Court of Appeal, Fourth District, Division 2, California.
COMMERCE & INDUSTRY INSURANCE COMPANY, Plaintiff, Cross-Defendant and
SCOTTSDALE INDEMNITY COMPANY, Defendant, Cross-Complainant and Appellant.
March 8, 2004.
RICHLI, Acting P.J.
A tractor-trailer rig was involved in an accident with a car. Plaintiff Commerce & Industry Insurance Company (Commerce) had issued a motor vehicle liability policy to the owner of the trailer; defendant Scottsdale Indemnity Company (Scottsdale) had issued a motor vehicle liability policy to the owner of the tractor. Each insurer, however, concedes that its policy covers both insureds and covers both the tractor and the trailer.
The fight is over how the loss (including defense costs) is to be allocated between the two insurers. Commerce contends–and the trial court ruled–that the Scottsdale policy is primary and the Commerce policy is excess. Scottsdale appeals, contending that both policies are primary and the loss should be prorated between them.
The Legislature enacted Insurance Code section 11580.9 (section 11580.9) with the express intent of reducing litigation over the priority between two or more motor vehicle liability insurance policies that cover the same loss. In cases to which it applies, section 11580.9 dictates, by means of a series of conclusive presumptions, which policy is primary and which is excess. As this case will demonstrate, however, the Legislature’s intent has not been fully realized. It is not always clear whether section 11580.9 applies, or, if it does apply, how its conclusive presumptions play out.
Fortunately, on the facts of this case, we are able to conclude that, regardless of whether section 11580.9 applies, and regardless of whether the trial court applied the correct conclusive presumption under section 11580.9, the result must be the same: The Scottsdale policy is primary, and the Commerce policy is excess. Accordingly, we will affirm.
A. The Accident.
On October 16, 1996, while Francisco Licea was driving a tractor-trailer rig, a pipe fell off; it hit a car driven by Javier Vargas, injuring Vargas and his son Jonathan.
Licea owned the tractor. Pipeline Trucking Company (Pipeline) owned the trailer; Pipeline had leased the trailer to Licea for his use as a subhauler for Pipeline.
B. The Insurance Policies.
Pipeline was insured by Commerce. The Commerce policy covered the liability of “an insured” for damages resulting from the ownership, maintenance, or use of any “covered auto.”
Pipeline was a named insured. Licea was not. However, “[a]n insured” also included “[a]nyone else while using with your permission a covered auto you own….”
“Covered auto” was defined as “any auto[ ].” (Capitalization omitted.) On the declarations page, under “Schedule of Covered Autos You Own,” were the words, “Per composite rate endorsement.” (Capitalization omitted.) The “Composite Rate Endorsement,” in turn, stated:
FN1. The Composite Rate Endorsement indicated that Pipeline owned 280 trailers and that the premium per trailer was $280. However, the total premium charged for trailers was $63,280, which equals 280 times 226. Thus, it would appear that there was some mistake; probably either the actual number of trailers was 226, or the actual premium per trailer was $226.
“TOTAL ANNUAL PREMIUM: $297,040
“Vehicle Type: PPT/LT (20)
“TRAILERS (280)[¶] … [¶]
“Coverage Composite Rate Estimated Premium
“Liability $2,405.60 (PPT/LT) $ 48,112
“$4,528 (TRACTOR) $185,648
“$ 280 (TRAILER) $ 63,280” [FN1]
FN1. The Composite Rate Endorsement indicated that Pipeline owned 280 trailers
and that the premium per trailer was $280. However, the total premium charged
for trailers was $63,280, which equals 280 times 226. Thus, it would appear
that there was some mistake; probably either the actual number of trailers
was 226, or the actual premium per trailer was $226.
Licea was insured by Scottsdale. Like the Commerce policy, the Scottsdale policy covered the liability of “an insured” for damages resulting from the ownership, maintenance, or use of any “covered auto.”
Licea was the named insured. Although Pipeline was not, “an insured” also included “[t]he owner or anyone else from whom you hire or borrow a covered ‘auto’ that is a ‘trailer’ while the ‘trailer’ is connected to another covered ‘auto’ that is a power unit….”
The Scottsdale policy listed the following as “Covered Autos You Own” (capitalization altered):
1. “1993 Freightliner Tractor # 1FUYADYB7PP469996.”
2. “Any unidentified semitrailer while attached to a covered auto….”
C. The Underlying Action.
On July 18, 1997, as a result of the accident, Vargas filed an action for negligence against, among other defendants, Pipeline and Licea. Commerce defended Pipeline. Scottsdale defended Licea.
Vargas obtained a judgment against Pipeline and Licea for $220,000. Scottsdale paid the entire judgment, without any contribution from Commerce.
Section 11580.9 was originally enacted in 1970. It was intended to “resolv [e], so far as possible, conflicts and litigation over which of two or more applicable policies providing automobile liability insurance are to be deemed primary or excess.” (Continental Ins. Co. v. Lexington Ins. Co. (1997) 55 Cal.App.4th 637, 642; see Ins.Code, § 11580.8.)
