the position of the defendant is the stronger, and there can be no recovery.' And: 'The two policies did not cover the same risk with enough identity of scope and purpose to be concurrent.' Rehearing denied in 253 N.W. 888.
This being a problem in the equity field the respective rights of the insured persons must first be determined as a basis for adjusting equities between the insurers.
At the time of the accident Mason was the servant of Oilfields and not Phoenix. The liability to Leming is due to negligence of Oilfields' driver, Mason. In the law of joint venture and of partnership, the member who has committed a tort must indemnify the other member against liability for the same. Young v. Evans, 62 Cal.App.2d 365, 372, 144 P.2d 651; United Brokers' Co. v. Dose, 143 Or, 283, 22 P.2d 204, 205; Restatement of Law of Restitution, § 96, p. 418; § 98, p. 422; 13 Am.Jur. § 43, p. 40; § 47, p. 43; 38 Am.Jur. § 238, p. 925; 62 A.L.R. 442; 82 A.L.R. 632; 68 C.J.S., Partnership, § 83, page 522. If there were no insurance available and Phoenix were compelled to pay the Leming judgment, it would have an immediate right to recover over from Oilfields, whose servant had committed the wrong. If Phoenix' insurer, Continental, is required to pay Leming, it, through an established equitable principle, is subrogated to the right of Phoenix against Oilfields--a right of recovery over. The Phoenix policy contains this paragraph 14: 'In the event of any payment under this policy the company shall be subrogated to all the insured's rights of recovery therefor against any person or organization and the insured shall execute and deliver instruments and papers and do whatever else is necessary to secure such rights.' But that provision adds nothing to the right of subrogation, which springs from the existing equity. In good conscience Oilfields has a right to have its insurer make good at this point. And the authorities are to the effect that this right of subrogation runs against the insurer of the immediate tort feasor as well as the wrongdoer himself.
Hartford Accident & Indemnity Co. v. Worden-Allen Co., 238 Wis. 124, 297 N.W. 436, at page 440: 'Where, however, by reason of the agreement between the sureties or by reason of the general equities of the situation one surety or insurer ought, as against other sureties or insurers, to bear the whole loss, he becomes the principal surety, and all other insurers or sureties become sub-insurers or sub-sureties.' This language was quoted with approval in Fireman's, etc., Co. v. State Compensation, etc., Fund, 93 Cal.App.2d 408, 413, 209 P.2d 55. The same fundamental reasoning was applied to the same effect in these cases: Canadian Indemnity Co. v. United States Fidelity & Guaranty Co., 9 Cir., 213 F.2d 658; Central Surety & Ins. Corp. v. London & Lancashire Indemnity Co., 181 Wash. 353, 43 P.2d 12; Lucas v. Garrett, 209 S.C. 521, 41 S.E.2d 212, 169 A.L.R. 660; Maryland Casualty Co. v. Hubbard, D.C.Cal., 22 F.Supp. 697, 700; Bennett v. Preferred Accident Ins. Co. of New York, 10 Cir., 192 F.2d 748, 751; United States Fidelity & Guaranty Co. v. Thomlinson-Arkwright Co., 172 Or. 307, 141 P.2d 817, 824, 826; Aetna Casualty & Surety Co. v. Buckeye Union Casualty Co., 157 Ohio St. 385, 105 N.E.2d 568, 31 A.L.R.2d 1317.
This equitable subrogation overrides the exact terms of the insurance policies. And the present case furnishes adequate reason. If adherence to the exact terms of the Transport policy were in order, Oilfields, after making good on the Continental subrogated claim, would be confronted with clause (11) of the Transport policy to the effect that 'this insurance shall be deemed excess insurance over and above the applicable limits of all such other insurance,' i. e., 'other insurance against an occurrence covered by this policy.' That is to say, Transport does not have to pay until after Continental and its excess insurers have paid the judgment in full; but Continental in fact has not paid at all, because it recovered over from Oilfields, and Oilfields, the insured of Transport, is saddled with the entire burden. That is the line of argument that would flow from strict adherence to the language of the Transport policy. Equity will not tolerate any such legalism. Cf. In re Estate of Kemmerrer, 114 Cal.App.2d 810, 814, 251 P.2d 345, 35 A.L.R.2d 1393. It breaks through the barrier of form and does justice by placing the burden upon the proper, the equitable repository,--the insurer for the wrongdoer.
