Summary
noting that, “in contrast [to Swearinger ], the GMC truck was being used for the dual purpose of serving the business interests of both” the insured and another party
Summary of this case from Travelers Prop. Cas. Co. of America v. LK Transp., Inc.Opinion
2d Civil No. B226545 Super. Ct. No. 56-2008-00333518-CU-IC-VTA
11-30-2011
EMPLOYERS INS. CO. of WAUSAU, Plaintiff and Respondent, v. CALIFORNIA CAPITAL INS. CO., Defendant and Appellant..
Lance D. Orloff; Grant, Genovese & Baratta, for Appellant. Duane Morris, Paul J. Killon, Dominica C. Anderson and Christina C. Marshall for Respondent.
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
California Rules of Court, rule 8.1115(a), prohibits courts and parties from citing or relying on opinions not certified for publication or ordered published, except as specified by rule 8.1115(b). This opinion has not been certified for publication or ordered published for purposes of rule 8.1115.
(Ventura County)
California Capital Insurance Company (Capital) appeals from a $1 million judgment in favor of Employers Insurance Company of Wausau (Wausau). Pursuant to principles of equitable subrogation and equitable indemnity, Wausau sought reimbursement of the $1 million after paying that amount under an excess liability policy on behalf of its insureds, Santa Barbara Harley-Davidson (Harley-Davidson) and Marty Cherrie. Capital contends that the trial court erroneously concluded that Wausau was entitled to equitable subrogation and equitable indemnity from Capital. We affirm.
Factual and Procedural Background
Marty Cherrie was the principal owner of Harley-Davidson. He was the sole owner and sole employee of Marty Cherrie Construction, Inc. (Cherrie Construction).
Wausau issued two insurance policies to Harley-Davidson. One policy was a primary policy with a liability limit of $1 million. The other was an excess policy with a liability limit of $5 million.
Capital issued to Cherrie Construction a commercial auto primary insurance policy with a liability limit of $1 million. The policy designated Marty Cherrie as a driver and provided that an "Insured" includes "[a]ny employee of yours [i.e., of Cherrie Construction] while using a covered 'auto' you don't own, hire or borrow in your business or your personal affairs." As a covered auto, the policy expressly designated only a 2006 Dodge Charger owned by Cherrie Construction. The policy did not mention a 2003 GMC truck (GMC truck) that Marty Cherrie personally owned and used while conducting business for both Cherrie Construction and` Harley-Davidson. Marty Cherrie's use of the GMC truck was equally divided between the two businesses. Less than five percent of the time, Marty Cherrie used the truck for personal matters unrelated to his businesses.
Capital's policy covered vehicles other than those scheduled on the policy. The policy provides that "covered auto" includes "[o]nly those 'autos' you [Cherrie Construction] do not own, lease, hire, rent or borrow that are used in connection with your business. This includes 'autos' owned by your employees . . . but only while used in your business or your personal affairs." Thus, to the extent that Marty Cherrie used his GMC truck to conduct business for Cherrie Construction, he would be an insured under Capital's policy provided that Cherrie Construction did not lease, hire, rent, or borrow the vehicle from him.
The GMC truck was expressly covered by a primary insurance policy issued to Marty Cherrie by Interinsurance Exchange of Automobile Club (Auto Club). The Auto Club's policy had a liability limit of $250,000.
In June 2007, while driving the GMC truck in an unincorporated area of Ventura County, Marty Cherrie ran a red light and collided with an automobile driven by Herman Jimenez, a husband and father of four children. Jimenez was killed. Cherrie pleaded guilty to misdemeanor vehicular manslaughter. Wausau and Capital stipulated that "[b]oth Wausau Policies covered the accident."
At the time of the accident, Marty Cherrie was en route from his home to a Cherrie Construction job site "where he intended to '[m]eet with the superintendent and go over progress on the job.' " In the bed of the truck was a desk that Marty Cherrie was going to transport to the Cherrie Construction office after the job site visit. The day before, Marty Cherrie had picked up the desk at the` Harley-Davidson office. He intended to store the desk at the Cherrie Construction office.
