Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
Superior Court County Ct. No. 1231464 of Santa Barbara Timothy J. Staffel, Judge
Law Offices of Fred G. Glantz, Fred G. Glantz for Plaintiff and Appellant.
Hager & Dowling, Thomas J. Dowling, Jessica M. Johnson, for Defendant and Respondent.
COFFEE, J.
Diane Karp appeals from the judgment entered in favor of respondent, Mercury Casualty Company, following the granting of its motion for summary judgment. Respondent denied appellant's claim relating to bodily injuries that she incurred while its named insured, Lionel Rivers, drove her car. Appellant obtained a default judgment against Rivers and later filed this action against respondent for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief. Respondent obtained summary judgment on the ground that appellant's claims were excluded from the policy's insuring clause. Appellant contends that the relevant exclusion is not permissible under Insurance Code section 11580.1, subdivision (c)(5); is contrary to public policy; and violates equal protection principles. We affirm.
All statutory references are to the Insurance Code.
FACTUAL AND PROCEDURAL BACKGROUND
Appellant agrees that the facts are not in dispute. Respondent issued an automobile liability insurance policy to Rivers, the named insured, covering a 1999 Mercury Grand Marquis. The policy provides an exclusion from coverage for "liability for bodily injury to an insured . . . ."
The policy definition of an insured includes the owner of a non-owned automobile. Among other things, a non-owned automobile is one that is not owned by the named insured or certain members of the named insured's family.
"Coverage A – Bodily Injury Liability; Coverage B – Property Damage Liability: To pay on behalf of the insured all sums, except punitive or exemplary damages, which the insured shall become legally obligated to pay as damages because of:
"Non Owned Automobile means a vehicle that:
Appellant is not a member of Rivers' family. During the coverage period, while driving appellant's 2004 Honda with her permission and while she was a passenger, Rivers was involved in a single vehicle accident. Appellant sustained injuries in the accident and filed a bodily injury claim with respondent. Respondent denied her claim.
Appellant then filed an action against Rivers in superior court. (Karp v. Rivers (Super. Ct. Santa Barbara County, 2005, No. 1194234).) Rivers filed a claim with respondent seeking defense and indemnity. Respondent denied Rivers' claim. The court subsequently entered a default judgment for $532,119.27 in favor of Karp and against Rivers. Appellant then filed an action against respondent for breach of contract, breach of the implied covenant of good faith and fair dealing and declaratory relief.
Respondent filed a motion for summary judgment and argued that appellant's claims were excluded from the policy's insuring agreement. Respondent asserted that because appellant's Honda was a non-owned automobile that was used with her permission by the named insured (Rivers), appellant was an insured, subject to the policy's exclusion from coverage for liability for bodily injury to an insured. The court ruled that the policy excluded coverage for appellant's injuries and granted summary judgment in favor of respondent.
DISCUSSION
The challenged exclusion concerns liability for bodily injury incurred by insureds who are owners of "non-owned" automobiles, as defined by the policy. Appellant argues that the exclusion is not authorized by section 11580.1, subdivision (c)(5), and is contrary to public policy. We disagree.
The issue before us turns upon the proper interpretation and application of language in a policy of insurance. These are questions of law. (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.) "'We apply a de novo standard of review to an order granting summary judgment when, on undisputed facts, the order is based on the interpretation or application of the terms of an insurance policy.'" (Pacific Indemnity Co. v. Bellefonte Ins. Co. (2000) 80 Cal.App.4th 1226, 1232.)
"An insurer has a right to limit coverage in plain and understandable language, and is at liberty to limit the character and extent of the risk it undertakes to assume. [Citation.] The right of a company to limit its contract of coverage may not be questioned [citation], provided the limitation is not prohibited by public policy or statute. [Citation.]" (Kincer v. Reserve Ins. Co. (1970) 11 Cal.App.3d 714, 718.)
Appellant does not contend that the exclusion is ambiguous, or that it is not understandable.
The challenged exclusion is authorized by the following provisions of section 11580.1, subdivision (c): "In addition to any exclusion provided [by statute], the insurance afforded by any policy of automobile liability insurance, including the insurer's obligation to defend, may, by appropriate policy provision . . ., be made inapplicable to any or all of the following: [¶] . . . [¶] (5) Liability for bodily injury . . . to an insured whenever the ultimate benefits of that indemnification accrue directly or indirectly to an insured. [¶] . . . [¶] 'An insured' . . . shall mean any insured under the policy . . . ."
