Doug SCHIPPER, et al., Appellants,

v.

DAHL TRUCKING, INC., et al., Respondents.

 

June 26, 2007.

 

Martin County District Court, File No. 46-CV-05-821.

 

WILLIS, Judge.

Appellants challenge the district court’s determination on summary judgment that an exculpatory clause in a contract between appellant Doug Schipper and respondent Dahl Trucking is enforceable. Because we conclude that the exculpatory clause is enforceable, we affirm in part. But because the district court did not explain the legal theory under which it determined that the negligence claim against respondent Chad Jongbloedt was waived, and because the district court did not perform a choice-of-law analysis to determine whether to apply Iowa or Minnesota law to the loss-of-consortium claim, we remand in part.

 

FACTS

 

Appellants Doug and Mary Schipper are residents of Murray County. Doug Schipper (Schipper) is the owner of Midwest Cargo, which owns and operates a truck. On May 13, 2003, Schipper entered into an agreement with respondent Dahl Trucking, Inc., an Iowa corporation that has its headquarters in Minnesota, to provide freight transportation. The contract contains the following provision:

9. THE CONTRACTOR EXPRESSLY WAIVES ANY CLAIM, DEMAND, ACTION, OR CAUSE OF ACTION AGAINST CARRIER AS A RESULT OF THE DEATH OR INJURY OF CONTRACTOR OR CONTRACTOR’S EMPLOYEES IN CONNECTION WITH THE PERFORMANCE OF CONTRACTOR OR THE CONTRACT AND FURTHER AGREES TO HOLD CARRIER HARMLESS AND INDEMNIFY CARRIER FORM [sic] SUCH CLAIMS.

 

The contract defines the “ carrier”  as Dahl Trucking and the “ contractor”  as “ Doug Schipper of Midwest Cargo.”  Under the contract, Schipper received 75% of the gross revenue generated as a result of the hauling services that he provided.

 

The contract also requires that Schipper maintain business-liability insurance and stipulates that “ [a]ny collision, physical damage, or comprehensive insurance on the Equipment furnished by [Schipper] shall be the sole responsibility of [Schipper]”  and that Dahl Trucking “ shall in no way be liable for any damage which may occur to [Schipper’s] Equipment.”  The contract provides that it “ shall be governed by the Laws of the State of Iowa and Minnesota, both as to interpretation and performance.”

 

On July 21, 2003, Schipper and respondent Chad Jongbloedt, an employee of Dahl Trucking who is a resident of Minnesota, both were hauling asphalt along highway 218 in Iowa. Schipper was driving his truck, while Jongbloedt was driving a truck owned by Dahl Trucking. While traveling northbound, Jongbloedt rounded a curve and saw a vehicle stopped in front of him. Jongbloedt attempted to stop, but his trailer “ jackknifed”  and collided with Schipper’s truck, which was traveling in the southbound lane. As a result, Schipper suffered personal injuries, and his truck was damaged.

 

Appellants brought this negligence action against Dahl Trucking and Jongbloedt, seeking compensation for Schipper’s personal injuries, the damage to Schipper’s truck, and Mary Schipper’s loss of consortium. The parties filed cross-motions for summary judgment, and the district court granted respondents’ motion.

 

Relying on this court’s decision in Bogatzki v. Hoffman, 430 N.W.2d 841 (Minn.App.1988), review denied (Minn. Dec. 21, 1988), the district court determined that the exculpatory clause is unambiguous because it applies to “ any claim, demand, action, or cause of action”  and, therefore, necessarily applies to Schipper’s negligence claim against Dahl Trucking.

 

The district court also determined that Schipper waived any claim against Jongbloedt, reasoning that by including the exculpatory clause in its contract, “ Dahl Trucking meant to absolve itself of liability based on its own conduct as well as the conduct of others”  and that because Dahl Trucking can act only through its employees, the exculpatory clause applies to claims against those employees. Finally, the district court dismissed Mary Schipper’s loss-of-consortium claim because it determined that under Minnesota law, loss of consortium is a derivative claim, which cannot survive dismissal of the underlying claim. This appeal follows.

 

DECISION

 

I.

 

Appellants assert that the district court erred by determining that the exculpatory clause is enforceable, arguing that the clause is ambiguous and that it contravenes public policy. When reviewing a grant of summary judgment, this court examines the record to determine (1) whether there are any issues of genuine material fact and (2) whether the district court erred in its application of the law. State by Cooper v. French, 460 N.W.2d 2, 4 (Minn.1990). We must review the record in a light most favorable to the party against whom summary judgment was granted. Fabio v. Bellomo, 504 N.W.2d 758, 761 (Minn.1993).

 

The contract at issue contains a choice-of-law provision that provides that the contract “ shall be governed by the Laws of the State of Iowa and Minnesota.”  Minnesota courts generally enforce contractual choice-of-law provisions. Milliken & Co. v. Eagle Packaging Co., 295 N.W.2d 377, 380 n. 1 (Minn.1980). When there is more than one possible source of law that may be applied, a choice-of-law analysis must be performed only if there is an actual conflict in the law, that is, if the conflict is outcome-determinative. Nodak Mut. Ins. Co. v. Am. Family Mut. Ins. Co., 604 N.W.2d 91, 93-94 (Minn.2000). Here, the district court reviewed the enforceability of the exculpatory clause under Minnesota law, and the parties do not argue that Minnesota and Iowa law are in conflict with regard to the issue. We will therefore consider the enforceability of the exculpatory clause under Minnesota law. See Davis by Davis v. Outboard Marine Corp., 415 N.W.2d 719, 723 (Minn.App.1987) (noting that in the absence of a conflict, a forum state may apply its own law), review denied (Minn. Jan. 28, 1988).

 

It is well settled that contracting parties may protect themselves from liability through exculpatory clauses, although such clauses are not favored in the law and are strictly construed against the benefiting party. Anderson v. McOskar Enters., Inc., 712 N.W.2d 796, 799-800 (Minn.App.2006). Exculpatory clauses are enforceable if they (1) are not ambiguous; (2) do not purport to protect against intentional, willful, and wanton acts; and (3) do not contravene public policy. Id. at 800.