The same result is reached through another sound line of reasoning. The phrase 'other insurance' in paragraph (11) of the Transport policy connotes valid, collectible insurance. Though there is a split among the authorities upon this question, 6 Appleman Insurance Law & Practice, § 3905, p. 270; 29 Am.Jur., § 736, p. 569, the rule just stated is the sounder one as applied to this case. Otherwise Oilfields would be left without coverage of the accident against which it had insured--with a premium deposit of $4,500. In this case it is an especially sound view that 'every rule of construction in apportioning losses must yield to the right of the insured to be fully indemnified.' 6 Appleman Insurance Law and Practice, § 3905, p. 270. Cf. Kiefer Tanning Company v. Alliance Insurance Company, 266 Ill.App. 362, 376; Republic Ins. Co. v. American Ice Co., Tex.Civ.App., 2 S.W.2d 329, 330. If the 'other insurance'--that issued by Continental--is not collectible, then the question of whether Oilfields or its insurer Transport should bear the loss is easily solved in favor of the insured. And the Continental policy is not in truth collectible if the company pays Phoenix and recovers the same amount from Oilfields. Other insurance clauses cannot fairly be construed to deprive a policy-holder of full coverage because of what some other policy-holder may have done in the way of procuring coverage for himself.
It is contended by respondents Oilfields and Transport that Oilfields is innocent of wrongdoing equally with Phoenix, that the liability of each is vicarious and hence that there is no basis for subrogation. Of course, each is a corporation and can act only through agents and servants. If this argument were to prevail there could be no subrogation with respect to corporations. But the authorities are to the effect that subrogation runs against the employer, individual or corporate, whose employee has done the wrong,--and against the insurer of that employer. Applications of this principle are found in Canadian Indemnity Co. v. United States Fidelity & Guaranty Co., supra, 9 Cir., 213 F.2d 658; United Pacific Ins. Co. v. Ohio Casualty Ins. Co., 9 Cir., 172 F.2d 836; Central Surety & Ins. Corp. v. London & Lancashire Indemnity Co., supra, 181 Wash. 353, 43 P.2d 12, 14; Maryland Casualty Co. v. Hubbard, supra, D.C.Cal. 22 F.Supp. 697, 700; Bennett v. Preferred Accident Ins. Co. of New York, supra, 10 Cir., 192 F.2d 748, 751.
Thus far the discussion of subrogation has proceeded upon the basis of Continental's equity of subrogation against Oilfields and through it against Transport. But the same result follows from consideration of the fact that Mason himself was insured by Transport and not by Continental. The latter company, standing in the shoes of Phoenix, is entitled to indemnity from the wrongdoer Mason and hence from his insurer Transport. The cases just cited support this proposition. And it is plain as a matter of principle.
We conclude that Transport, not Continental, must bear the burden of the Leming judgment.
What we have said about primary and secondary insurance obligations may seem opposed to certain California precedents. But analysis of them discloses that they deal with factual situations which do not afford a true analogy to this case and for other reasons are not controlling at bar. Those cases are Consolidated Shippers v. Pacific Employers Ins. Co., 45 Cal.App.2d 288, 114 P.2d 34; Air Transport, etc., Co. v. Employers' Liability, etc., Corp., 91 Cal.App.2d 129, 204 P.2d 647; Employers, etc., Corp. v. Pacific, etc., Ins. Co., 102 Cal.App.2d 188, 277 P.2d 53; Traders, etc., Ins. Co. v. Pacific Employers Ins. Co., 130 Cal.App.2d 158, 278 P.2d 493.
It 'is a familiar rule that expressions used in judicial opinions are always to be construed and limited by reference to the matters under consideration, and that they cannot be safely applied in their largest and most universal sense to dissimilar cases.' City of Pasadena v. Stimson, 91 Cal. 238, 250, 27 P. 604, 606.
