State Farm Mutual Automobile Insurance Co. v. Progressive Marathon Insurance Co. (2007)
__ Cal.App.4th __ , 2007 WL 602584 (Cal. App. Super.)

Insurance Code Section 11580.9(D) Conclusive Presumption Of Which Policy Is Primary Triggered Only When Each Of The Competing Polices "Apply To The Same Motor Vehicle"

The San Bernardino County Superior Court, Appellate Division, held the statutory presumption making certain automobile policies primary and others excess applies to allocation of responsibility for uninsured motorist (UM) coverage between insurers. However, the statute requires the competing insurance policies each to "apply to the same motor vehicle" out of which the liability loss arises. On the facts of this case, the court held that because one of the policies did not "apply" to the motor vehicle, the presumption did not apply and pro rata distribution was therefore appropriate.

The accident victim was injured when a car in which she was riding, a Volkswagen Jetta, was hit by an uninsured motorist. The Jetta, owned by the insured and driven with the insured's permission by a friend, was insured under an automobile liability policy issued by Progressive Marathon Insurance Company ("Progressive"). Progressive's policy provided coverage to passengers like the accident victim who are injured as a result of the operation of an uninsured motor vehicle. Progressive's UM policy limits were $15,000 per accident, $30,000 in the aggregate.

The accident victim was also insured under UM coverage of her parent's policy, issued by State Farm Mutual Automobile Insurance Company ("State Farm"). This policy insured a separate vehicle. The victim qualified as an "insured" under the State Farm policy because she was a relative living in her parents' household. State Farm's UM policy limits were $25,000 per accident, $50,000 in the aggregate. The two insurers agreed to settle the claim for $9,800. Progressive paid $3,626 and State Farm paid $6,174. This represented their pro rata shares of the settlement amount based on their respective policy limits.

State Farm reserved its right to seek reimbursement from Progressive. It then filed an action, seeking equitable contribution and indemnity from Progressive. State Farm alleged that Insurance Code Section 11580.9(d) applied to this accident, and made Progressive's UM coverage primary and State Farm's excess. Since the accident victim's loss fell entirely within Progressive's policy limits, State Farm argued Progressive should bear the entire loss.

Section 11580.9(d) reads in relevant part:

[W]here two or more policies affording valid and collectible liability insurance apply to the same motor vehicle or vehicles in an occurrence out of which a liability loss shall arise, it shall be conclusively presumed that the insurance afforded by that policy in which the motor vehicle is described or rated as an owned automobile shall be primary and the insurance afforded by any other policy or policies shall be excess. (Emphasis added.)

State Farm argued the victim sustained her injuries in the Jetta, which is described as an "owned automobile" only by Progressive's policy. Therefore, Progressive's coverage should be primary. Progressive countered that the statute was inapplicable for three reasons: (1) the statute refers to "liability insurance," which does not include UM coverage; (2) UM coverage does not pertain to a "liability loss;" and (3) the two insurance policies in this case do not both "apply to" the Jetta.

The Court rejected the first two contentions. It concluded the statute encompasses UM coverage, based on the definition of "liability insurance" in Insurance Code Section 108(c). This section, although not expressly listing UM coverage, covers "injuries sustained by an insured resulting from a tort committed by a third party against which such third party is not himself covered by liability insurance." The Court held this definition encompasses UM insurance and applied to both Progressive and State Farm's policy language. The Court further reasoned that Insurance Code Section 11580.9(d) encompasses UM insurance because a different section, Insurance Code Section 660's definition of "automobile liability coverage" includes UM coverage.

The Court next held that loss caused by an uninsured motorist is a "liability loss" under Section 11580.9(d), again borrowing from Insurance Code Section 108's definition of "liability insurance." It further reasoned that since an insurer pays UM coverage only when an uninsured motorist is liable for damage to the insured, payments under that coverage are "liability losses."

The court also cited Insurance Code Section 11580.8 as support for legislative intent that Section 11580.9 serve as a mechanism for apportioning insurance coverage among insurers covering the same loss. Progressive argued Section 11580.9 should not be read to include UM coverage because the section would then conflict with Section 11580.2, which gives an insurer the right to cap its UM coverage and to prorate with other UM policies. The court rejected this contention, finding section 11580.2 does not trump section 11580.9 because the former statute only applies if two policies "apply to the same motor vehicle." Therefore, section 11580.2 will be given effect only where insurers comply with its requirements and section 11580.9 does not apply.

The Court did however hold that Section 11580.9(d) ultimately does not apply in this specific case because State Farm's UM coverage does not "apply to the same motor vehicle," i.e. the Jetta. The Jetta was not being "used" by any insured, as required under the State Farm policy, and it thus was not a covered vehicle under the policy. The Court further held that under the terms of State Farm's policy the accident victim's occupancy of the Jetta was incidental to State Farm's obligations towards her, which were triggered only because she was injured by a motorist who was driving an uninsured vehicle.

The Court therefore affirmed the trial court's judgment in Progressive's favor and dismissed the appeal.

This opinion is not final. Though it has been certified for publication, it may be withdrawn from publication, modified on rehearing, or granted review by the California Supreme Court. Should any of these events occur, the opinion would be unavailable for use as authority in other cases.

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