 

Appellants contend first that the exculpatory clause here is ambiguous. Whether a clause is ambiguous is a question of law, which we review de novo. See Blackburn, Nickels & Smith, Inc. v. Erickson, 366 N.W.2d 640, 643 (Minn.App.1985) (discussing construction of contracts), review denied (Minn. June 24, 1985). A clause is ambiguous if it is reasonably subject to more than one interpretation. Beehner v. Cragun Corp., 636 N.W.2d 821, 827 (Minn.App.2001); see also Anderson, 712 N.W.2d at 800 (noting that alternative constructions of an exculpatory clause must be reasonable to establish ambiguity).

 

Appellants argue that the exculpatory clause is ambiguous because it does not specifically state that claims against Dahl Trucking that arise from Dahl Trucking’s own negligence are waived. Appellants rely on the supreme court’s recent decision in Yang v. Voyagaire Houseboats, Inc., in which the lessee of a houseboat signed a rental contract that contained an exculpatory clause. 701 N.W.2d 783, 786-87 (Minn.2005). The supreme court held that the clause was unenforceable because the houseboat-leasing company provided a service similar to that provided by an innkeeper and because an innkeeper cannot enforce an exculpatory clause, as a matter of public policy, neither could the houseboat-leasing company. Id. at 790-91. But the supreme court did not address the issue of whether the exculpatory clause was ambiguous; it based its determination that the clause was unenforceable entirely on public policy. See id. at 789-91. We conclude therefore that Yang does not control our determination of whether this exculpatory clause is ambiguous.

 

We note that the provision at issue here also contains an indemnity clause, in which Schipper agreed to hold Dahl Trucking harmless from and indemnify Dahl Trucking against “ any claim, demand, action, or cause of action”  arising from the performance of the contract. On appeal, appellants argue only that the district court erred by determining that Schipper waived his negligence claims, and there is no claim against Schipper under the indemnity clause. Thus, because the parties have not put the enforceability of the indemnity clause at issue, we do not address it.

 

Schipper purported to waive “ any claim, demand, action, or cause of action”  against Dahl Trucking that arises “ in connection with the performance of contractor or the contract.”  This clause necessarily includes a negligence claim against Dahl Trucking because as long as the claim arises from “ the performance of contractor or the contract,”  Schipper has waived that claim. See Otis Elevator Co. v. Don Stodola’s Well Drilling Co., 372 N.W.2d 77, 78 (Minn.App.1985) (concluding that the lack of “ an explicit reference to negligence”  does not make an exculpatory clause ambiguous), review denied (Minn. Oct. 11, 1985). We agree with the district court’s conclusion that the exculpatory clause is not ambiguous and that it applies to claims based on Dahl Trucking’s negligence.

 

Appellants argue also that the clause is unenforceable because it contravenes public policy. In determining whether a clause violates public policy, we consider (1) whether there is a disparity in the parties’ bargaining power such that one party lacks the ability to negotiate the terms, or the elimination, of the exculpatory clause and (2) the type of service that is provided by the benefiting party. Schlobohm v. Spa Petite, Inc., 326 N.W.2d 920, 923 (Minn.1982). There is a disparity of bargaining power when (1) a service is necessary or is unavailable elsewhere; (2) there is a compulsion to participate; and (3) there is no opportunity to negotiate. Beehner, 636 N.W.2d at 827.

 

Appellants argue that the “ relationship of employer and independent contractor created a disparity in bargaining power,”  relying on this court’s decisions in Bunia v. Knight Ridder, 544 N.W.2d 60 (Minn.App.1996), and Walton v. Fujita Tourist Enters. Co., 380 N.W.2d 198 (Minn.App.1986), review denied (Minn. Mar. 21, 1986).

 

In Bunia, this court determined that an exculpatory clause was unenforceable on the ground that there was a disparity in bargaining power between Bunia, an independent contractor who delivered newspapers, and the newspaper company because the relationship between the parties was “ comparable to … that of most employers and employees.”  544 N.W.2d at 63. In reaching that conclusion, this court noted that exculpatory clauses in contracts between employees and employers are generally held to violate public policy because of “ the economic necessity which forces the employee to accept the employer’s terms.”  Id. (quoting Restatement (Second) of Torts § 496B cmt. f (1995)). In Walton, this court held that there was a disparity of bargaining power between a travel agent who was injured while on a “ familiarization trip”  to Japan and an airline because the airline’s familiarization trips to Japan were a “ practical necessity”  for the travel agent because “ participation in [familiarization] trips is necessary for the business success of an agent”  and the airline’s size “ gave it a virtual monopoly on such trips”  from the Minneapolis area. 380 N.W .2d at 201.

 

We conclude that there is no evidence of a disparity of bargaining power here. Unlike the plaintiff in Bunia, Schipper was not in a circumstance that was “ nearly identical to that of an employee,”  nor is this a case involving a relationship similar to that between a newspaper carrier and a “ major newspaper publisher.”  544 N.W.2d at 63. Indeed, under the contract, Schipper received 75% of the gross revenue that was generated from the hauling services that he provided for Dahl Trucking. Similarly, unlike the circumstance in Walton, where the airline had a “ virtual monopoly”  on familiarization trips to Japan from the Minneapolis area, there is no evidence here that Dahl Trucking was the only freight hauler that Schipper could contract with. 380 N.W.2d at 201.