Courts have long recognized the right of an insurer to "lawfully limit coverage to certain types of vehicles, including vehicles not owned by the named insured." (California State Auto. Assn. Inter-Ins. Bureau v. Gong (1984) 162 Cal.App.3d 518, 529.) Here, the policy definition of an insured includes an owner of a "non-owned" automobile driven with the owner's permission by the named insured (Rivers). Section 11580.1, subdivision (c) thus authorizes the challenged exclusion from coverage for liability for bodily injury to such an insured.
Because the challenged exclusion was authorized by section 11580.1, subdivision (c), it is consistent with public policy. (State Farm Mut. Auto. Ins. Co. v. MacKenzie, supra, 85 Cal.App.3d 727, 732.) "The total public policy in regard to provisions required to be included in voluntary automobile liability insurance policies issued or delivered in California is contained in the Insurance Code. (See §§ 11580.05, 11580.1.)" (Ibid.; see also Farmers Ins. Exchange v. Cocking (1981) 29 Cal.3d 383, 390 (Cocking).)
Appellant also argues that the challenged exclusion violates equal protection because it does not "have a substantial relation to a legitimate object to be accomplished." We disagree. The exclusion directly relates to the insurer's legitimate interest in minimizing losses attributable to fraud or collusion. (Cocking, supra, 29 Cal.3d at p. 390.)
Appellant's equal protection argument relies in large part upon Brown v. Merlo (1973) 8 Cal.3d 855. In Brown, our state Supreme Court concluded that the classifications created by the guest statute "between those denied and those permitted recovery for negligently inflicted injuries do not bear a substantial and rational relation to the statute's purposes of protecting the hospitality of the host-driver and of preventing collusive lawsuits." (Id. at p. 882). Here appellant challenges an insurance policy exclusion similar to the family member exclusion that withstood an equal protection challenge in Cocking.
The Cocking court addressed multiple factors, including several that are relevant to this case: "[T]he Legislature has merely excluded one class from mandatory liability coverage . . . founded upon freedom of contract and the insurer's legitimate interest in minimizing future losses attributable to fraud or collusion. These considerations fully satisfy the rational basis test. The Legislature reasonably may have concluded that the benefits to the public from automatically including 'family member' coverage in all automobile liability policies were outweighed by the probable adverse consequences of such a rule. It is not unreasonable to suppose that substantial increases in premiums would be forthcoming if such coverage were declared mandatory. It may well have been a legislative concern that an increase in the costs of liability insurance might result in an appreciable increase in the number of uninsured drivers to the ultimate detriment of the general public. In addition, family members are frequently protected by the medical coverage provisions of the insured's policy, or by other . . . insurance, thereby diluting the necessity for liability coverage. The Legislature may have deemed it unwise to require an insured to purchase expensive liability insurance in order to protect himself or another insured from potential injuries. [¶] The decision of a carrier whether to offer, or of a prospective insured to accept, the various kinds of liability insurance is one which the Legislature reasonably might well leave to the insurer and insured, respectively. To hold otherwise and, in effect, to require family member liability coverage against the better judgment of the contracting parties would constitute an unprecedented judicial interference into private contractual and economic arrangements in direct contravention of the public policy legislatively expressed in section 11580.1." (Cocking, supra, 29 Cal.3d at p. 390.)
Appellant argues that the rational basis for treating people differently is not present here because she is not a family member. Continuing in this vein, she asserts that unlike a family member exclusion which serves a legitimate state purpose of preventing collusive intra-family torts, the present exclusion does not involve a legitimate state purpose. We acknowledge that the medical insurance issues may differ when the parties are unrelated. Nonetheless, it is reasonably probable that fraud or collusion can occur among friends as well as among family members. The challenged exclusion does not violate equal protection.
The judgment is affirmed. Costs on appeal are awarded to respondent.
We concur: YEGAN, Acting P.J., PERREN, J.
"A. Bodily injury sustained by any person other than an insured;
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
"Persons Insured: The following are insured . . .:
". . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
" (b) With respect to a non-owned automobile:
"(1) the named insured;
"(2) relatives listed as drivers in the declarations . . .;
"(3) the owner or lessee of the non-owned automobile, but only while the non-owned automobile is used by one of the persons in (b)(1) or (b)(2) above." (First italics in original, second and third italics added.)
"(a) is used with the permission of the owner of the vehicle and
"(b) is a private passenger . . . automobile . . . and
"(c) is not used for commercial purposes and
"(d) is not owned by, or leased to, or registered to, or available for the regular use of, the named insured, any persons listed as drivers in the policy declarations, an insured's employer, and insured's employee, a relative, a corporation, partnership or other legal entity in which the combined ownership interest of the named insured and relatives exceeds . . ., or is a temporary substitute automobile."