The Consolidated Shippers case involved an accident in which one Harvey was operating a truck owned by him; he was transporting merchandise for plaintiff Consolidated Shippers. Both Harvey and Consolidated Shippers were covered by a policy of defendant Commercial Standard Insurance Company and plaintiff Consolidated Shippers alone was covered by one issued by defendant Pacific Employers Insurance Company. Consolidated Shippers paid a compromise judgment and sued the two insurers for reimbursement. Both policies contained pro-ration clauses. The trial court held that the Commercial policy afforded primary coverage and that Pacific's coverage was secondary or excess insurance. This was challenged upon the ground that the risks were co-extensive, that both policies had pro-ration clauses and neither provided for conversion of its liability into excess insurance in the event of 'other insurance.' This contention was upheld and the judgment reversed because of the presence of the pro-ration clauses, which the court held to be inconsistent with any idea of excess insurance. The court, having thus ruled, said at page 293 of 45 Cal.App.2d, at page 37 of 114 P.2d: 'Pacific contends that Harvey was primarily liable, that plaintiff was secondarily liable and that the judgment correctly determines the respective liabilites. No California case is cited in support of this proposition and we know of no law in this state fixing degrees of liability in relation the the joint liability for torts. From the fact that an action to recover damages for injuries resulting from the negligence of an employee may be maintained against either the employer or the employee alone (Schilling v. Central California Traction Co., 115 Cal.App. 30, 1 P.2d 53), or against both jointly, it would seem that there could be no such thing as primary and secondary liability. Moreover, the court made no finding on the issue of primary and secondary liability as between Harvey and plaintiff, and in fact made no finding concerning the relationship existing between Harvey and plaintiff out of which the latter's liability arose. In view of our conclusion that both policies insured the same risk so far as plaintiff is concerned, the fact that plaintiff's liability may have been primary or secondary becomes immaterial. Regardless of the nature of such liability, any loss resulting therefrom was covered by both insurers.' (Emphasis added.) It thus appears that the discussion of primary and secondary liability was dictum. And the sentence 'From the fact that an action to recover damages for injuries resulting from the negligence of an employee may be maintained against either the employer or the employee alone * * *, or against both jointly, it would seem that there could be no such thing as primary and secondary liability' is directed to the matter of liability to the injured party, not to the relationship between the parties liable for the tort.
The Supreme Court spoke on this subject in Bradley v. Rosenthal, 154 Cal. 420, 423, 97 P. 875, 876, saying: 'The employe's responsibility is primary. He is responsible because he committed the wrongful or negligent act. The employer's responsibility is secondary, in the sense that he has committed no moral wrong, but under the law is held accountable for his agent's conduct. While both may be sued in a single action. a verdict exonerating the agent, must necessarily exonerate the principal, since the verdict exonerating the agent is a declaration that he has committed no wrong, and the principal cannot be responsible for the agent if the agent has committed no tort. While no right of contribution exists between joint tort-feasors, whether sued separately or collectively, there exists, in the kind of case here presented, much more than the mere right of contribution. The principal who had been obliged thus to pay for the unauthorized negligent act of his agent resulting in injury may indemnify himself to the full amount against his agent.' The dictum in the Consolidated Shippers case is not controlling here.
In Air Transport, etc., Co. v. Employers' Liability, etc., Corp., supra [91 Cal.App.2d 129, 204 P.2d 650], it appeared that Employers had issued to American U-Drive Truck Rentals Company a public liability policy containing an omnibus clause covering anyone using a U-Drive car by permission of the insured. The policy also contained an 'other insurance' clause converting Employers' insurance into excess coverage for the part of the policy limit which might exceed the "'other valid insurance"'; Pacific Indemnity had issued a comprehensive policy to Air Transport covering all its operations; it contained an 'other insurance' clause providing for pro-ration in that event. Air Transport rented a car from American U-Drive and same was in an accident while being driven by an employee of Air Transport. Employers was adjudged liable for one-half of the damages and contended on appeal that it was exonerated from any liability because the other insurance issued by Pacific Indemnity brought its own excess clause into operation. The judgment was affirmed. In discussing the conflicting views entertained by various courts upon the effect of other insurance clauses, the court said at page 132 of 91 Cal.App.2d, at page 649 of 204 P.2d: "Another line of authorities holds that each insurer is primarily liable for the losses of its named assured and secondarily liable as an excess carrier for other losses. (Citing cases.) This principle cannot apply in California for the reason that there is no such thing as primary and secondary liability as between a vehicle owner and the operator thereof with permission. Consolidated Shippers, Inc., v. Pacific Employers Ins. Co., 45 Cal.App.2d 288, 114 P.2d 34." Having rejected this test of primary and secondary liability, the court proceeded to determine the case from a construction of the language of the different policies. It is quite true that the liability of both the owner and the permittee-driver to the injured person under Vehicle Code Section 402 is direct and primary, Holland v. Kodimer, 11 Cal.2d 40, 42, 77 P.2d 843; Broome v. Kern Valley Packing Co., 6 Cal.App.2d 256, 261, 44 P.2d 430. But the statute clearly makes it primary and secondary so far as the owner and driver are concerned. It provides for a joinder of the driver and a recovery over by the owner in event of judgment for plaintiff and its payment by the owner. And the lower court was reversed in Aynes v. Winans, 33 Cal.2d 206, 200 P.2d 533, because the verdicts and judgments entered thereon did not preserve to the owner this right of subrogation. Examination of the briefs in the Air Transport case reveals that our question of primary and secondary liability or its relation to the matter of subrogation was not discussed by counsel. The court's remark that 'there is no such thing as primary and secondary liability as between a vehicle owner and the operator thereof with permission' is at best arguendo, and does not constitute a binding precedent.