 

Appellants argue also that the exculpatory clause violates public policy because Dahl Trucking provides a “ public and essential”  service. Public policy bars a service provider from enforcing an exculpatory clause if (1) the service provided is subject to public regulation or (2) the service provided is of practical necessity to a portion of the public. Beehner, 636 N.W.2d at 828. Appellants argue that the clause is unenforceable because Dahl Trucking is subject to regulation. But this court has held that the fact that a business is regulated is not alone sufficient to establish that the business provides a “ necessary or public service .”  See Malecha v. St. Croix Valley Skydiving Club, Inc., 392 N.W.2d 727, 730-31 (Minn.App.1986) (noting that the fact that the skydiving company was regulated did not void an exculpatory agreement when the service provided by the skydiving company was qualitatively different from the services provided by businesses that were found to be necessary or public), review denied (Minn. Oct. 29, 1986). And appellants have not shown that Dahl Trucking provides a service that is a practical necessity. We therefore conclude that the exculpatory clause is not void on public-policy grounds.

 

Finally, the district court determined that Schipper waived his negligence claim against Jongbloedt because, by including the exculpatory clause in the contract, “ Dahl Trucking meant to absolve itself of liability based on its own conduct as well as the conduct of others.”  The district court reasoned that because Dahl Trucking can only act through its employees, the exculpatory clause necessarily applies to claims against those employees. The district court cited no authority for this conclusion. And we note that appellants’ complaint seeks damages against Dahl Trucking and against Jongbloedt individually, not as an agent of Dahl Trucking for the purpose of establishing Dahl Trucking’s liability under a respondeat-superior theory. We also note that the exculpatory clause in the contract provides that Schipper waives all claims against Dahl Trucking, not against its employees. See Anderson, 712 N.W.2d at 800 (noting that exculpatory clauses are strictly construed). Because we cannot determine on what basis the district court concluded that Schipper waived his negligence claim against Jongbloedt, we remand for clarification or reconsideration of that issue.

 

II.

 

 

Appellants argue next that the district court erred when it applied Minnesota law to Mary Schipper’s loss-of-consortium claim. The district court’s resolution of a choice-of-law issue is a question of law, which we review de novo. Danielson v. Nat’l Supply Co., 670 N.W.2d 1, 4 (Minn.App.2003), review denied (Minn. Dec. 16, 2003). There are facts here that could support the application of either Minnesota or Iowa law to the loss-of-consortium claim. Thus, to determine what law to apply, a court must first determine if the applicable states’ laws are actually in conflict so that resolution of the conflict would determine the outcome of the case. See Jepson v. Gen. Cas. Co. of Wis., 513 N.W.2d 467, 469 (Minn.1994). Second, once the court has concluded that the laws are in conflict, it must determine whether there are any constitutional barriers to applying one state’s law rather than another’s. See id. (describing the constitutionality test as a determination of whether there are sufficient contacts between a state and the parties that applying the law of that state would not be arbitrary or fundamentally unfair). And third, assuming that the laws are in conflict and that there is no constitutional barrier, the court must apply a five-factor analysis to determine which state’s law to apply. Id. at 470. Specifically, courts are to consider (1) the predictability of result; (2) the maintenance of interstate order; (3) the simplification of the judicial task; (4) the advancement of the forum state’s interest; and (5) the application of the better rule of law. Nodak, 604 N.W.2d at 94.

 

We note that although in Minnesota a loss-of-consortium claim is derivative, it appears that a loss-of-consortium claim may not be derivative in Iowa. Compare Thill v. Modern Erecting Co., 284 Minn. 508, 513, 170 N.W.2d 865, 869 (1969) (holding that a loss-of-consortium claim is derivative), with Huber v. Hovey, 501 N.W.2d 53, 57 (Iowa 1993) (concluding that although husband signed a release waiving a negligence claim, wife could still bring a loss-of-consortium claim arising from the act of negligence, regardless of whether the husband had waived his own claim).

 

The supreme court has stated that these factors are not intended to be applied mechanically but rather are “ to prompt courts”  to carefully consider and explain choice-of-law determinations. Jepson, 513 N.W.2d at 470; see also Schwartz v. Consol. Freightways Corp. of Del., 300 Minn. 487, 491, 221 N.W.2d 665, 668 (1974) (noting that a choice-of-law determination takes into account policy and factual considerations of each case). But aside from the statement that the “ State of Iowa has no interest in [appellants’] marriage,”  the record lacks an explanation of the district court’s rationale for its decision to apply Minnesota law to Mary Schipper’s loss-of-consortium claim. Because a choice-of-law analysis is dependent on the particular facts of a case, we remand for such an analysis by the district court.

 

In summary, we affirm the district court’s determination that the exculpatory clause in the parties’ contract is enforceable. But because the district court did not explain the legal theory under which it determined that Schipper waived his negligence claim against Jongbloedt, individually, and because the district court failed to perform the required choice-of-law analysis of Mary Schipper’s loss-of-consortium claim, we remand for further proceedings consistent with this opinion. We express no opinion as to the merits of appellants’ remaining claims.

 

Affirmed in part and remanded.

 

BRIT SYNDICATES, LTD., Defendant and Appellant,

v.

NOVELTEX, INC., Plaintiff and Respondent.

(San Francisco City & County Super. Ct. No. 05-440048).

 

June 25, 2007.

 

Appellant Brit Syndicates, Ltd. (Brit) appeals from the judgment entered below after the trial court granted respondent Noveltex, Inc .’s (Noveltex) motion for summary judgment. We affirm the judgment.

 

BACKGROUND

 

In 2001, Brit insured A & A Logistics (A & A), not a party to this action, against certain physical damage for up to $100,000 under a “ Motor Truck Cargo Broad Form (15)”  policy. The policy states in relevant part in its “ insuring agreement”  section:

 

“ [T]he Underwriters hereby agree to indemnify the Insured … for ALL RISKS OF PHYSICAL LOSS OR DAMAGE FROM AN EXTERNAL CAUSE to lawful cargo in and/or on a truck whilst in the Insured’s care, custody or control in the ordinary course of transit, including loading and unloading, within the contiguous states of USA…. THIS INSURANCE BEING SUBJECT TO ALL THE PROVISIONS, EXCLUSIONS, DEFINITIONS, TERMS AND CONDITIONS CONTAINED IN THE FOLLOWING WORDING.”