Jimenez's family filed a wrongful death action against Harley-Davidson, Cherrie Construction, and Marty Cherrie. "Wausau agreed to defend and indemnify [Marty] Cherrie and [Harley-Davidson] under its primary policy . . . ."
The action was settled for $3 million, but Capital did not sign the settlement agreement. Auto Club paid its full primary policy limit of $250,000. Wausau paid its full primary policy limit of $1 million. It also paid $1.75 million under its excess policy. Capital refused to contribute any funds to the settlement.
Wausau filed an action against Capital seeking (1) a declaration that the Capital policy is primary to the Wausau excess policy, (2) a declaration that Capital must reimburse Wausau for $1 million that Wausau paid under its excess policy, (3) a declaration that the GMC truck was not a "borrowed" vehicle within the meaning of Capital's policy, (4) equitable indemnity from Capital in the amount of $1 million, and (5) equitable subrogation to the rights of Wausau's insured against Capital in the amount of $1 million.
In its trial brief, Capital made two arguments. The first was that the " 'Borrowed Vehicle' provision" of its policy "precludes coverage for the underlying action" because Cherrie Construction had "borrowed [Marty Cherrie's] personal vehicle to run an errand" when the fatal accident occurred. Capital asserted: "The only disputed coverage issue in this case is whether the ["borrowed vehicle"] provision applies."
Capital's second argument was that Cherrie Construction's misrepresentation in failing to schedule the GMC truck on the Capital policy "is a complete defense to coverage under [the] policy." Capital alleged, "If the true facts regarding the use of the 2003 GMC truck had been known to . . . Capital, the policy would not have been issued for the premium charged."
At trial three witnesses testified, including Marty Cherrie. One of the other two witnesses, Douglas Rundell, testified as follows: As an employee of JECCA Services, Inc., he provided administrative services to Cherrie Construction. (49-50, 68-69, 88-89, 95) Rundell obtained the Capital primary auto policy through Ben Suddock, an insurance broker. Rundell told Suddock that Marty Cherrie personally owned the GMC truck. He asked Suddock "if it was possible to schedule the 2003 GMC" truck on the Capital policy. Suddock replied that the truck could not be scheduled on the policy because it was owned by Marty Cherrie, not Cherrie Construction.
In its statement of decision, the trial court found that "there was no 'borrowing' of Marty Cherrie's vehicle [the GMC truck] by [Cherrie Construction] at the time of the accident." The court therefore concluded that the accident was covered under Capital's policy. The court further found that Capital had not met its burden of proving the defenses of "fraud, misrepresentation, and/or concealment" regarding the alleged failure to schedule the GMC truck on Capital's policy. Thus, the court "determined that Wausau has established its entitlement to reimbursement, equitable indemnity and equitable subrogation from [Capital] and that [Capital] owes Wausau reimbursement of the [Capital] policy limit of $1 million."
Whether the GMC Truck Was a "Borrowed" Vehicle
Capital's policy covers an automobile owned by the named insured's (Cherrie Construction's) employee while it is being used in the named insured's business, provided that the named insured does not "lease, hire, rent or borrow" the automobile. "Although the insurance policy does not define 'borrower,' the Supreme Court has provided guidance in a case involving similar policy language. That case referred to a definition of a borrower as 'someone who, with the permission of the owner, has temporary possession and use of the property for his own purposes; possession connotes the right to exercise dominion and control.' (Home Indemnity Co. v. King (1983) 34 Cal.3d 803, 813 . . . .) Home Indemnity concluded a forklift operator who was loading a trailer did not exercise 'the requisite dominion and control over the truck and trailer to be a "borrower" under the terms of the policy.' (Home Indemnity, supra, 34 Cal.3d at pp. 813-814 . . . .) Accordingly, one point is beyond dispute: the exercise of 'dominion and control [by Cherrie Construction] over the [GMC] truck' is indispensable to a finding that [Cherrie Construction] was a 'borrower' of [the] truck under the terms of the insurance policy." (City of Los Angeles v. Allianz Ins. Co. (2004) 125 Cal.App.4th 287, 291-292.)
