Court of Appeal, Second District, Division 2, California.

Gustavo JUAREZ et al., Plaintiffs and Respondents,

v.

GODBEY-MONROE, INC., Defendant, Cross-defendant and Appellant;

Jose Luis Pena, Defendant, Cross-complainant and Respondent.

April 22, 2004.

NOTT, Acting P.J.

Godbey-Monroe, Inc. (Godbey), appeals from a judgment entered against it following a jury trial of the personal injury claims of respondents Gustavo Juarez, Rosa Juarez, Jose Luis Pena, Thomas Dailey, and Rosa Bravo. Respondents were injured in a freeway accident involving a truck driven by Pena and carrying trash from a work site controlled by Godbey. After application of settlement credits, Godbey was found liable to Gustavo Juarez in the amount of $4,147,850 plus prejudgment interest and costs; to Rosa Juarez in the amount of $625,000 plus prejudgment interest; to Dailey in the amount of $15,000; to Bravo in the amount of $15,000; and zero to Pena. Godbey contends the trial court erred in admitting insurance evidence to prove negligent hiring in violation of Evidence Code section 1155, in instructing the jury that it could consider evidence of insurance in determining whether Godbey was negligent, and in admitting evidence of insurance to prove agency.

PROCEDURAL AND FACTUAL BACKGROUND

In August 1998, Gustavo Juarez, Rosa Juarez, Dailey, and Bravo filed an action against Arrow Disposal Services, its owner and co-managers, and Pena (Arrow defendants); four companies involved in the manufacture, sale, and modification of the Arrow truck, its tires, and its “roll-off tilt frame” (White Motor Company, Williams Tires, Bandag, Inc., Bodyworks, Inc.); and Ford Motor Company, the manufacturer of the Juarez automobile. In September and November of 1998, respectively, respondents added Volvo Trucks North America, Inc. (Volvo), and Godbey as defendants.

Defendants filed cross-complaints for indemnity against each other. All but the Arrow defendants and Godbey entered into settlements with plaintiffs for a cumulative total of approximately $4,450,000 prior to trial.

The action proceeded against Godbey on three theories: negligent hiring of Arrow based in part upon Godbey’s failure to ask for proof that Arrow was insured; strict liability based upon agency; and negligent loading of the “high-boy” container with concrete. The trial court denied Godbey’s motion in limine to exclude evidence relating to Godbey’s insurance and Arrow’s lack of insurance.

The case was tried to a jury. Godbey does not contest the judgment on substantial evidence grounds. The evidence, viewed in the light most favorable to the judgment, tends to show the following. In November 1997, Pena was driving a truck carrying a loaded high-boy waste container eastbound on the 60 freeway when the truck suffered a blown retread tire. It careened out of control, hit the center divider, and dumped construction debris across the westbound lanes. Although the point was contested below, the evidence tends to show that the debris came from a Godbey construction site. Gustavo Juarez, traveling in the westbound lanes in a Mercury Sable, was severely injured when his automobile turned over after hitting a piece of concrete. He became a quadriplegic. Less severely injured were Dailey (a passenger in the Juarez car), Bravo (driving a vehicle in a westbound lane), and Pena. The truck driven by Pena was owned by Arrow Disposal Services (Arrow), Pena’s employer. Arrow also supplied the container.

The evidence tended to show that it is understood within the construction industry that concrete and similar debris should only be placed in a “low-boy” container, but that concrete and similar materials were improperly present in the high-boy container carried in the truck driven by Pena. Their presence contributed to Pena’s loss of control of the truck and caused the Juarez vehicle to overturn. The evidence that the debris was Godbey’s included an admission by Godbey’s owner that Godbey was the owner of the debris that spilled onto the freeway. [FN1]

FN1. In addition, the jury was expressly instructed that Godbey would not be liable if the debris was a cause of injury but did not come from a Godbey site. The jury nevertheless unanimously found Godbey negligent.

The trial court permitted evidence of insurance. Plaintiffs introduced evidence that it is the custom and practice for construction contractors to demand proof of valid permits and insurance prior to hiring a debris hauler, and that Godbey had failed to do so. The truck was not insured by Arrow. There was also evidence, apparently rejected by the jury, that Arrow was Godbey’s agent, and that they had an understanding that Godbey would insure the Arrow truck involved in the accident in return for a reduction in price. [FN2]

FN2. Evidence regarding Arrow’s insurance was conflicting. Godbey introduced evidence that Arrow had attempted to insure all its trucks and that after the accident it had tendered an insurance claim to its insurance broker, who had mistakenly failed to write a policy for the truck involved in the accident.

The jury instruction regarding insurance evidence permitted the jury to consider insurance evidence to determine whether an agency relationship existed between Godbey and Arrow and whether Godbey was negligent in hiring Arrow.