 

The exclusions section which follows begins with the introductory phrase “ [t]his insurance does not insure the liability of the insured for …”  followed by a list of exclusions, including the following: “ (c) Loss of cargo due to voluntary act of Insured, whether or not resulting from a third party’s use of fraudulent documents, forged freight bills, interchange receipts, release orders, or other unauthorized form or unauthorized use of documents.”

 

In April 2005, Noveltex filed a complaint against Brit in San Francisco Superior Court. Among other things, Noveltex alleged that while the policy was in full force and effect, Noveltex entered into a contract of carriage with A & A whereby A & A agreed to transport a container-load of linen fabric from the Port of Long Beach to Hudd Distribution Services, Inc. in Rancho Dominguez, California. On or about January 10, 2002, A & A “ misdelivered”  the shipment to another premises. “ The container and its contents were discovered stolen from those premises on or about January 14, 2002.”  Noveltex further alleged that it had sued A & A for damages, obtained a judgment in the sum of $235,759.14, and had made demand to Brit to pay the judgment, but that Brit had refused to do so.

 

Noveltex moved for summary judgment against Brit in November 2005. Noveltex provided the following statements of undisputed facts to explain the underlying loss:

 

“ 5. On Thursday, January 10, 2002, at approximately 2:20 p.m., A & A Logistics, Inc. misdelivered [the subject container] to the premises of GSL Transportation Services, Inc. in Rancho Dominguez, California.

 

“ 6. At all relevant times, GSL’s Rancho Dominguez facilities included a warehouse and adjacent truck yard, in which trucks, trailers and other equipment were stored. GSL’s facilities, including its yard, were fully enclosed by a six-foot-high wire fence, and GSL’s facilities were accessible through a gate.

 

“ 7. [The subject container] and the chassis on which it was mounted remained in GSL’s truck yard until it was discovered stolen in the early morning hours of Monday, January 14, 2002.

 

“ 8. Unknown persons cut GSL’s chain link fence and drove off with [the subject container] and its chassis.

 

“ 9. The gate to GSL’s Rancho Dominguez property was securely closed and locked at the time of the theft.

 

“ 10. [The subject container] was closed and locked throughout the time it remained in GSL’s truck yard prior to the theft.”

 

The evidence Noveltex cited to support these statements were several paragraphs from a declaration by the GSL’s president, including the statement that the subject container and chassis had been delivered to and parked in GSL’s yard on January 10, 2002, and that GSL did not discover that the subject container had been “ misdelivered”  to its facilities until after the theft.

 

Brit opposed the motion on a variety of grounds. The trial court granted Noveltex’s motion and subsequently entered judgment in its favor in the sum of $100,000. Brit then filed this timely appeal. After the parties completed their briefing of the issues Brit raised on appeal, they submitted supplemental briefs at our request regarding the issue of “ external cause.”

 

DISCUSSION

 

Brit raises the following issues on appeal:

 

“ First, whether the trial court erred as a matter of law in determining that Insurance Code section 11580 applies to indemnity policies, even though by its terms section 11580 applies only to liability policies.

 

“ Second, whether the trial court erred as a matter of law by ignoring the policy requirement that a covered loss to cargo must be from an external cause while the cargo was ‘ in the ordinary course of transit’  and ‘ whilst in the Insured’s care, custody or control.’  “

 

“ Third, whether the trial court erred as a matter of law by ignoring the conspicuous, plain and clear exclusion that bars coverage for losses caused by the voluntary act of the insured in improperly turning the cargo over to a third party.”

 

Additionally, in response to our request for additional briefing on the issue, Brit argues that Noveltex did not meet its initial of production to establish that the subject loss resulted from an “ external cause.”

 

I. Application of Insurance Code section 11580

 

Brit first argues that the “ trial court erred as a matter of law”  in determining that Insurance Code section 11580  applies to indemnity policies, even though by its terms section 11580 applies only to liability policies. Brit’s argument lacks merit for a couple of reasons. First, Brit did not present this theory to the trial court and, therefore, has waived it on appeal. Second, the policy’s express language indicates it is a liability policy.

 

All further unspecified code sections refer to the Insurance Code.

 

A. Forfeiture of Argument

 

Noveltex points out that Brit, in arguing on appeal that the policy is not subject to section 11580, which allows third party actions against liability insurers, presents a different construction of the policy than what it presented below. Noveltex does not assert that Brit has forfeited its appellate argument by failing to first raise it below, but we nonetheless find it has done so here.

 

“  ‘ [P]ossible theories not fully developed or factually presented to the trial court cannot create a “ triable issue”  on appeal.’  “  (Robinson v. Hewlett-Packard Corp. (1986) 183 Cal.App.3d 1108, 1127 [involving an appeal of a summary judgment], disapproved on other grounds in Rojo v. Kliger (1990) 52 Cal.3d 65, 81.) “ [A] party is precluded from urging on appeal any point not raised in the trial court.”  (In re Riva M. (1991) 235 Cal.App.3d 403, 411-412.) “ The general rule that a legal theory may not be raised for the first time on appeal is to be stringently applied when the new theory depends on controverted factual questions whose relevance thereto was not made to appear at trial.”  (Bogacki v. Board of Supervisors (1971) 5 Cal.3d 771, 780.) Moreover, “  ‘ [a] party is not permitted to change his position and adopt a new and different theory on appeal. To permit him to do so would not only be unfair to the trial court, but manifestly unjust to the opposing party.’  [Citation.] The principles of ‘ theory of the trial’  apply to motions [citation], including summary judgment motions. [Citation.] … It would be manifestly unjust to opposing parties, unfair to the trial court, and contrary to judicial economy to permit a change of theory on appeal.”  (North Coast Business Park v. Nielsen Construction Co. (1993) 17 Cal.App.4th 22, 29 [alternate basis of liability not raised by appellant in opposing summary judgment motion below will not be considered on appeal].)