Whether Cherrie Construction exercised dominion and control over the GMC truck is a factual issue to be determined by the trier of fact. (People v. Wesley (1990) 224 Cal.App.3d 1130, 1145 ["Whether . . . defendant had dominion and control over the contraband sufficient to constitute possession, was a factual issue"]; Campbell v. State (Fla. 1991) 577 So.2d 932, 935 ["the question of whether a defendant had dominion or control over contraband is generally a factual question for the jury"]; Prahm v. Rupp Const. Co. (Minn. 1979) 277 N.W.2d 389, 391 [in determining coverage under insurance policy, "[t]he issue . . . is who has dominion or control over the property and is a question of fact which depends on the circumstances of each case"].)
"When the trial court has resolved a disputed factual issue, the appellate courts review the ruling according to the substantial evidence rule. If the trial court's resolution of the factual issue is supported by substantial evidence, it must be affirmed. [Citation.]" (Winograd v. American Broadcasting Co. (1998) 68 Cal.App.4th 624, 632.) " 'Evidence is substantial if any reasonable trier of fact could have considered it reasonable, credible and of solid value.' [Citations.]" (Kazensky v. City of Merced (1998) 65 Cal.App.4th 44, 52-53.) "We must 'view the evidence in the light most favorable to the prevailing party, giving it the benefit of every reasonable inference and resolving all conflicts in its favor . . . .' [Citation.] Needless to say, a party 'raising a claim of insufficiency of the evidence assumes a "daunting burden[,]" ' [citation] . . . ." (Wilson v. County of Orange (2009) 169 Cal.App.4th 1185, 1188.)
Substantial evidence supports the trial court's express finding of "no borrowing" and the implied finding that Cherrie Construction did not exercise dominion and control over the GMC truck at the time of the accident. A reasonable trier of fact could have concluded that Marty Cherrie, an individual, personally exercised dominion and control. Since he was driving the truck, he was in actual possession of the vehicle. "[P]ossession connotes the right to exercise dominion and control. [Citation.]" (Home Indemnity Co. v. King, supra, 34 Cal.3d at p. 813.)
Furthermore, the business use of the GMC truck was not limited to Cherrie Construction. The business use was divided equally between Cherrie Construction and Harley-Davidson as determined by Marty Cherrie in the exercise of his discretion. (RT 46) At the time of the accident, Marty Cherrie was en route to a Cherrie Construction job site. He was transporting a desk that he had picked up the day before from the Harley-Davidson office. Cherrie intended to store the desk at the Cherrie Construction office. Thus, it is reasonable to infer that, at the time of the accident, the truck was being used to conduct business on behalf of both Harley-Davidson and Cherrie Construction. In view of this dual business use and Marty Cherrie's discretionary control over that use, the trial court could have reasonably concluded that the truck had not been under the dominion and control of Cherrie Construction when the accident occurred.
Travelers Indemnity Co. v. Swearinger (1985) 169 Cal.App.3d 779, is distinguishable. In Swearinger the appellate court concluded that a school district had "borrowed" a vehicle within the meaning of its insurance policy. "[T]he vehicle was used for one purpose - the school district's purpose of transporting guest students, and the district was therefore a borrower." (City of Los Angeles v. Allianz Ins. Co., supra, 125 Cal.App.4th at p. 295.) Here, in contrast, the GMC truck was being used for the dual purpose of serving the business interests of both Cherrie Construction and Harley-Davidson.
The Swearinger court's definition of "borrow" was rejected in American Intern. Underwriters Ins. Co. v. American Guarantee and Liability Ins. Co. (2010) 181 Cal.App.4th 616, 628-630.)