In the later case of Gillies v. Michigan Millers, etc., Ins. Co., 98 Cal.App.2d 743, 751, 221 P.2d 272, 277, the holding in the Air Transport case was thus defined by the same division of the same court: 'There the court decided but one question; was Employers' policy rendered void because of the existence of other valid insurance? Or to be more specific, was the policy issued prior to that of Employers' valid insurance within the meaning of the 'other insurance' clause of the defendant's policy? The court held that the term, 'valid insurance,' contemplated insurance which provides unconditional coverage and that since the Pacific policy afforded only pro rata coverage it did not meet the requirement. The 'excess' portion of the clause was not involved.'
Employers, etc., Corp. v. Pacific, etc., Ins. Co., 102 Cal.App.2d 188, 227 P.2d 53, turned upon the effect of clauses in two policies covering the same risk, both of which provided that the existence of other valid insurance would convert the particular policy into excess coverage. It was held that they constituted concurrent insurance and must pro-rate the loss. The closest approach to our problem of subrogation appears at page 192, of 102 Cal.App.2d, at page 55 of 227 P.2d where the court said: 'Appellant maintains that even assuming that each of the policies constituted excess insurance, Employers' policy is specific in nature whereas that of appellant is comprehensive or general and therefore the liability of Employers is primary and that of appellant is secondary. This contention is not supported by the cases cited by appellant, which are readily distinguishable from the instant case.' The court then reviewed Commercial Casualty Ins. Co. v. Hartford Accident & Indemnity Co., 190 Minn. 528, 252 N.W. 434, quoted supra, and remarked: 'The theory that the insurer covering the primary tort feasor is liable to its policy limits and the insurer covering the secondary tort-feasor is liable for excess insurance only has been rejected in California. Consolidated Shippers, Inc. v. Pacific Employers Ins. Co., 45 Cal.App.2d 288, 114 P.2d 34; Air Transport Mfg. Co., Ltd. v. Employers' Liability, etc., Corp., 91 Cal.App.2d 129, 204 P.2d 647. Moreover, in the instant case, neither appellant nor respondent insured the party driving the car involved in the accident.' It will be observed that the question was not one of subrogation and could not be, because 'neither appellant nor respondent insured the party driving the car involved in the accident.' He was covered by the policy which constituted the "'other valid insurance."'
The Consolidated Shippers, Air Transport, and Employers, etc., Corp. cases, supra, were held inapplicable to a subrogation problem, in Canadian Indemnity Co. v. United States Fidelity & Guaranty Co., supra, 9 Cir., 213 F.2d 658, 659. In that case the plaintiff United States F. & G. Co. had insured Headrick & Brown Co. against liability for negligence but the policy did not cover its employees. An accident was caused by negligence of one Goff, an employee of Headrick & Brown Co.; Goff was driving a truck belonging to Thomas Rigging Co., with its consent; the Canadian Indemnity Co. had insured the Rigging Co. and Goff was within the omnibus clause of that policy, though not protected by that of United States F. & G. Co. Headrick & Brown Co. was held liable for the injury as employer of Goff and its insurer paid the judgment. It then sued Canadian Indemnity Company, the only insurer of Goff, asserting its right of subrogation. 'This is on the basis that as between principal and agent, where only the agent has been at fault, the agent has a duty to reimburse the principal. 3 C.J.S., Agency, § 162, page 46. Stated another way, the principal, under such circumstances, may recoup from its agent. Bradley v. Rosenthal, 154 Cal. 420, 97 P. 875; Popejoy v. Hannon, 37 Cal.2d 159, 231 P.2d 484; Spruce v. Wellman, 98 Cal.App.2d 158, 219 P.2d 472. Being subrogated to the rights of the principal (Headrick & Brown Co.), U. S. F. & G. claims the right to recoup against Goff; and consequently against the only insurer of Goff, i. e., Canadian.' Each policy had an "other insurance' clause' which the court held inapplicable to the problem before it, saying: 'A comparable situation was presented to this court in United Pacific Ins. Co. v. Ohio Casualty Ins. Co., 9 Cir., 172 F.2d 836. In that case we recognized that right of an employer to recoup his losses from a negligent employee, relying on Johnston v. City of San Fernando, 35 Cal.App.2d 244, 95 P.2d 147, and Myers v. Tranquility Irr. Dist., 26 Cal.App.2d 385, 79 P.2d 419. See note 5 at page 840 of 172 F.2d, United case, supra. We also held that the insurer of the employer may recover against the insurer of the negligent employee. United, etc., Co. v. Ohio, etc., Co., supra, 172 F.2d at pages 846-848. Viewed in the light of these principles, the 'other insurance' clauses of these policies are removed from the issue. Goff being ultimately liable, is insured by Canadian alone.' The court then reviewed the three California cases and held them not controlling because they presented no question of subrogation. The judgment in favor of plaintiff was affirmed.