Section 11580.9 provides four conclusive presumptions, each of which applies under specified circumstances. Only two of the four even arguably apply here. [FN2] First, section 11580.9, subdivision (b) (hereafter, subdivision (b)) provides, as relevant here:
FN2. The other two conclusive presumptions apply: (1) when “one policy affords coverage to a named insured engaged in the business of selling, repairing, servicing, delivering, testing, road-testing, parking, or storing motor vehicles” (§ 11580.9, subd. (a)), and (2) when the “loss aris[es] out of the loading or unloading of a motor vehicle, and one or more of the policies is issued to the owner, tenant, or lessee of the premises on which the loading or unloading occurs” (§ 11580.9, subd. (c)).
“Where two or more policies apply to the same loss, and one policy affords coverage to a named insured engaged in the business of renting or leasing motor vehicles without operators, it shall be conclusively presumed that the insurance afforded by that policy to a person other than the named insured … shall be excess over … any other valid and collectible insurance applicable to the same loss covering the person as a named insured or as an additional insured…. The presumption provided by this subdivision shall apply only if, at the time of the loss, the involved motor vehicle either:
“(1) Qualifies as a ‘commercial vehicle’ as that term is used in Section 260 of the Vehicle Code.
“(2) Has been leased for a term of six months or longer.”
Second, section 11580.9, subdivision (d) (hereafter, subdivision (d)), provides, as relevant here:
“Except as provided in subdivisions (a), (b), and (c), where 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.”
“Motor vehicle,” as used in section 11580.9, is defined as “any vehicle designed for use principally upon streets and highways and subject to motor vehicle registration under the laws of this state.” (Ins.Code, § 11580.06, subd. (a).) Trailers and semitrailers are subject to motor vehicle registration. (Veh.Code, § 4000, subd. (a)(1).)
The Legislature declared that, in cases of “death or injury to persons or property caused by the operation or use of a motor vehicle,” section 11580.9 “expresses the total public policy of this state respecting the order in which two or more of such liability insurance policies covering the same loss shall apply….” (Ins.Code, § 11580.8.) Nevertheless, “the statutory solution is not complete.” (CSE Ins. Group v. Northbrook Property & Casualty Co. (1994) 23 Cal.App.4th 1839, 1844.) That is, there can be cases in which two or more policies apply to the same motor vehicle, yet none of the conclusive presumptions set forth in section 11580.9 applies. (E.g., Mercury Casualty Co. v. Hertz Corp. (1997) 59 Cal.App.4th 414, 424.)
On January 19, 1999, Commerce filed this action against Scottsdale, asserting causes of action for declaratory relief and indemnity. Scottsdale filed a cross-complaint, likewise seeking declaratory relief and indemnity.
On August 29, 2001, Commerce filed a motion for summary judgment. After a hearing on November 13, 2001, the trial court tentatively granted the motion. It ruled that subdivision (b) did not apply because Pipeline had not leased the trailer to Licea for six months or longer. Thus, subdivision (d) did apply. Under subdivision (d), “the issue is whether both trailer and tractor are identified in the … policy. If they are, then both Scottsdale and Commerce are primary under Mission [Mission Ins. Co. v. Hartford Ins. Co. (1984) 155 Cal.App.3d 1199]; but if the Commerce policy doesn’t identify the tractor, then it’s excess under Transport Indemnity [Transport Indemnity Co. v. Royal Ins. Co. (1987) 189 Cal.App.3d 250].” The trial court tentatively found that the Scottsdale policy described or rated both the tractor and the trailer, and the Commerce policy described or rated only the trailer. However, it called for further briefing on the Commerce policy.
After receiving and considering such further briefing, the trial court entered a minute order granting the motion for summary judgment. In its minute order, it found that the Scottsdale policy described or rated only the tractor, and not the trailer; the Commerce policy did not describe or rate either the tractor or the trailer. Accordingly, the Scottsdale policy was primary and the Commerce policy was excess.
Counsel for Commerce submitted a proposed formal order, which the trial court signed and entered. Once again, it ruled that the Scottsdale policy was primary and the Commerce policy was excess. However, it found that the Scottsdale policy described or rated both the tractor and the trailer, whereas the Commerce policy described or rated only the trailer; hence, Transport Indemnity Co. v. Royal Ins. Co., supra, 189 Cal.App.3d 250 was “controlling.” These findings were consistent with its oral tentative ruling but inconsistent with its minute order.
The trial court then entered a final judgment, awarding Commerce its defense costs against Scottsdale.
IF SECTION 11580.9, SUBDIVISION (b) APPLIED
In the trial court, Commerce argued, among other things, that subdivision (b) applied. The trial court ruled that it did not. Scottsdale supports this aspect of the trial court’s ruling. Commerce, however, reiterates its argument that subdivision (b) applies.