The jury returned a verdict in favor of plaintiffs and cross-complainant Pena. It found that Godbey and Arrow were negligent, that their negligence was a legal cause of plaintiffs’ injuries, and that Godbey’s negligence was a legal cause of Pena’s injuries. The jury found that Arrow was not an agent of Godbey. With respect to Gustavo Juarez and Rosa Juarez, the jury apportioned fault 50 percent to Arrow, 25 percent to Ford, and 25 percent to Godbey. With respect to the others, it apportioned fault 75 percent to Arrow and 25 percent to Godbey.

The trial court denied Godbey’s motions for new trial and for a judgment notwithstanding the verdict. This appeal followed.

DISCUSSION

I. Standard of review

Our review of statutory construction is de novo. (Mansell v. Board of Administration (1994) 30 Cal.App.4th 539, 544.) We review the trial court’s determinations regarding the relevance of insurance evidence (City of Ripon v. Sweetin (2002) 100 Cal.App.4th 887, 900) and its weighing of the probative value against any prejudice pursuant to section 352 of the Evidence Code (Akers v. Miller (1998) 68 Cal.App.4th 1143, 1147) for abuse of discretion. This court considers instructions in light of the other instructions given and the entire record, and adopts a construction that will support the judgment if it is reasonably susceptible to such an interpretation. (Mullanix v. Basich (1945) 67 Cal.App.2d 675, 681.)

II. Allowance of insurance evidence

Godbey’s contention that the trial court erroneously admitted evidence of insurance to prove negligence in violation of section 1155 of the Evidence Code lacks merit. Evidence Code section 1155 states: “Evidence that a person was, at the time a harm was suffered by another, insured wholly or partially against loss arising from liability for that harm is inadmissible to prove negligence or other wrongdoing.”

The statute, enacted in 1965, codified existing law and states the general rule against allowing the fact of insuring against an event to raise an inference of negligence. (Menefee v. Williams (1968) 259 Cal.App.2d 56, 61; Roche v. Llewellyn Iron Works Co. (1903) 140 Cal. 563, 575.) It is excluded because the “existence of liability insurance is generally irrelevant to the issue of a party’s liability or the extent of permissible recovery” and is inherently prejudicial. (See Wegner et al., Cal. Practice Guide: Civil Trials and Evidence (The Rutter Group 2003)[¶] 8.2866, p. 8E-194.) Wigmore explains that while “the fact of insurance covering liability might tend to make the insured less careful,” “the inference is too elusive to be serviceable as evidence, depending as it does on a peculiar temperament which is by no means general.” (2 Wigmore on Evidence (Chadbourn rev.1979) § 282a, p. 174.)

The principle is subject to the exception that insurance evidence may properly be allowed where the evidence is introduced for other purposes. (See Staples v. Hoefke (1987) 189 Cal.App.3d 1397, 1410-1411.) “The fact of insurance … may be relevant on an issue other than the quality of the insured’s conduct, and therefore may be introduced under the doctrine of limited admissibility, with a limiting instruction, where its probative value outweighs the possible prejudice from its admission.” (1 Witkin, Cal. Evidence (4th ed.2000) § 134, p. 484.) For example, the fact of insurance may be admissible as tending to prove ownership of a vehicle or employment of a person covered by the policy. (See Perry v. Paladini, Inc. (1928) 89 Cal.App. 275, 285 [ownership]; Mullanix v. Basich, supra, 67 Cal.App.2d at p. 682 [employment].)

In the present case, insurance evidence was admissible both to show negligent hiring and agency. Neither of these involve the type of inference of wrongdoing section 1155 of the Evidence Code was meant to preclude. As to negligent hiring, plaintiffs submitted expert testimony that it is the custom, practice, and standard of care in the construction industry to require a valid permit and certificate of insurance from anyone who comes onto the jobsite to perform services, including persons hauling debris. [FN3] Evidence of Arrow’s lack of insurance for the truck tended to prove that Arrow did not have a valid permit to operate the truck. [FN4] Failure to enquire whether a trucker is licensed is relevant to the issue of negligent hiring. (See L.B. Foster Co. v. Hurnblad (9th Cir.1969) 418 F.2d 727, 731 [applying Washington law]; Shifflette v. Walkup Drayage etc. Co. (1946) 74 Cal.App.2d 903, 909 [knowledge that driver lacks operator’s license is sufficient to put company on inquiry as to his competency].)

FN3. Vehicle Code section 34620, subdivision (b), as amended in 1997, imposes a similar duty on commercial entities which hire motor carriers of property.

FN4. Vehicle Code section 34630, subdivision (a) provides that no motor carrier permit shall be issued until proof of insurance is filed with the state; subdivision (c) of section 34630 provides that the permit shall be suspended if the insurance is terminated or lapses.

As to agency, Arrow’s lack of insurance and Godbey’s coverage tend to support the position that Arrow was Godbey’s agent, and therefore not required to provide insurance for the vehicle. (See Phillips Cooperative Gin Co. v. Toll (Ark.1960) 335 S.W.2d 303, 305 [evidence probative based upon the presumption that the contracting parties intended to act lawfully]; Curcic v. Nelson Display Co. (1937) 19 Cal.App.2d 46, 57 [insurance evidence relevant to the issue of respondeat superior].) Arrow put on evidence that it had an agreement with Godbey that Godbey would provide insurance coverage and permits for the truck in exchange for a reduction in price.