Traders, etc., Ins. Co. v. Pacific Employers Ins. Co., 130 Cal.App.2d 158, 278 P.2d 493, deals with an owner Harris and a permittee-driver Shinn. The owner was insured by Pacific Employers Insurance Company; the driver was covered by Traders and General Insurance Company. Both policies contained pro-ration clauses. Pacific contended, inter alia, that its policy should be adjudged excess insurance because Traders' insured, Shinn, was the primary tort feasor and Harris only secondarily liable. The court rejected this argument, saying at page 165 of 130 Cal.App.2d, at page 498 of 278 P.2d: 'Many jurisdictions distinguish between primary and secondary liability and apply excess coverage only to the later. * * * But that theory has been expressly rejected in this state. "This principle cannot apply in California", said the court in Air Transport Mfg. Co. v. Employers' Liability Assur. Corp., 91 Cal.App.2d 129, 132, 204 P.2d 647, 649, "for the reason that there is no such thing as primary and secondary liability as between a vehicle owner and the operator thereof with permission." To the same effect is Consolidated Shippers, Inc., v. Pacific E. Ins. Co., 45 Cal.App.2d 288, 114 P.2d 34.' At page 166 of 130 Cal.App.2d, at page 499 of 278 P.2d the court discussed the matter of subrogation saying: 'Nevertheless, insists appellant, even if Harris was liable as owner, under Vehicle Code § 402 Harris would be entitled to indemnity from Shinn; as Harris' insurance carrier, then Pacific would be entitled to reimbursement from Traders, which covers Shinn; to prevent this multiplicity and circuity of lawsuits, the trial court should have recognized Pacific's right of subrogation. Aetna Casualty & Surety Co. v. Buckeye Union Cas. Co., 157 Ohio St. 385, 105 N.E.2d 568, 31 A.L.R.2d 1317; Central Surety & Ins. Corp. v. London & Lancashire Indemnity Co., 181 Wash. 353, 43 P.2d 12. This contention, however, is built upon the erroneous belief that the Pacific policy covered only Harris' liability as owner and did not provide any coverage for the operator, Shinn. The Pacific policy was not restricted in coverage to the named insured. The insured to whom coverage was granted included not only the named insured but also any person using an automobile covered thereby with permission of the named insured. As operator of the De Soto with the permission of the owner Harris, Shinn was expressly included as an insured under the Pacific policy.' It is plain that the denial of subrogation was rested upon the fact that appellant, who was making that claim, had insured both the owner and driver and the basis for subrogation was therefore absent, both policies covered Shinn. The case requires no further comment, except the observation, applicable to all the California cases just discussed, that the question of primary and excess insurance, which turns upon the language of the policies, is essentially different from that of subrogation which flows from considerations of fundamental equities. And none of those cases actually decides the exact question of subrogation which is crucial in the case before us.
Upon oral argument at bar counsel for respondents Oilfields and Transport invoked as res judicata the holding in the Leming case, 44 Cal.2d 343, 282 P.2d 23, rendered five days before. The argument was that the Supreme Court had upheld the sufficiency of the evidence to support an implied jury finding that Mason was under the control of Phoenix as well as Oilfields; that therefore he was at least a special employee of Phoenix; that any basis for indemnification or subrogation thus disappeared; and that the affirmance of the Leming judgment was a conclusive determination of the matter.
This claim of res judicata cannot be upheld for several reasons. In the first place, there is no plea of former judgment, and courts will not take judicial notice of proceedings in a different case for the purpose of applying the rule of res judicata, Willson v. Security-First National Bank, 21 Cal.2d 705, 710, 134 P.2d 800; Dillard v. McKnight, 34 Cal.2d 209, 218, 209 P.2d 387, 11 A.L.R.2d 835; Johnston v. Ota, 43 Cal.App.2d 94, 97, 110 P.2d 507.