For our purposes, it is sufficient to note that, for subdivision (b) to apply at all, Pipeline would have to be “engaged in the business of renting or leasing motor vehicles without operators.” (Subd. (b).) Thus, if subdivision (b) did apply, the Scottsdale policy would be primary and the Commerce policy would be excess. Scottsdale does not argue otherwise. Accordingly, the trial court would have been right, albeit for the wrong reason, and we would affirm.
IF SECTION 11580.9, SUBDIVISION (d) APPLIED
In this part, we assume, without deciding, that subdivision (d) applied. In that event, “that policy in which the motor vehicle is described or rated as an owned automobile” is conclusively deemed primary. (Subd. (d).)
Parenthetically, we note that the parties have focused on whether the tractor or the trailer “is described or rated as … owned.” They take it for granted that, if so, then each is also “described or rated as an owned automobile. ” (But see Ins.Code, § 11580.06, subd. (d).) We accept this assumption for purposes of our opinion. If, however, this assumption is incorrect–if neither policy described or rated the tractor or the trailer as an owned “automobile” within the meaning of subdivision (d)–then subdivision (d) did not apply. We have already discussed that scenario in part IV, ante.
In determining which policy or policies described or rated the vehicle as owned, the trial court cited and relied on Transport Indemnity Co. v. Royal Ins. Co., supra, 189 Cal.App.3d 250 (Transport ). Scottsdale argues that Transport conflicts with Mission Ins. Co. v. Hartford Ins. Co., supra, 155 Cal.App.3d 1199 (Mission ). We therefore begin by discussing these two cases.
A. The Mission Case.
In Mission, as here, a tractor-trailer rig was involved in an accident. Hartford’s insured owned the tractor. The Hartford policy described only the tractor as owned; however, it did also cover four trailers not otherwise identified. Mission’s insured owned the trailers. The Mission policy described only the trailers as owned and covered only the trailers. (Mission, supra, 155 Cal .App.3d at p. 1204.)
First, the court considered whether section 11580.9 applied at all. It noted: “Application of Insurance Code section 11580.9 turns on whether the policies cover ‘the same motor vehicle’ within the meaning of that code section.” (Mission, supra, 155 Cal.App .3d at p. 1209.) “… ‘… [V]irtually every jurisdiction which has addressed the question has held that an accident involving a tractor-trailer unit “arises out of” the use of both, regardless of which part of the unit was actually involved in the accident. [Citations.] [¶] The theory seems to be that a trailer is of no use without a tractor, and vice versa. [Citation.] But for the need to haul the trailer, the tractor would not have traveled the highway and been involved in the accident….’ [Citation.]” (Id. at p. 1212, quoting Ryder Truck Rental, Inc. v. U.S. Fidelity & Guaranty Co. (E.D.Mo.1981) 527 F.Supp. 666, 669-670.)
Next, the court applied subdivision (d) to the facts. It concluded: “Since the Hartford policy describes the … tractor as an owned automobile, it shall be conclusively presumed the insurance afforded by that policy is primary and the coverage by the Mission policy is excess. Since the Mission policy describes the [trailers] as owned automobiles, it too shall be conclusively presumed the insurance afforded by that policy is primary and the coverage afforded by Hartford is excess. [Citation.]” (Mission, supra, 155 Cal.App.3d at p. 1213.) It therefore held that “each insurer is liable for an equal (50 percent) share of the total settlement expense….” (Ibid.)
B. The Transport Case.
In Transport, once again, a tractor-trailer rig was involved in an accident. (Transport, supra, 189 Cal.App.3d at p. 252.) Orsetti, which was insured by Transport, owned the tractor. The Transport policy described the tractor and nine “unidentified semi-trailer[s]” as owned. R & A, which was insured by Royal, actually owned the trailers. The Royal policy described only the trailers as owned. (Id. at pp. 252, 256, 256, fn. 3, 257.)
Two justices concurred in the majority opinion. First, the majority held, as had the Mission court, that section 11580.9 applied because both policies applied to “the same motor vehicle or vehicles.” (Transport, supra, 189 Cal.App.3d at pp. 253-255.) “[A]n accident which involves a … tractor/trailer rig should be viewed as arising out of the use of all components of the rig.” (Id. at p. 255.)
Next, applying subdivision (d) to the facts, the majority held that the Transport policy was primary, because it described the tractor and the trailers–“the entire rig”–as owned; the Royal policy was excess because it described only the trailers as owned. (Transport, supra, 189 Cal.App.3d at pp. 252, 256.) The majority distinguished Mission, noting that there, “one policy described the trailers as ‘owned automobiles,’ while the other described the … tractor as an ‘owned automobile.’ [Citation.] Neither policy described the entire rig as an ‘owned automobile.’ ” (Transport at pp. 255-256, citing Mission, supra, 155 Cal .App.3d at p. 1213.)