"[T]he sine qua non of borrowing a vehicle is the exercise of dominion and control over the vehicle, whether through the use of the vehicle in the pursuit of one's own purposes or through possession and custody of the vehicle." (City of Los Angeles v. Allianz Ins. Co., supra, 125 Cal.App.4th at p. 296.) Since substantial evidence supports the trial court's implied finding that Cherrie Construction did not exercise dominion and control over the GMC truck, we uphold the court's conclusion that Cherrie Construction did not borrow the truck from Marty Cherrie. At the time of the accident, therefore, Marty Cherrie was an insured under the Capital policy.
Misrepresentation
Capital's policy provides that it is void if any insured "intentionally conceal[s] or misrepresent[s] a material fact concerning: . . . [t]he Covered 'auto.' " Capital contends that Cherrie Construction's failure to schedule the GMC truck on the Capital policy was an intentional material misrepresentation that voids the policy.
It is a factual issue whether Cherrie Construction made an intentional material misrepresentation concerning "[t]he covered 'auto.' " (Warner Constr. Corp. v. City of Los Angeles (1970) 2 Cal.3d 285, 292-293.) Substantial evidence supports the trial court's finding that no such misrepresentation was made. The relevant Capital form asked the named insured to provide a "schedule of covered autos you own." A reasonable trier of fact could have concluded that Cherrie Construction was not required to schedule nonowned vehicles used by employees in its business.
Moreover, Douglas Rundell testified that Ben Suddock, the insurance broker, informed him that the GMC truck could not be scheduled on the Capital policy because it was personally owned by Marty Cherrie. (RT 108) Rundell's testimony alone constitutes substantial evidence that Cherrie Construction did not intentionally fail to disclose the GMC truck to Capital. "Credibility is an issue of fact for the trier of fact to resolve [citation], and the testimony of a single witness, even a party, is sufficient to provide substantial evidence to support a factual finding [citation]." (Fariba v. Dealer Services Corp. (2009) 178 Cal.App.4th 156, 170-171.)
Cherrie Construction's Objectively Reasonable Expectation
Capital argues that Cherrie Construction's "objectively reasonable expectation could only be that [the] Capital policy covered the 2006 Dodge [scheduled on the policy], not the 2003 GMC [truck]." We reject this argument because, as explained above, it was reasonable to believe that Capital's policy did not require the scheduling of nonowned vehicles used by employees in Cherrie Construction's business. If unscheduled, nonowned vehicles were not leased, hired, rented, or borrowed by Cherrie Construction, they would qualify as covered vehicles "but only while used in [Cherrie Construction's] business or . . . personal affairs."
Equitable Subrogation
"In the case of insurance, subrogation takes the form of an insurer's right to be put in the position of the insured in order to pursue recovery from third parties legally responsible to the insured for a loss which the insurer has both insured and paid. [Citations.]" (Fireman's Fund Ins. Co. v. Maryland Cas. Co. (1998) 65 Cal.App.4th 1279, 1291-1292.) "The subrogated insurer is said to ' "stand in the shoes" ' of its insured, because it has no greater rights than the insured and is subject to the same defenses assertable against the insured. Thus, an insurer cannot acquire by subrogation anything to which the insured has no rights, and may claim no rights which the insured does not have. [Citations.]" (Id., at pp. 1292-1293.)
"The essential elements of an insurer's cause of action for equitable subrogation are as follows: (a) the insured suffered a loss for which the defendant is liable, either as the wrongdoer whose act or omission caused the loss or because the defendant is legally responsible to the insured for the loss caused by the wrongdoer; (b) the claimed loss was one for which the insurer was not primarily liable; (c) the insurer has compensated the insured in whole or in part for the same loss for which the defendant is primarily liable; (d) the insurer has paid the claim of its insured to protect its own interest and not as a volunteer; (e) the insured has an existing, assignable cause of action against the defendant which the insured could have asserted for its own benefit had it not been compensated for its loss by the insurer; (f) the insurer has suffered damages caused by the act or omission upon which the liability of the defendant depends; (g) justice requires that the loss be entirely shifted from the insurer to the defendant, whose equitable position is inferior to that of the insurer; and (h) the insurer's damages are in a liquidated sum, generally the amount paid to the insured. [Citations.]" (Fireman's Fund Ins. Co. v. Maryland Cas. Co., supra, 65 Cal.App.4th at p. 1292.)