Such a plea, if made, would not be good, for the parties interested in this subrogation matter were not adversary parties in the former (the Leming) action. '[I]t is fundamental as to the doctrine of res judicata that, before the former adjudication may operate as an estoppel as to issues in the later action, there must be an identity of parties, as well as an identity of issues.' Standard Oil Co. v. John P. Mills Organization, 3 Cal.2d 128, 139, 43 P.2d 797, 802. Section 1910, Code of Civil Procedure, says: 'The parties are deemed to be the same when those between whom the evidence is offered were on opposite sides in the former case, and a judgment or other determination could in that case have been made between them alone, though other parties were joined with both or either.' There are numerous cases in this state to the effect that a judgment is not res judicata as to codefendants. Victor Oil Co. v. Drum, 184 Cal. 226, 239, 193 P. 243; Tanaka v. Highway Farming Co., 76 Cal.App. 590, 594, 245 P. 434; City of San Diego v. California Water & Telephone Co., 71 Cal.App.2d 261, 276, 162 P.2d 684; County of Los Angeles v. Continental Development Corp., 113 Cal.App.2d 207, 222, 248 P.2d 157; Allen v. California Water & Telephone Co., 29 Cal.2d 466, 491, 176 P.2d 8, are a few of them. See, also, 15 Cal.Jur. § 217, p. 186. The cases having direct application to the question of the effect, as between the defendants, of a judgment in favor of plaintiff and against one or more of them, are collected in notes in 101 A.L.R. 104; 142 A.L.R. 727; 152 A.L.R. 1066. They are thus summarized in 101 A.L.R. at 105: 'While the cases are not entirely in harmony, sometimes even in the same jurisdiction, the rule supported by the great weight of authority is that a judgment in favor of the plaintiff in an action against two or more defendants is not res judicata or conclusive of the rights and liabilities of the defendants inter se in a subsequent action between them, unless those rights and liabilities were expressly put in issue in the first action, by cross complaint of other adversary pleadings, and determined by the judgment in the first action.' And in 142 A.L.R. at 728: 'The same conflict of authority prevails in the later cases, with the weight of authority, as in the older cases, supporting the view that the judgment in favor of the plaintiff in the former action is not res judicata or conclusive, in a subsequent action between the codefendants, of their rights and liabilities inter se, unless those rights and liabilities were expressly put in issue in the first action by cross complaint or other adversary pleadings, and determined by the judgment therein.' In Merrill v. St. Paul City Ry. Co., 170 Minn, 332, 212 N.W. 533; Pearlman v. Truppo, 159 A. 623, 10 N.J. Misc. 477, Id., 160 A. 334, 10 N.J.Misc. 772; Snyder v. Marken, 116 Wash. 700, 199 P. 303; United States Fidelity & Guaranty Co. v. Thomlinson-Arkwright Co., supra, 172 Or. 307, 141 P.2d 817, 824, it is pointed out that mere assertions in separate answers that the other defendant was at fault do not make the codefendants adversaries where no cross-pleading is filed. Bernhard v. Bank of America, etc., 19 Cal.2d 807, 813, 122 P.2d 892, 895, prescrives as one of the elements of res judicata an affirmative answer to this question: 'Was the issue decided in the prior adjudication identical with the one presented in the action in question?' The case has been cited many times to this effect.
Hardy v. Rosenthal, 2 Cal.App.2d 442, 38 P.2d 412, seems to be controlling. One Stoffel sued H. J. Hardy, his employee J. W. Nicholson, and one T. Rosenthal. Automobiles driven by Nicholson and Rosenthal collided on the highway and traveled thence to plaintiff's house and swept it from its foundations. Stoffel recovered judgment, which was paid by Hardy and Rosenthal. Hardy then sued Rosenthal to recover his own damages. Defendant claimed that the former judgment holding both parties liable to Stoffel was a bar to the action. That claim was rejected. The court said, 2 Cal.App.2d at page 445, 38 P.2d at page 413: 'It is apparent that, to constitute a judgment in one case a bar to the prosecution of a second action, there must have been an identity of a question litigated in the two cases which would from the basis of a recovery in the second case. Such identity is entirely lacking in the two cases we are considering.' And at page 446 of 2 Cal.App.2d, at page 414 of 38 P.2d: "It is true that both Drum and the plaintiff were parties defendant in the action in which the judgment was rendered, but the judgment was not between them, but between them on the one side and the plaintiff in that action on the other. A judgment may operate as an estoppel between parties to it only when they are adverse parties, so that the judgment is a determination of issues between them. Section 1910, Code Civ.Proc.; 23 Cyc. 1237."