In a footnote, the majority rejected Transport’s contention that the reference in its policy to nine “unidentified semi-trailer[s]” was not intended to refer to the trailers at issue. It reasoned that, if Transport had intended to refer to some other trailers, it could have done so by describing them by their vehicle identification numbers. (Transport, supra, 189 Cal.App.3d at p. 256, fn. 3.)
The majority then explained that its holding “most closely implements the Legislature’s mandate that the policy which describes the motor vehicle as ‘an owned automobile’ shall bear primary coverage while at the same time leading to a fair and just result.” (Transport, supra, 189 Cal.App.3d at p. 256.) “… Transport charged Orsetti and received an additional premium of over $36,000 to insure a group of nine trailers which included the two trailers involved in the accident. Transport charged the additional premium in recognition of the fact that it was assuming the risk of providing primary coverage on the trailers when they were towed by another ‘owned automobile’ listed on the policy endorsement it provided to Orsetti. On the other hand, the premium charged R & A by Royal was undoubtedly based on the fact that Royal was assuming primary coverage for the trailers when pulled by a … tractor owned by R & A, but only excess coverage when the trailers were being pulled by another vehicle. In such a factual setting, we have no difficulty in concluding that the Transport policy, because it described all components of the … tractor/trailer rig as ‘owned automobiles’ provides primary coverage while the Royal policy is excess, and we so hold.” (Ibid.)
The dissenting justice disagreed because, in his view, the Transport policy described only the tractor as owned. He found its reference to nine “unidentified trailers” inadequate to describe the trailers. Thus, as in Mission, one policy described only the tractor as owned, while the other policy described only the trailer as owned. (Transport, supra, 189 Cal.App.3d at pp. 257-258, dis. opn. of Poché, J.)
He criticized the majority’s description of how the premiums had been calculated as “after the fact mindreading,” not supported by any “evidence in the record.” (Transport, supra, 189 Cal.App.3d at p. 258, dis. opn. of Poché, J.) He also argued that the majority opinion “undermines the clear mandate of the Legislature by creating shifting definitions of the terms ‘owned automobile.’ ” (Id. at p. 258.) Thus, it subverted the legislative intent to minimize “coverage litigation among and between insurance carriers.” (Id. at p, 256.)
In this case, the trial court followed Transport–quite properly, as it was required to do so. (Auto Equity Sales, Inc. v.. Superior Court (1962) 57 Cal.2d 450, 455.) Scottsdale, however, argues that Transport was badly reasoned, in conflict with Mission, and contrary to legislative intent.
1. “Described or Rated as … Owned.”
In Transport, the majority and the dissenting justice disagreed on whether the words “unidentified semi-trailer[s]” were sufficient to “describe or rate” the trailers involved. [FN3]
FN3. They may also have disagreed as to which policy described or rated the trailers “as owned.” The case is ambiguous on this point.
The leading case construing “described or rated” as used in subdivision (d) is Ohio Cas. Ins. Co. v. Aetna Ins. Co. (1978) 85 Cal.App.3d 521 (Ohio ). There, one of the policies was “an ‘audit’ or ‘fleet’ policy, by which a newly acquired vehicle automatically becomes insured upon transfer of ownership,” with the “premium to be calculated upon audit….” (Id. at p. 524.) The court held that the “general description” in the fleet policy was inadequate to describe or rate the vehicle. (Ibid.) It explained: “The court is bound by the statute which requires description or rating; this, in commonsense understanding, means a particularization of the vehicle.” (Ibid.)
Transport, to the extent that it held that “unidentified semi-trailer[s]” was sufficient to describe and rate the trailers involved, simply cannot be squared with Ohio. Hence, we find ourselves forced to choose between these two approaches.
Other cases dealing with subdivision (d) shed little light on the meaning of “described or rated.” Many of them involved a rented car; the car rental company had made a cash deposit in lieu of insurance, and the driver had a policy covering any car he or she drives. In such cases, ” … ‘[t]here is no dispute that … rented cars are not described or rated as owned automobiles in [personal automobile] insurers’ policies. It is also apparent that there is nothing in [a] certificate of self-insurance which describes or rates the vehicles owned by [a car rental agency].’ [Citation.]” (Mercury Casualty Co. v. Hertz Corp., supra, 59 Cal.App.4th at p. 422, quoting Grand Rent-A-Car Corp. v. 20th Century Ins. Co. (1994) 25 Cal.App.4th 1242, 1253; see also Enterprise Rent-A-Car Co. v. Workmen’s Auto Ins. Co. (1997) 58 Cal.App.4th 1543, 1549-1552; Interinsurance Exchange v. Spectrum Investment Corp. (1989) 209 Cal.App.3d 1243, 1253-1255.)