Capital argues: "Wausau failed at trial to prove its equitable-subrogation claim because as a matter of law it could not and did not prove that: [¶] 1. . . . Capital or [Cherrie Construction] was liable for [Harley-Davidson's] tort; [¶] 2. [Harley-Davidson] had an existing, assignable claim against . . . Capital, which [Harley-Davidson] could have asserted had Wausau not indemnified it for [sic]; [¶] 3. [Wausau's] indemnification was caused by the act or omission of . . . Capital or [Cherrie Construction]; [¶] 4. [Wausau's] equitable position is inferior to California Capital's because Wausau was paid $21,676 in premiums to insure the 2003 GMC, while California Capital was paid no premium to insure it; [¶] 5. [Wausau's] payment was not voluntary because its indemnity payment under its excess policy was paid to indemnify its insured [Harley-Davidson], while it owed no contractual obligation to [Cherrie Construction]."
Wausau maintains that Capital has forfeited the equitable subrogation issues because Capital failed to raise them below. In the trial court, Capital raised only two issues: (1) whether the GMC truck was a "borrowed" vehicle within the meaning of the Capital policy, and (2) whether Cherrie Construction's alleged failure to schedule the GMC truck on the Capital policy was a misrepresentation that constitutes a defense to coverage.
" 'It is well established that issues or theories not properly raised or presented in the trial court may not be asserted on appeal, and will not be considered by an appellate tribunal. A party who fails to raise an issue in the trial court has therefore [forfeited] the right to do so on appeal.' [Citations.]" (Fifth Day, LLC v. Bolotin (2009) 172 Cal.App.4th 939, 962, first brackets in original; see also Fergus v. Songer (2007) 150 Cal.App.4th 552, 572 [" 'To permit a party to raise a new theory is both unfair to the trial court and unjust to the opposing litigant' "].) "An exception to this rule 'is where a question of law only is presented on the facts appearing in the record.' [Citation.]" (Strasberg v. Odyssey Group, Inc. (1996) 51 Cal.App.4th 906, 920.) " 'Appellate courts are more inclined to consider such tardily raised legal issues where the public interest or public policy is involved. [Citations.] And whether the rule shall be applied is largely a question of the appellate court's discretion.' [Citations.]" (Resolution Trust Corp. v. Winslow (1992) 9 Cal.App.4th 1799, 1810.) " ' "[I]f the new theory contemplates a factual situation the consequences of which are open to controversy and were not put in issue or presented at the trial the opposing party should not be required to defend against it on appeal." [Citations.]' [Citation.]" (Strasberg v. Odyssey Group, Inc., supra, 51 Cal.App.4th at p. 920.)
Capital has failed to show that the equitable subrogation issues present solely questions of law based on facts appearing in the record. Moreover, "we cannot say [Wausau] presented all substantial evidence at its disposal on the theor[ies] now asserted." (Richmond v. Dart Industries, Inc. (1987) 196 Cal.App.3d 869, 880.) Nor can we say that Wausau "was reasonably put on notice to present all its evidence" concerning the issues. (Id., at p. 879.) In addition, the issues do not involve important questions of public policy or public concern. Accordingly, the equitable subrogation issues are forfeited.
In any event, there is no merit to Capital's contention that Wausau failed to prove its equitable subrogation claim. In so contending, Capital assumes that Marty Cherrie was not an insured under Capital's policy. But as we have previously explained, Marty Cherrie was an insured because at the time of the accident he was using his GMC truck to conduct business for Capital's named insured, Cherrie Construction, which had neither leased, rented, hired, nor borrowed the vehicle from him.