If it be said that the Leming opinion establishes a precedent upon the subject of sufficiency of the evidence to establish an employment of Mason by Phoenix, the record will not verity that assertion. For a comparison of the Leming opinion with the statement of the facts herein will reveal that the two records present substantially different facts. The matter arises from Phoenix' contention that "The evidence is insufficient to support a judgment against * * * Phoenix * * * as a joint adventurer of * * * Oilfields * * *, since appellant (Phoenix) exerted no control over Mason", quoting 44 Cal.2d 349, 282 P.2d 23, 27. Inasmuch as 'an officer of each corporation confirmed that 'that was a joint venture between' Oilfields and Phoenix', 44 Cal.2d 347, 282 P.2d 25, this contention of Phoenix injected an issue which was not controlling (an argument which is germane to the question of whether a joint adventure has been established, e. g., between several automobilists); joint control is not important in a case where the fact of joint venture is established or conceded and the co-venturers have expressly or impliedly agreed upon a division of the work and responsibility, Foster v. Keating, 120 Cal.App.2d 435, 452, 261 P.2d 529; Sime v. Malouf, 95 Cal.App.2d 82, 95, 212 P.2d 946, 213 P.2d 788. And the Supreme Court summarily disposed of the matter, immediately adding: 'Not only does the above evidence show that Phoenix actually did exercise control over Mason, but it appears to be the general principle that 'The relationship of joint venturers is that of a mutual agency, akin to a limited partnership' (Campagna v. Market Street Ry. Co. (1944), 24 Cal.2d 304, 308, 149 P.2d 281), and that the negligence of one joint venturer or of his employes acting in connection with the joint venture is imputed to the other joint venturers. (See Shook v. Beals, 1950, 96 Cal.App.2d 963, 970, 217 P.2d 56, 18 A.L.R.2d 919; Hupfeld v. Wadley, 1948, 89 Cal.App.2d 171, 175-176, 200 P.2d 564; Di Vita v. Martinelli, 1932, 123 Cal.App. 392, 394, 11 P.2d 423; 48 C.J.S., Joint Adventures, § 14-e, p. 870.)' Moreover, as previously pointed out, there is at bar no proof and no concession 'that after Mason 'got on the job with the equipment, the job superintendent of Phoenix * * * directed him in the spreading of the cement.'' The Leming opinion is not opposed to the views herein expressed as to Mason's alleged special employment or as to the right of subrogation existing in favor of Phoenix and Continental and against Oilfields and Transport.
Now as to excess insurance in the instant case. The Continental policy had a $200,000 limit. Certain interveners, whom counsel as matter of convenience have termed Pacific Lloyd's, issued to Phoenix a certificate providing maximum insurance of $100,000 with liability attaching only after full utilization of the $200,000 afforded by the main Continental policy CLP5707316. This Lloyd's certificate is LC17863. Pacific Lloyd's also issued to Phoenix a further certificate, No. LC17963, providing additional excess insurance in the sum of $150,000; total of Phoenix coverage $450,000.
Oilfields had these policies or certificates: Transport policy 46-001 with limit of $10,000; certificate No. 46-C3-32 issued by Lloyd's, London (not Pacific Lloyd's) providing excess insurance with $40,000 maximum; and another Transport policy, No. 46-002, affording additional excess coverage in the amount of $950,000; total Oilfields' coverage $1,000,000.
Each of the excess policies is conditioned upon liability under the primary policy, i. e., Continental CLP5707316 in the one instance and Transport 46-001 in the other. The Lloyd's London certificate 46-C3-32 states in endorsement No. 1 that it provides only excess insurance and that liability shall not attach 'unless the Primary Insurer shall have admitted liability for the first $10,000.00 under its policies, or unless or until the Assured has by final judgment been adjudged to pay the said sum of $10,000.' Transport policy No. 46-002 carries a 'special excess endorsement,' No. 2, making it excess insurance over and above $50,000 and upon the same warranties, terms and conditions as the primary policy 46-001.
The Phoenix policies, primary and excess, naturally stand or fall together. It having been held that Transport must bear the burden of the Leming judgment to the exclusion of Continental, it follows that Phoenix excess insurance does not attach. And the Transport policies do become payable in the order and the amounts above mentioned, viz.: Transport 46-001, the first $10,000; Lloyd's London the next $40,000; Transport 46-002 the next $950,000. The Leming judgment which the Supreme Court affirmed was for $213,460.22; the one against Mason $212,585.69; of course there can be but one satisfaction. It seems clear that the total liability to Leming will not exhaust the Oilfields' coverage of a million dollars. Therefore, the ultimate judgment in this case must be that Transport and Lloyd's, London shall bear the entire burden of the Leming judgments against Phoenix and Oilfields and Mason.