A few cases state conclusorily that a given policy did or did not describe or rate a given vehicle, but, alas, they never quote the crucial policy language. (E.g., Hartford Accident & Indemnity Co. v. Sequoia Ins. Co. (1989) 211 Cal.App.3d 1285, 1292[“[t]he policy … specifically describes as one of the insured vehicles the 1976 Chevrolet Blazer involved in the accident”]; Government Employees Ins. Co. v. Gibraltar Casualty Co. (1986) 184 Cal.App.3d 163, 172 [“Ms. McClellan’s private vehicle was the described and rated owned vehicle in the GEICO policy and not in the Gibraltar policy”].)
Several of these courts, however, have reaffirmed the holding of Ohio (though arguably it was dictum on the facts before them). For example, in Mercury Casualty Co. v. Hertz Corp., the court said, “To ‘describe or rate’ a vehicle ‘means a particularization of the vehicle.’ [Citations.]” (Mercury Casualty Co. v. Hertz Corp., supra, 59 Cal.App.4th at p. 422.) And in Grand Rent-A-Car Corp. v. 20th Century Ins. Co., the court said, “[Subdivision (d) ] requires that the primary policy ‘particularize’ the vehicle. [Citations.]” (Grand Rent-A-Car Corp. v. 20th Century Ins. Co., supra, 25 Cal.App.4th at p. 1253.)
The majority in Transport seems to have confused the question of which policy “described or rated” the vehicle with the question of coverage of the vehicle. It reasoned, essentially, that the insurer must be held to have described the trailers because the description was ambiguous and the insurer had failed to avoid the ambiguity. For purposes of coverage, ” ‘[a]ny ambiguous terms are resolved in the insureds’ favor, consistent with the insureds’ reasonable expectations.’ [Citation.]” (Safeco Ins. Co. v. Robert S. (2001) 26 Cal.4th 758, 763, quoting Kazi v. State Farm Fire & Casualty Co. (2001) 24 Cal.4th 871, 879.) For purposes of subdivision (d), however, such a construction-against-the-insurer rule is inappropriate. A dispute over which policy is primary under subdivision (d) cannot arise unless there is coverage under both policies. At that point, two insurers are pitted against each other; the reasonable expectations of the insured become irrelevant.
The Legislature could have drafted subdivision (d) so as to focus on which vehicle is “covered as owned”; it chose instead to focus on which vehicle is “described or rated as owned.” Under Insurance Code section 11580.1, every motor vehicle liability insurance policy must “[d]esignat[e] by explicit description of, or appropriate reference to, the motor vehicles or class of motor vehicles to which coverage is specifically granted.” (Ins.Code, § 11580.1, subd. (b)(2).) Section 11580.9, subdivision (d) was enacted at the same time and by the same bill. (Stats.1970, ch. 300, § 4, p. 573, and § 7, pp. 576-577.) Subdivision (d), however, requires a description of (not just an appropriate reference to) a motor vehicle (not just a class of motor vehicles). We can only conclude that “described or rated” means something different from “covered .” Wording such as “unidentified semitrailer” or “any semitrailer attached to a covered auto” may be adequate for purposes of coverage, but it is not sufficiently particular to “describe or rate” a vehicle for purposes of subdivision (d).
Certainly a policy is sufficiently particular when it specifies a vehicle by its unique license number or vehicle identification number. (Highlands Ins. Co. v. Continental Casualty Co. (9th Cir.1995) 64 F.3d 514, 519; see also Grand Rent-A-Car Corp. v. 20th Century Ins. Co., supra, 25 Cal.App.4th at p. 1253.) Here, the Scottsdale policy stated that one of the “Covered Autos You Own” was a “1993 Freightliner Tractor # 1FUYADYB7PP469996.” It is undisputed that this was sufficient to “describe” the tractor as owned.
The Scottsdale policy also stated that “Covered Autos You Own” included “[a]ny unidentified semitrailer when attached to a covered auto.” “Any unidentified semitrailer” could be referring to any semitrailer in the world. Hence, as a matter of law, the Scottsdale policy did not “describe,” within the meaning of subdivision (d), the trailer involved in the accident.
The Commerce policy listed, as “Covered Autos You Own,” some 41 tractors and 226 (or 280) trailers. Once again, this could have been referring to any tractors and trailers in the world. The fact that Pipeline owned the trailer involved in the accident does not necessarily mean it was one of the 226 (or 280) trailers specified in the policy. Pipeline could have sold some of those trailers and acquired more trailers since the policy was issued. Accordingly, as a matter of law, the Commerce policy did not “describe” the tractor or the trailer involved in the accident.
Scottsdale argues, however, that “rate” means something different than “describe” and requires less particularity. “Rating,” for insurance purposes, is defined as “[t]he process by which an insurer arrives at a policy premium for a particular risk.” (Black’s Law Dict. (7th ed.1999) p. 811.) Commerce did “rate” the 41 tractors and 226 (or 280) trailers, in that it calculated the premium as a price per tractor plus a price per trailer.