Capital acknowledges that both Harley-Davidson and Marty Cherrie were insureds under Wausau's policy: "Wausau . . . owed contractual indemnity obligations to its insureds [Harley-Davidson] and [Marty] Cherrie while in the course and scope of [Harley-Davidson's] business." Wausau, therefore, "stood in the shoes" of its insured, Marty Cherrie, and was entitled to be subrogated to the rights of Marty Cherrie against Capital.
Marty Cherrie had the right to reach a settlement with the Jimenez family in the wrongful death action, and that settlement was binding on Capital: "[W]hen a liability insurer denies coverage for a third party claim and abandons its insured, it relinquishes the right to object to the manner in which the claim is resolved by the insured or any other insurer providing coverage for the claim. A contrary rule would render the insured's right to settle meaningless in cases where an insurer denies liability. [Citation.]" (United Services Auto. Ass'n v. Alaska Ins. Co. (2001) 94 Cal.App.4th 638, 644; see also RLI Ins. Co. v. CNA Cas. of California (2006) 141 Cal.App.4th 75, 82, fn. 1 ["where the primary insurer denies coverage, . . . the policyholder may make a reasonable, good faith, noncollusive settlement with the claimant, then maintain or assign an action against the primary insurer for breach of the insurer's contractual duties"].) Capital does not contend that Marty Cherrie acted in bad faith or that his settlement with the Jimenez family was unreasonable or collusive.
Pursuant to the terms of Wausau's excess policy, it was excess to Capital's primary policy. Wausau's excess policy provides that it "is excess over, and shall not contribute with any 'other insurance' . . . ." "Other insurance" is defined as "any insurance, other than 'scheduled underlying insurance' [the Wausau primary policy], that provides for a 'loss' covered by this insurance . . . ." "Thus, under the terms of [Wausau's excess] policy, it was excess to the [Capital] policy. Accordingly, having paid a portion of the settlement funds on behalf of [Capital], [Wausau] was entitled to seek reimbursement from [Capital] by way of . . . equitable subrogation. (Reliance [Nat. Indemnity Co. v. General Star Indemnity Co. (1999)] 72 Cal.App 4th [1063,] 1078-1079 ['where different insurance carriers cover differing risks and liabilities, they may proceed against each other for reimbursement by subrogation rather than by contribution. [Citations.]'].) [¶] Moreover, . . .we do not think the equities favor the primary carrier, [Capital]. . . . '[T]he basic rules construing primary and excess policies would be altered' if we accepted [Capital's] argument [that the equities favor Capital]. [Citation.]" (JPI Westcoast Const., L.P. v. RJS & Associates, Inc. (2007) 156 Cal.App.4th 1448, 1464.)
Equitable Indemnity
"Equitable indemnity ' "applies in cases in which one party pays a debt for which another is primarily liable and which in equity and good conscience should have been paid by the latter party." ' [Citation.]" (United Services Auto. Ass'n v. Alaska Ins. Co., supra, 94 Cal.App.4th at pp. 644-645.) Capital contends that "Wausau has no equitable-indemnity claim" and no standing to assert the claim, which actually is a meritless "equitable-contribution claim." We need not resolve this issue because, irrespective of the merits of the equitable indemnity claim, Wausau would still prevail in this appeal under its equitable subrogation claim.
Disposition
The judgment is affirmed. Wausau shall recover its costs on appeal.
NOT TO BE PUBLISHED.
YEGAN, J. We concur:
GILBERT, P.J.
COFFEE, J.
Ken W. Riley, Judge
Superior Court County of Ventura
Lance D. Orloff; Grant, Genovese & Baratta, for Appellant.
Duane Morris, Paul J. Killon, Dominica C. Anderson and Christina C. Marshall for Respondent.