 

Brit inaccurately states the trial court’s ruling as “ determining that Insurance Code section 11580 applies to indemnity policies….”  The trial court did not make such a ruling because Brit did not argue the policy was an indemnity agreement to the trial court, raising it for the first time in this appeal. Instead, Brit asserted below in its additional disputed material facts that the “ policy … is an inland marine property cover that insures the trucker’s interest in the cargo.”  (Italics added.) It characterized this construction as a factual contention, and based it on the declaration of an administrator for Brit.

 

Brit did contend to the trial court as an additional disputed material fact that “ [t]he policy was not a liability policy.”  This is the central question when analyzing whether or not Noveltex could properly sue pursuant to section 11580. Nonetheless, Brit’s theories below and to this court about the nature of the subject policy each weaves together what the policy is with what it is not, to the point that the two are not readily separated. For example, Brit argues on appeal that the reference to “ indemnity”  in the coverage clause of the policy means as follows:

 

“ The insuring agreement of a liability policy typically provides that the insurer will pay on behalf of the insured all sums that the insured becomes legally liable to pay. However, an agreement to provide indemnity against loss or damage entitles the insured to recover only after his liability has been discharged by satisfaction of a judgment or settlement. Therefore, an agreement to provide indemnity against loss or damage is deemed an ‘ indemnity policy’  and not a ‘ liability policy.’  [Citations.]”

 

In short, we find that Brit has forfeited its right to argue that the policy is an indemnity, rather than a liability policy on appeal because Brit has changed its theory from what it presented to the trial court, adopting a theory that is inconsistent with its own prior factual assertion, and without first affording Noveltex and the trial court the opportunity to address the matter below.

 

B. Application of Section 11580

 

Assuming for the sake of argument that waiver has not occurred here, we consider the merits of Brit’s argument on its merits. Section 11580 allows a judgment creditor of an insured to bring an action directly against the insurer in certain circumstances. It states in relevant part:

 

“ A policy insuring against losses set forth in subdivision (a) shall not be issued or delivered to any person in this state unless it contains the provisions set forth in subdivision (b). Such policy, whether or not actually containing such provisions, shall be construed as if such provisions were embodied therein.

 

(a) Unless it contains such provisions, the following policies of insurance shall not be thus issued or delivered: [¶] … [¶]

 

(2) Against loss of or damage to property caused by draught animals or any vehicle, and for which the insured is liable….”

 

The statute goes on to allow a direct action against the insurer once a judgment is secured against the insured, even if the insured is bankrupt. (§ 11580, subd. (b)(1).)

 

Although we are not aware of any case directly analyzing the issue, section 11580’s express reference to “ loss of or damage to property … for which the insured is liable ”  (§ 11580, subd. (a)(2), italics added) indicate that the statute applies to liability policies only, and the parties do not contest the issue. Thus, we turn to whether the policy provides liability or indemnity coverage.

 

Brit cites to two cases as support for its proposition that the statute provides only for an action by the judgment creditor against a liability insurer, Garamendi v. Golden Eagle Ins. Co. (2004) 116 Cal.App.4th 694 and Johnson v. Holmes Tuttle Lincoln-Merc. (1958) 160 Cal.App.2d 290. However, these cases involve liability insurance policies, and do not analyze the scope or limitations of section 11580.

 

We apply general principles of contractual interpretation here. “ [I]nterpretation of an insurance policy is a question of law.”  (Waller v. Truck Ins. Exchange, Inc. (1995) 11 Cal.4th 1, 18.) “ While insurance contracts have special features, they are still contracts to which the ordinary rules of contractual interpretation apply.”  (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1264.) Thus, “ the mutual intention of the parties at the time of the contract is formed governs [the] interpretation.”  (AIU Ins. Co. v. Superior Court (1990) 51 Cal.3d 807, 821.) If possible, the courts infer this intent solely from the written provisions of the insurance policy. (See id. at p. 822.) If the policy language “ is clear and explicit, it governs.”  (Bank of the West, supra, at p. 1264.) When interpreting a policy provision, a court must give its terms their “  ‘ ordinary and popular sense,’  unless ‘ used by the parties in a technical sense or a special meaning is given to them by usage.’  “  (AIU Ins. Co. v. Superior Court, supra, at p. 822, quoting Civ.Code, § 1644.)

 

“ The whole of a contract is to be taken together, so as to give effect to every part, if reasonably practicable, each clause helping to interpret the other.”  (Civ.Code, § 1641.) The effect of this rule, among other things, “ is to disfavor constructions of contractual provisions that would render other provisions surplusage .”  (Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495, 503.) “ [C]ontracts, including insurance contracts, are to be construed to avoid rendering terms surplusage [.]”  (Farmers Ins. Exchange v. Knopp (1996) 50 Cal.App.4th 1415, 1421.)

 

“ An insurance policy provision is ambiguous when it is capable of two or more constructions, both of which are reasonable. Courts will not adopt a strained or absurd interpretation in order to create an ambiguity where none exists. Language in a contract must be construed in the context of that instrument as a whole, and in the circumstances of that case, and cannot be found to be ambiguous in the abstract. If asserted ambiguity is not eliminated by the language and context of the policy, courts then invoke the principle that ambiguities are generally construed against the party who caused the uncertainty to exist (ordinarily the insurer) in order to protect the insured’s reasonable expectation of coverage.”  (Culligan v. State Comp. Ins. Fund (2000) 81 Cal.App.4th 429, 435.)

 

The subject policy does not define the insurer’s obligation in the event that the insured is pursued by third parties, i.e., whether the insurer provides liability coverage, or indemnifies the insured after liability has been discharged by satisfaction of a judgment or settlement. As indicated by our discussion herein, its insuring agreement section states that the insurer will indemnify the insured for all risks of physical loss or damage to certain cargo. What this entails is unclear; no provision is made in the section for coverage regarding either liability or indemnity for economic loss. Furthermore, the section is by its own terms subject to the remaining terms and conditions in the policy, which expressly refer to coverage for the insured’s liability. This lack of clarity and other language render the policy ambiguous as to whether or not liability coverage is provided. We must determine whether this ambiguity is eliminated by “ the language and context of the policy,”  or if we should construe the agreement against Brit in order to protect the insured’s reasonable expectation of coverage. (Culligan v. State Comp. Ins. Fund, supra, 81 Cal.App.4th at p. 435.)