Nevertheless, we believe that “rate,” within the meaning of subdivision (d), requires as much particularity as “describe.” In Ohio, the court held that the policy did not describe or rate a newly acquired vehicle, despite the fact that an additional premium would be charged, after an audit, based on it. Moreover, the court held that both description and rating required “a particularization of the vehicle.” (Ohio, supra, 85 Cal.App.3d at p. 524.) Subsequent cases have echoed this formulation.
The Commerce policy rated some 41 tractors and some 226 (or 280) trailers. It did not, however, rate the particular tractor and trailer involved in the accident. The policy was concerned only with how many tractors and trailers Pipeline owned, not with which tractors and trailers they might be. Thus, the Commerce policy did not describe or rate, within the meaning of subdivision (d), the tractor or the trailer involved.
Scottsdale also argues that Commerce admitted, as an undisputed fact, that its policy described the trailer. True, Commerce moved for summary judgment partly on the theory that the Scottsdale policy described both the tractor and the trailer, whereas its own policy described just the trailer. Accordingly, in its separate statement of undisputed material facts (see Code Civ. Proc., § 437c, subd. (b)), it stated: “The Commerce … policy[ ] only describes the trailer, and does not describe or reference the 1993 Freightliner at all.” (Italics added; capitalization omitted.) Scottsdale, however, never agreed that this was undisputed. To the contrary, it responded that it was “[d]isputed [, a]rgumentative and legally incorrect.” Thus, the trial court was not bound by this admission.
The parties simply “drew different legal conclusions or conclusions of ultimate fact from the factual transaction which both sides agreed to as to its details. With the issue in this posture, it was proper for the trial court to proceed to resolve the motion as a matter of law. [Citation.]” (C.L. Smith Co. v. Roger Ducharme, Inc. (1977) 65 Cal.App.3d 735, 743 [Fourth Dist., Div. Two].) In its minute order, the trial court appears to have concluded–as do we–that the Commerce policy did not describe or rate either the tractor or the trailer (although it muddied the waters later by signing the formal order containing different conclusions). Commerce’s contention that its policy described the trailer but not the tractor makes no sense. Its policy described the tractor and the trailer in exactly the same way–by lumping them into groups of 41 undifferentiated tractors and 226 (or 280) undifferentiated trailers, respectively. It described or rated both, or neither. We conclude neither.
The main holding of Transport was that, when one policy describes or rates an entire tractor/trailer rig and a second policy describes or rates only the tractor or the trailer, the first is primary and the second excess. Scottsdale urges us to reject this aspect of Transport, too. The dissenting justice, however, did not disagree; he had no occasion to do so, because, in his view, neither policy described or rated the entire rig. We find ourselves in the same position–we need not decide whether we would agree with Transport on this point.
Accordingly, under both Mission and Transport, the Scottsdale and Commerce policies cover the same motor vehicle or vehicles–viz., the combined tractor/trailer rig. The Scottsdale policy describes or rates the tractor but not the trailer. The Commerce policy does not describe or rate either the tractor or the trailer. Thus, assuming subdivision (d) otherwise applies, we conclude once again that the Scottsdale policy is primary and the Commerce policy is excess.
IF SECTION 11580.9 DID NOT APPLY
Scottsdale contends that section 11580.9 did not apply at all. It argues that section 11580.9 applies only to “liability insurance.” (See Ins.Code, §§ 11580.8, 11580.9, subds. (a), (d).) It then argues that the policies in this case provided “common carrier liability insurance,” which it claims is distinct from “liability insurance” as the two are defined by the Insurance Code. (Compare Ins.Code, § 108, subd. (a) with Ins.Code, § 110; see also Home Indemnity Co. v. King (1983) 34 Cal.3d 803, 810-812.) Hence, in this part, we assume, without deciding, that section 11580.9 did not apply.
A. Application of Rossmoor.
According to Commerce, if section 11580.9 does not apply, we must look to the provisions of the subhauling and equipment rental agreements between Pipeline and Licea. Under these agreements, Licea was to obtain liability insurance covering the trailer and covering Pipeline as an additional insured; Licea also indemnified Pipeline against all claims arising out of either the performance of the subhauling agreement or the use of the trailer. Commerce argues that, under Rossmoor Sanitation, Inc. v. Pylon, Inc. (1975) 13 Cal.3d 622, these provisions effectively render the Scottsdale (i.e., Licea) policy primary and the Commerce (i.e., Pipeline) policy excess.
Scottsdale does not dispute that, if Rossmoor applies, that would be the result. It merely argues that Rossmoor does not apply. Accordingly, assuming, without deciding, that Rossmoor does apply, the trial court did not err.
B. Application of the “Other Insurance” Clauses.
If, however, Rossmoor does not apply, the parties concur that we would have to look to the “other insurance” clauses in the policies. We begin by reviewing the general operation of “other insurance” clauses.