There are no issues of fact to be determined after a reversal herein; the trial judge's errors went to matters of law only; it is therefore appropriate to reverse with instructions, Code Civ.Proc. § 53; Stauter v. Carithers, 185 Cal. 160, 164, 196 P. 37.
The judgment is reversed with instructions to the trial court to enter judgment declaring that defendant Transport Indemnity Company, and intervener Underwriters at Lloyd's, London, an unincorporated association, are obligated to pay any and all damages awarded against Phoenix Construction Company and Oilfields Trucking Company and James E. Mason in favor of said Harvey Leming by final judgments in the case of Harvey Leming, Plaintiff, v. Oilfields Trucking Company, a corporation, Phoenix Construction Company, a corporation, and James Ellert Mason, Defendants, being No. 56455 on the records of the Superior Court for Kern County; or nay damages which may be payable to said Leming through any valid compromise of said action; also declaring that Phoenix Construction Company, Continental Casualty Company, interveners Certain Underwriters at Lloyd's London, Pacific Marine Insurance Agency, Inc., E. C. Evans Agencies, Managers, and Willis Faber & Dumas, Ltd., are not, nor is any of them, obligated to pay to said Leming or to any other party to this action all or any part of any judgment in favor of said Leming or any moneys payable under any compromise of said Kern County action No. 56455.
Each party to bear own costs on appeal, except as to transcripts on appeal; Continental and Transport each to bear one-half of cost thereof.
SHINN, P. J., and VALLEE, J., concur. --------------- * Opinion vacated 296 P.2d 801. 1 Transport Indemnity Company is the successor in interest and obligation to Transport Insurance Exchange which actually issued both Transport policies herein discussed. 2 These riders are hereinafter referred to as Nos. 202 and 208. 3 Vehicle Code, § 419. All references to code sections point to their form as same existed at the time of the accident,--the latest amendments being those of 1949. This seems to be dictated by Watson v. Division of Motor Vehicles, 212 Cal. 279, 287, 298 P. 481. 4 There were two people injured in this accident. See footnote 12, infra. 5 'Owned automobile' is defined in paragraph (b)(1) of the Definitions as one 'owned by the named insured,'--in this case Phoenix. 6 This question of special employment takes on added significance in our later discussion of subrogation. 7 On cross-examination he was led into stating the conclusion, obviously erroneous, that they were his superiors on the job. 8 The record at bar is substantially different from that in the Leming case. Specifically we have no such concession as is quoted in that opinion, viz.: 'Phoenix expressly concedes * * * that after Mason 'got on the job with the equipment, the job superintendent of Phoenix * * * directed him in the spreading of the cement.'' Leming v. Oilfields Trucking Co., 44 Cal.2d 343, 349, 282 P.2d 23, 27. 9 For convenience said paragraph (11) is again quoted: 'If there is other insurance against an occurrence covered by this policy, this insurance shall be deemed excess insurance over and above the applicable limits of all such other insurance.' 10 Cases cited by respondent, Maryland Casualty Co. of Baltimore v. Sturgis, 198 Ark. 574, 129 S.W.2d 599, 123 A.L.R. 704 and Edinger & Co. v. Southwestern Surety Ins. Co., 182 Ky. 340, 206 S.W. 465, are not in point. They deal only with problems arising between a defendant and his own insurer. 11 The term Pacific Lloyd's embraces Certain Underwriters at Lloyd's London; Pacific Marine Agency, Inc.; E. C. Evans Agencies, Managers; Willis Faber & Dumas, Ltd.; and Lloyd's, London, refers to Underwriters at Lloyd's, London, an unincorporated association. 12 Appellant's opening brief says that one Laverne Rife died from injuries received in the same accident and that his heirs were prosecuting an action for wrongful death, Kern County case No. 56653, against Oilfields, Phoenix and Mason. But the later history of the case is not given; all counsel treat it as if nonexistent and discuss the Insurance from the standpoint of liability for injuries to only one person. 13 The fact that this group (Pacific Lloyd's) did not appeal does not preclude reversal as to them, for the phase of the judgment relating to their alleged liability is so inextricably interwoven with the rest of the judgment that a complete reversal is necessary in the interest of justice. See Blache v. Blache, 37 Cal.2d 531, 538, 233 P.2d 547.