 

Brit argues that this is an indemnity policy because the “ insuring agreement”  section of the policy states that “ the Underwriters hereby agree to indemnify the Insured … for ALL RISKS OF PHYSICAL LOSS OR DAMAGE … to lawful cargo….”  (Italics added.) Brit asserts that the express agreement to “ indemnify”  against loss or damage in this clause, and the lack of any language indicating that the insured would be indemnified against liability, establishes that this is an indemnity policy, not a liability policy, citing, among other things, Civil Code section 2778. This is a strained and unreasonable construction for a number of reasons.

 

Civil Code section 2778 states in relevant part, “ In the interpretation of a contract of indemnity, the following rules are applied, unless a contrary intention appears: [¶] 1. Upon an indemnity against liability, expressly or in other equivalent terms, the person indemnified is entitled to recover upon being liable; [¶] 2. Upon an indemnity against claims, or demands, or damages, or costs, expressly, or in other equivalent terms, the person indemnified is not entitled to recover without payment thereof[.]”

 

First, Brit’s argument largely ignores that the policy’s reference to “ loss or damage”  is plainly tied to “ physical,”  rather than economic loss or damage. Therefore, the reference does not establish that the policy is limited to indemnification for an insured’s payments in the course of a dispute.

 

Second, the mere use of the term “ indemnify”  itself does not determine the issue, as is evident from our independent review of other sources. For example, the statutory definition of “ insurance”  is “ a contract whereby one undertakes to indemnify another against loss, damage, or liability arising from a contingent or unknown event.”  (§ 22, italics added.) “ Liability insurance”  has been defined as “  ‘ that form of insurance which indemnifies against liability on account of injuries to the person or property of another. It is distinguished from “ indemnity insurance”  … and may be issued to cover the liability of, for example, carriers, contractors, employers, landlords, manufacturers, owners, and railroads.’  “  (Day v. City of Fontana (2001) 25 Cal.4th 268, 278, fn. 4, italics added.)

 

Third, while the express language of the policy’s “ insuring agreement”  section identifies indemnification for physical loss or damage to certain cargo, without mention of liability coverage, its own terms make the section “ subject to all the … exclusions, definitions, terms and conditions contained in the following wording .”  Thus, the insuring agreement section must be read in the context of the entire policy, which is consistent with the general rules of contract interpretation that we must follow. The policy’s provisions read together clearly illuminate an answer to the question posed.

 

First, the policy makes two direct references to coverage for the liability of the insured. As Noveltex points out, the introductory sentence of the “ EXCLUSIONS”  section of the policy states, “ This insurance does not insure the liability of the Insured for[,]”  followed by the list of exclusions. (Italics added.) An amendment to the certificate states that “ [i]n consideration of the reduced premium charged, the Certificate does not insure the liability of the Insured for loss or damage to cargo on a truck”  which occurs while the truck is beyond a radius stated in the policy. Brit’s interpretation would render these references to “ liability”  meaningless; in other words, they would be surplusage, a construction we cannot adopt. (Farmers Ins. Exchange v. Knopp, supra, 50 Cal.App.4th at p. 1421.) Furthermore, unless we were to ignore these references altogether, Brit’s interpretation would lead to absurd constructions of the subject terms. None of the exclusions would apply to any claim because all of the exclusions would be to a non-existent liability coverage. Similarly, there would be no radius limit, since the limit would apply to a non-existent liability coverage; the insurer would have reduced its premium in consideration for nothing at all.

 

On the other hand, taking the exclusions’ prefatory phrase into account, a number of exclusions (lettered e, k, m, and r)  state in effect that the policy does not insure the liability of the insured for certain losses unless certain conditions are met. In other words, the construction of the exclusion provisions indicates repeatedly that the policy does cover the liability of the insured.

 

Brit argues that the “ unattended truck endorsement”  “ effectively replaced”  exclusion k, and makes no mention to “ liability of the insured.”  The endorsement, however, states terms which are “ irrespective of exclusion k”  and, therefore, does not eliminate exclusion k from the agreement.

 

Other terms and conditions further support the conclusion that an insured would reasonably expect the policy to provide liability coverage. The policy’s definition of “ cargo,”  the physical loss or damage to which is the basis for indemnification, is “ [a]ll property or equipment not owned, hired, or leased by, or loaned to the Insured or by or to the Agents or servants of the Insured.”  (Italics added.) Also, the policy specifically excludes “ goods or merchandise which are the property of the Insured.”  Thus, the policy only indemnifies the insured against physical loss or damage to certain cargo belonging to third parties. The policy contemplates the insurer’s involvement with liability claims made by such parties. It allows the insurer the privilege to adjust the loss or damage claimed by third parties, stating that “ [i]n the event of loss or damage to property of others held by the Insured for which claim is made upon the Underwriters the right to adjust such loss or damage with the owner or owners of the property is reserved to the Underwriters and the receipt of such owner or owners in satisfaction thereof shall be in full satisfaction of any claim of the Insured for which such payment has been made.”