In the insurance context, “primary” and “excess” have two different meanings. First, a policy may be “primary,” meaning that a duty to indemnify and defend arises immediately upon the happening of a covered occurrence, as opposed to “excess,” meaning that a duty to indemnify and defend does not arise until some specified underlying policy has been exhausted. (See generally Travelers Casualty & Surety Co. v. American Equity Ins. Co. (2001) 93 Cal.App.4th 1142, 1149.) Both the Scottsdale and Commerce policies were “true” primary policies in this sense.
However, even a primary policy may include an “other insurance” clause, which provides that, if there is another insurance policy covering the same risk, that other policy will be “primary,” and the policy with the “other insurance” clause will be “excess” (or will prorate, or will contribute according to some other formula). ” ‘ “Other insurance” clauses become relevant only where several insurers insure the same risk at the same level of coverage. An “other insurance” dispute cannot arise between [true] excess and primary insurers. [Citations.]’ [Citations.]” (Travelers Casualty & Surety Co. v. American Equity Ins. Co., supra, 93 Cal.App.4th at p. 1150, quoting Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2000) ¶ 8:12, p. 8-3.)
“… ‘The reciprocal rights and duties of several insurers who have covered the same event do not arise out of contract, for their agreements are not with each other…. 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.’ [Citation.]” (Signal Companies, Inc. v. Harbor Ins. Co. (1980) 27 Cal.3d 359, 369, quoting Amer. Auto. Ins. Co. v. Seaboard Surety Co. (1957) 155 Cal.App.2d 192, 195-196.)
Nevertheless, “[c]ontractual terms of insurance coverage are honored whenever possible. The courts will therefore generally honor the language of excess ‘other insurance’ clauses when no prejudice to the interests of the insured will ensue.” (Fireman’s Fund Ins. Co. v. Maryland Casualty Co. (1998) 65 Cal.App.4th 1279, 1304.) There must be “some compelling equitable consideration” before one insurer can be required to reimburse another in contravention of the provisions of its policy. (Signal Companies, Inc. v. Harbor Ins. Co., supra, 27 Cal.3d at p. 369.) “For example, where two or more primary insurers’ policies contain excess ‘other insurance’ clauses purporting to be excess to each other, the conflicting clauses will be ignored and the loss prorated among the insurers on the ground the insured would otherwise be deprived of protection. [Citations.]” (Fireman’s Fund Ins. Co. v. Maryland Casualty Co., at pp. 1304-1305.)
Here, the relevant “other insurance” clauses in the Commerce and Scottsdale policies were identical. They both provided:
“a. This Coverage Form’s Liability Coverage is primary for any covered auto while hired or borrowed by you and used exclusively in your business as a trucker and pursuant to operating rights granted to you by a public authority. This Coverage Form’s Liability Coverage is excess over any other collectible insurance for any covered auto while hired or borrowed from you by another trucker. However, while a covered auto which is a trailer is connected to a power unit this Coverage Form’s Liability Coverage is
“(1) On the same basis primary or excess as for the power unit if the power unit is a covered auto.
“(2) Excess if the power unit is not a covered auto. [¶] … [¶]
“c. Except as provided in paragraph[ ] a … above this Coverage Form provides primary insurance for any covered auto you own and excess insurance for any covered auto you don’t own.”
“You” was defined as “the Named Insured.”
1. The Scottsdale Policy.
a. “Primary Insurance for Any Covered Auto You Own.”
Under the Scottsdale policy, the tractor was a “covered auto.” Moreover, because Licea owned the tractor, it was a “covered auto you own.” None of the exceptions governing a hired or borrowed auto or a trailer connected to a power unit applied.
Scottsdale relies on the exception for a “covered auto while hired or borrowed from you by another trucker.” It argues that, by virtue of the subhauling agreement, the tractor had been “hired or borrowed” from Licea by Pipeline. We cannot agree.
The policies do not define the terms “hired” or “borrowed.” (Cf. Continental Cas. Co. v. Zurich Ins. Co. (1961) 57 Cal.2d 27, 32 [policy defined “hired automobile” as “non-owned automobile used under contract with the named insured”]; Monolith Portland Cement Co. v. American Home Assur. Co. (1969) 273 Cal.App .2d 115, 118 [policy defined “[h]ired [a]utomobile” as “an automobile used under contract in behalf of, or loaned to, the named insured”].) Generally, absent a contrary definition, there is a “distinction between hiring a company that provides transportation and hiring a truck. ‘[F]or a vehicle to constitute a hired automobile, there must be a separate contract by which the vehicle is hired or leased to the named insured for his exclusive use or control.’ [Citations.] It is a further requirement … that in order for a vehicle to constitute a hired automobile it must be under the named insured’s exclusive use or control. [Citations.]” (Toops v. Gulf Coast Marine Inc. (5th Cir.1996) 72 F.3d 483, 487, quoting Sprow v. Hartford Ins. Co. (5th Cir.1979) 594 F.2d 418, 422.)