Godbey urges that insurance evidence was not probative because the jury instruction concerning agency did not expressly list insurance as a factor. Among the factors listed were: who supplies the instrumentalities for the person doing the work; the method of payment; whether the work is part of the regular business of the principal; and whether the parties believe they are creating an agency relationship. The insurance evidence was a consideration in all of those factors, and was relevant to the jury’s determination of whether an agency relationship existed.

Even where not barred by section 1155 of the Evidence Code, however, insurance evidence may be excluded under section 352 of the Evidence Code where its probative value is outweighed by the risk of prejudice from disclosure. (See Blake v. E. Thompson Petroleum Repair Co. (1985) 170 Cal.App.3d 823, 831.) The insurance evidence should be of substantial probative value to the case. (See Hrnjak v. Graymar, Inc. (1971) 4 Cal.3d 725, 733 [stated in context of the collateral source rule].)

While the issue is close, we conclude that the trial court acted within its discretion in determining that the insurance evidence was admissible. The trial court acknowledged that insurance evidence may have a prejudicial effect on the jury. It also stated that the insurance evidence was relevant to the jury’s determination of whether Godbey was negligent in hiring Arrow and that absence of the evidence would severely hamper Arrow’s ability to prove that it was acting as Godbey’s agent. The trial court minimized the evidence’s prejudicial effect by fashioning a limiting instruction, which is discussed below. It did not abuse its discretion in admitting the evidence. [FN5]

FN5. The trial court also addressed these issues in ruling on Godbey’s motion for new trial. (See Fountain Valley Chateau Blanc Homeowner’s Assn. v. Department of Veterans Affairs (1998) 67 Cal.App.4th 743, 751 [new trial motion allows the trial court to reweigh the evidence and draw inferences contrary to that of the jury].) It concluded that the evidence supported the verdicts and that it had properly allowed insurance evidence.

III. Instructional error

Godbey contends the trial court committed prejudicial error in instructing the jury according to the following limiting instruction: “Generally in litigation of the sort involved here, the existence of insurance coverage by any party is inadmissible. The reasoning for such a rule is that the exist[e]nce of insurance has no bearing on issues involving the negligence of a party, causation or the nature and extent of damage or harm caused by such negligence. [¶] In this case the court has allowed evidence of the existence and/or nonexistence of insurance as it relates to defendants Godbey-Monroe and Arrow Disposal. Such evidence has been received for the limited purpose of determining (1) the factual and legal relationship that existed between defendants Godbey-Monroe and Arrow Disposal at the time of the involved traffic collision and (2) whether defendant Godbey-Monroe was negligent in hiring or retaining the services of Arrow Disposal. [¶] You may not consider this evidence for any other purpose such as assigning negligence to a defendant solely because it had or did not have insurance. Nor may you consider the existence of insurance to ensure that a plaintiff will be fully compensated for his or her injury or harm. To do so could unjustly penalize a defendant for undertaking the responsibility and the financial burden of insuring himself and could unjustly reward a defendant who is uninsured. It is the task of the jury to determine who is legally responsible for any resulting damage according to the facts and the jury instructions given by the court. It is not within the province of the jury to attempt to guarantee any plaintiff that sufficient resources will exist to compensate a party for his or her injury. The mere existence of insurance does not necessarily mean that the insurance coverage will fully compensate all of the damages you may find that defendant to have legally caused and by the same token, the lack of insurance does not necessarily mean that a defendant without insurance is without the resources or financial means to compensate any party injured by its own negligence. [¶] You shall therefore consider the evidence received for the limited purpose for which it was received and for no other purpose.”

We find no error. As discussed above, the insurance evidence was relevant to issues of negligent hiring and agency. The probative value of the evidence outweighed the risk of prejudice from disclosure. The instruction properly limits the jury’s use of the evidence and does not violate Evidence Code section 1155.

IV. Prejudice

Having concluded that the trial court acted within its discretion in allowing the insurance evidence, we need not reach the issue of prejudice. We note, however, that the special verdicts do not appear to be products of passion or prejudice. Despite hearing evidence that Godbey was insured and that Arrow was not, the jury rejected an agency theory that would have resulted in Godbey’s liability for Arrow’s actions. While the jury voted 12 to 0 that Godbey was negligent, apparently based upon the presence of concrete debris in the high- boy container, it allocated only 25 percent fault to Godbey. (The jury voted 10 to 2 in favor of causation of Pena’s injury, and 9 to 3 in favor of causation of the Juarezes’ injuries.) It does not appear that the jury was swayed by prejudice.

DISPOSITION

The judgment appealed from is affirmed. Respondents shall recover their costs of appeal from appellant.

We concur: DOI TODD and ASHMANN-GERST, JJ.