 

Brit cites a number of legal authorities in support of its indemnity argument, but they are not persuasive in light of the policy’s provisions. None of the cases Brit cites involve a policy that actually refers repeatedly to “ liability”  coverage, or involves coverage for loss to property belonging only to third parties; moreover, the “ loss”  discussed in a number of the cases Brit cites is the insured’s payment, i.e., an economic rather than a physical loss. (E.g., Gribaldo, Jacobs, Jones & Associates v. Agrippina Versicherunges, A.G. (1970) 3 Cal.3d 434, 447 [“ an indemnitor is not liable for a claim made against the indemnitee until the indemnitee suffers actual loss by being compelled to pay the claim]; Alberts v. American Casualty Co. (1948) 88 Cal.App.2d 891, 898-899 [referring to indemnity contracts where “ the loss does not arise until the debt has been paid and the indemnitee has thus suffered a loss” ]; Garvey v. State Farm Fire & Casualty Co. (1989) 48 Cal.3d 395, 406-407 (Garvey ) [distinguishing between a liability agreement and a first party property insurance agreement, in which “ the insurer agrees to indemnify the insured in the event that the insured property suffers a covered loss” ]; 175 East 74th Corp. v. Hartford Accident & Indemnity Co. (1980) 51 N.Y.2d 585, 592 [finding that New York’s direct action statute, analogous to section 11580, did not extend to a fidelity bond insuring against loss of money, securities and other property sustained by the insured, including that belonging to others and “ irrespective of the insured’s liability therefor,”  as the bond “ does not contemplate and is not dependent upon the assertion of a third party claim” ].)

 

Brit also argues that relying on terms in the exclusion section of the agreement ignores “ the basic precept of policy interpretation”  that exclusions do not define the basic insuring agreement, and cannot be used to expand coverage. Brit is correct that “ [o]rdinarily, an exception to a policy exclusion does not create coverage not otherwise available under the coverage clause.”  (Hurley Construction Co. v. State Farm Fire & Casualty Co. (1992) 10 Cal.App.4th 533, 540.) However, that is not what is occurring here. The policy provides for indemnification for certain physical losses of cargo belonging to third parties only, but does not indicate if it provides liability or indemnity coverage in the face of third party claims. The section itself is subject to the remainder of the agreement, where, as we have already discussed, liability coverage is indicated. Brit does not cite any cases which involve such circumstances. (See, e.g., St. Paul Fire & Marine Ins. Co. v. Coss (1978) 80 Cal.App.3d 888, 896 [finding the subject exclusion to be of limited application and the agreement not ambiguous]; Old Republic Ins. Co. v. Superior Court (1998) 66 Cal.App.4th 128, 144-145, 147-148 [reconciling the subject exclusion clause with the terms of the coverage clause, and noting, among other things, that “ [t]he function of an exception to an exclusionary clause is to give back coverage taken away by the exclusion” ]; Hurley Construction v. State Farm Fire & Casualty Co ., supra, 10 Cal.App.4th at p. 540 [finding the argument that a certain exception to a particular exclusion clause indicated coverage to be “ specious”  given the facts involved], disapproved on other grounds in Vandenberg v. Superior Court (1999) 21 Cal.4th 815, 841, fn. 13.)

 

Accordingly, we conclude that the policy provides liability coverage, and that Noveltex may bring suit against Brit pursuant to section 11580. We turn now to issues Brit has raised about the scope of coverage provided.

 

II. The Loss Is Covered Under The Policy

 

Brit argues that, in any event, policy coverage does not apply here because the loss occurred as a result of the theft of the container after it was misdelivered to GSL, when the cargo was no longer in transit, nor in the care, custody, or control of A & A, the insured. We conclude that coverage extends to the loss involved here because the insured’s misdelivery of the cargo to GSL, which was undisputed, was a proximate cause of the loss.

 

Noveltex argued two theories of loss below on the issues of transit and care, custody and control, which they repeat to this court. First, it argued that “ [t]he loss occurred as a result of the “ misdelivery”  of the container by A & A to GSL Transportation Services, instead of the designated consignee…. As A & A, itself, misdelivered the container, clearly it had care, custody and control of it at the time, and the cargo was in ‘ transit.’  “  It argues to this court in its supplemental briefing, that A & A’s misdelivery was one of the “ external causes”  of loss here, the other being the theft of the subject cargo. Noveltex also argues that even if the loss occurred when the cargo was stolen, as Brit alleges, coverage still applied because, pursuant to California law, the cargo’s transit, as well as A & A’s care, custody and control of it, cannot be said to end prior to the cargo’s delivery to its intended designation.

 

We conclude that coverage applies as a result of the cargo’s misdelivery to GLS. Therefore, we do not address whether or not under California law the cargo was in transit or in the insured’s care, custody or control after its misdelivery.

 

As indicated in the insuring agreement section of the policy, coverage applies to physical loss or damage resulting from an “ external cause”  to cargo that is in transit and in the care, custody or control of the insured. Therefore, we must consider how causes of such loss are analyzed generally in third party liability insurance contracts. “ [T]he right to coverage in the third party liability insurance context draws on traditional tort concepts of fault, proximate cause and duty.”  (Garvey, supra, 48 Cal.3d at p. 407.) Coverage under a third party liability policy “ is equally available to an insured whenever an insured risk constitutes simply a concurrent proximate cause of the injuries. That multiple causes may have effectuated the loss does not negate any single cause; that multiple acts concurred in the infliction of injury does not nullify any single contributory act.”  (State Farm Mut. Auto. Ins. Co. v. Partridge (1973) 10 Cal.3d 94, 104-105, fns. omitted; limited by Garvey, supra, 48 Cal.3d at pp. 405, 410.)

 

There is no real dispute that the insured misdelivered the subject cargo to GSL, in whose yard it was placed and later stolen. There can be no question that the insured’s misdelivery of the cargo to GSL was a proximate cause of the loss, even if it was not the only cause involved, and that this misdelivery occurred while the cargo was in transit, and in the insured’s care, custody, and control. Brit’s argument that the policy does not provide coverage because of the circumstances which existed at the time of the theft does not address this prior misdelivery. The argument is not a basis for reversal because the misdelivery was an “ external cause”  of the loss.