Courts have repeatedly held that a truck driven by an independent contractor is not a “hired automobile.” (E.g., U.S. Fidelity & Guar. v. Heritage Mut. Ins. (7th Cir.2000) 230 F.3d 331, 335 [“the truck [driver] was driving was not a hired vehicle; rather, [driver’s employer] was an independent contractor”]; Southern General Ins. Co. v. Alford (1998) 234 Ga.App. 615, 618 [507 S.E.2d 179]; Sampay v. Morton Salt Co. (La.App.1985) 482 So.2d 752, 758[“[f]or a vehicle to constitute a ‘hired automobile,’ there must be a separate contract by which the vehicle is hired or leased to the named insured for his exclusive use or control”].)
The subhauling agreement provided, as relevant here: “[Licea], as an independent contractor, agrees to transport freight for [Pipeline] … and to furnish all equipment and perform all services for such transportation.” Thus, Pipeline “hired” Licea, as an independent contractor, to provide transportation. It did not hire his tractor. The subhauling agreement did not specify any particular equipment Licea was to provide. Accordingly, the exception that required a “covered auto … hired or borrowed by you” did not apply. We conclude that, as to the tractor, the Scottsdale policy was primary.
b. “A Covered Auto Which Is a Trailer … Connected to a Power Unit.”
The trailer, too, was a “covered auto.” However, it came under the exception for “a covered auto which is a trailer … connected to a power unit” (namely, the tractor). Thus, the policy was primary or excess “[o]n the same basis … as for the power unit….” Because the Scottsdale policy was primary as to the tractor, it was also primary as to the trailer.
2. The Commerce Policy.
a. “Excess Insurance for Any Covered Auto You Don’t Own.”
Under the Commerce policy, the tractor was a “covered auto.” However, because Pipeline did not own the tractor, it was a “covered auto you don’t own.” For the reasons just discussed (see Part VI.B.1.a, ante ), the exception for a “covered auto while hired or borrowed by you” did not apply. Accordingly, as to the tractor, the Commerce policy was excess.
b. “A Covered Auto Which Is a Trailer … Connected to a Power Unit.”
The trailer, too, was a “covered auto” and, as noted, it was connected to a “power unit.” Because the Commerce policy was excess as to the tractor, it also was excess as to the trailer.
c. Effect of the Federal Motor Carrier Endorsement.
Finally, Scottsdale argues that the “other insurance” clause in the Commerce policy was modified by the motor carrier endorsement. This endorsement was required by federal law. [FN4] (See 49 U.S.C. §§ 13906(a)(1), 31139(b)(2); 49 C.F.R. §§ 387.7(a), 387.9, 387.15.) In it, the line stating, “This insurance is primary …” was checked; the line stating, “This insurance is excess …” was not.
FN4. The Commerce policy includes the federally mandated endorsement, presumably because Pipeline operated in interstate commerce. The Scottsdale policy, by contrast, includes a similar–though not identical–endorsement prescribed by the state Public Utilities Commission (see PUC Gen. Order No. 100-M; but see Pub. Util.Code, §§ 212, subd. (e), 216.5; Veh.Code, §§ 34630, 34631, 34631.5; Stats.1996, ch. 1042, § 28 [repealing former Pub. Util.Code, § 3631 et seq.), presumably because Licea operated wholly instrastate. Unlike the federal endorsement, the state endorsement does not address “other insurance” in any way.
This motor carrier endorsement does not override the “other insurance” clause in the Commerce policy, for two reasons. First, it is not in conflict with the “other insurance” clause. It relates solely to whether the policy is a “true” primary or “true” excess policy; it simply does not speak to how a loss will be apportioned between two true primary policies. Second, the majority of federal appellate courts that have considered this question have held that such an endorsement operates only when necessary to protect injured members of the public; it does not govern the allocation of a loss between insurers. (Canal Ins. Co. v. Distribution Services, Inc. (4th Cir.2003) 320 F.3d 488, 489, 492- 493, and cases cited.) Hence, as to this, the “other insurance” clauses in the two policies remain controlling.
C. Application of Equitable Principles.
We see no equitable reason to override the policies’ own allocation of risk. Quite the contrary–equity strongly supports that allocation, for two reasons. First, the clauses, on these facts, do not conflict. This is not a case in which both policies purport to be excess only, or one purports to be excess while the other purports to prorate. We can enforce both clauses according to their terms without leaving the insureds unprotected. Second, it is significant that the other insurance clauses in both policies were identical. This means that, while Commerce and Scottsdale did not contract directly with each other, they both agreed be bound by the same provisions.
We therefore conclude that, even if section 11580.9 did not apply at all, the trial court’s ruling was correct: The Scottsdale policy was primary and the Commerce policy was excess.
The judgment is affirmed. Commerce is awarded costs on appeal against Scottsdale.
We concur: WARD and KING, JJ.