 

In its statement of disputed facts submitted below, Brit “ disputed”  that the container was “ misdelivered,”  contending that GSL’s president, whose declaration provided the basis for Noveltex’s factual contention, did not “ admit”  in his declaration that the cargo was “ misdelivered”  until after it was stolen, but instead admitted that it was “ delivered”  to GSL. While the president stated that the container was “ delivered”  to GSL when first discussing the event, he later states in his declaration that “ [i]t was only after the theft that GSL discovered that the container … had been misdelivered to GSL’s facilities by A & A.”  (Italics added.) Brit does not challenge that the misdelivery was not discovered until after the theft. It also does not dispute A & A’s participation in the misdelivery.

 

III. The Loss Was Due to An External Cause

 

We requested supplemental briefing from the parties to determine whether or not Noveltex met its initial burden of establishing that there was no triable issue of material fact about the loss resulting from an “ external cause,”  a requirement of the insuring agreement section, and whether Brit disputed Noveltex’s contention.

 

“ [T]he party moving for summary judgment bears the burden of persuasion that there is no triable issue of material fact and that he is entitled to judgment as a matter of law.”  (Aguilar v. Atlantic Richfield Co. (2001) 25 Cal.4th 826, 850.) A plaintiff “ bears the burden of persuasion that ‘ each element of’  the ‘ cause of action’  in question has been ‘ proved,’  and hence that ‘ there is no defense’  thereto.”  (Ibid.) As stated in Code of Civil Procedure section 437c, a plaintiff moving for summary judgment has met its “ burden of showing that there is no defense to a cause of action if that party has proved each element of the cause of action entitling the party to judgment on that cause of action. Once the plaintiff … has met that burden, the burden shifts to the defendant … to show that a triable issue of one or more material facts exists as to that cause of action….”  (Code Civ. Proc., § 437c, subd. (p)(1).)

 

Noveltex asserted in its statement of undisputed facts that the subject cargo was “ misdelivered”  to GSL, which we have already determined was a proximate cause of the loss involved here. We must also determine, however, whether this misdelivery constitutes an “ external cause,”  as only losses resulting from such a cause are covered according to the express terms of the insuring agreement section. As Noveltex points out in its supplemental briefing, the matter of “ external cause”  was addressed in Chadwick v. Fire Ins. Exchange (1993) 17 Cal.App.4th 1112, in the context of policy exclusions for inherent vice and latent defect, as follows:

 

“ Historically, the latent defect and inherent vice exclusions were closely related to the restriction of property insurance to coverage of risks, i.e., fortuities. Under the ‘ objective theory of fortuity, a risk was thought to be something that happened to the property from an external cause, not something inherent or latent in the property; damage from such an inherent cause was considered, like wear and tear, a certainty and, hence, uninsurable. (Id. at p. 1119.)

 

Brit argues that the delivery of the cargo to the wrong location does not constitute an “ external cause,”  citing Contractors Realty v. Ins. Co. of North America (S.D.N.Y.1979) 469 F.Supp. 1287, which concludes without analysis that the phrase “ external cause”  in a property policy was intended to exclude coverage from, among other things, losses resulting from the negligent acts of the owner or master. Brit largely ignores that Noveltex argued below that the misdelivery caused the loss. Brit also concedes that it “ did not specifically raise the issue of ‘ external cause’  below.”  In other words, Brit did not dispute that the misdelivery, if it was a cause, was an “ external cause,”  thereby failing to raise a triable issue of fact regarding the issue after Noveltex had met its initial burden.

 

IV. The “ Voluntary Act”  Exclusion

 

Brit also argues that judgment must be reversed because the trial court “ ignored”  the exclusion providing that loss of cargo due to a “ voluntary act”  of the insured is not covered. This argument also lacks merit.

 

Brit is correct that exclusions limiting coverage, where clear and conspicuous, are valid and binding. (Boghos v. Certain Underwriters at Lloyd’s of London (2005) 36 Cal.4th 495, 505. However, it is also correct that, as Noveltex points out, Brit has the burden of proving that a claim is specifically excluded, and that we are to construe the exclusion clause narrowly. (Garvey, supra, 48 Cal.3d at p. 406.) It is also a fundamental principle that the insurer cannot escape its basic duty to insure by means of an exclusions clause that is unclear. The insurer has the burden of phrasing exclusions in clear and unmistakable language. (State Farm Mut. Auto Ins. Co. v. Jacober (1973) 10 Cal.3d 193, 201-202. Policy exclusions are given the closest possible scrutiny and must be plain and clear. (Ponder v. Blue Cross of Southern California (1983) 145 Cal.App.3d 709, 718. “ Plain and clear”  means more than just unambiguous. Understandability is also required. (Id. at p. 723.)

 

The subject exclusion clause states that “ [t]his insurance does not insure the liability of the Insured for: “ c) Loss of cargo due to voluntary act of Insured, whether or not resulting from a third party’s use of fraudulent documents, forged freight bills, interchange receipts, release orders, or other unauthorized form or unauthorized use of documents.”

 

The policy does not define the term “ voluntary act.”  Furthermore, Brit does not contend that the cargo was lost due to any of the things listed in this exclusion. Instead, it characterizes the insured’s action as possibly “ an honest mistake in delivering cargo to the wrong person”  and as “ apparently misdeliver[ing] the container to the wrong location.”  Brit provides no evidence of the circumstances surrounding the misdelivery. Nonetheless, it contends that “ [t]his was still a voluntary act of the insured, much the same as relying on a forged freight bill to deliver the property to the wrong person.”  In other words, Brit’s argument rests on its speculation, rather than evidence, about the nature of the misdelivery. Accordingly, it has failed its burden of establishing the exclusion applies and its argument must be rejected.

 

Noveltex argues that we should find the exclusion clause invalid pursuant to the same reasoning used by our Supreme Court in Safeco Ins. Co. v. Robert S. (2001) 26 Cal.4th 758, in which the court found an exclusion for “ illegal acts”  was “ so broad as to render the policy’s liability coverage practically meaningless.”  (Id. at p. 764.) We need not reach this issue in light of Brit’s failure to put forward any evidence regarding the nature of the misdelivery.

 

DISPOSITION

 

The judgment is affirmed. Appellant is to pay respondent’s appeal costs.