JODY KELLER et al., Plaintiffs and Appellants,

v.

ARGONAUT INSURANCE COMPANY, Defendant and Respondent.

2d Civil No. B212083

Court of Appeal, Second District, California.

Filed 8/20/09

(Super.Ct. No. SC046668) (Ventura County)

Appellants Jody Keller and Daniel Vanover appeal from summary judgment in favor of respondent Argonaut Insurance Company (“Argonaut”) on their complaint for bad faith failure to defend appellants’ assignor in an underlying personal injury action. The trial court granted summary judgment on the ground that the vehicle driven by appellants’ assignor was not covered by Argonaut’s policy because it was not a “hired” automobile. We affirm.

FACTUAL AND PROCEDURAL HISTORY

Keller and Vanover were on a motorcycle when it was rear-ended by a truck driven by Javier Lopez. The truck was owned by Lopez’s employer, Carpio Transportation. Lopez was making a delivery for Scotts Corporation (“Scotts”) at the time of the accident. Argonaut is Scotts’ insurer.

Keller and Vanover filed a complaint for damages. Scotts and Argonaut settled the claims before trial for $ 1,075,000. A trial against Jose Carpio, Carpio Transportation (collectively “Carpio”) and Lopez resulted in a jury verdict in favor of Keller and Vanover. The jury awarded Keller $2,987,436.32 and Vanover $182,647.90. Carpio was defended at trial by their insurer, Sutter Insurance Company (“Sutter”). Sutter offered to defend Lopez, but he declined representation and did not appear at trial. As a result of the jury verdict, Sutter paid Keller and Vanover the policy limit of $750,000.

This second lawsuit against Argonaut arises from an assignment of claims Keller and Vanover received from Lopez. In the second amended complaint, Keller and Vanover allege breach of duty to defend, breach of the covenant of good faith and fair dealing and an action under Insurance Code section 11580, subdivision (a)(2) for Argonaut’s purported failure to defend Lopez in the underlying action.

Insurance Code section 11580, subdivision (a)(2) authorizes a judgment creditor of an insured to bring an action against the insurer.

Argonaut moved for summary judgment, or alternatively summary adjudication of issues, on the grounds that Lopez was not an insured under Argonaut’s policy, he refused an offer of defense by Sutter, and did not request to be defended by Argonaut. Keller and Vanover opposed the motion on the grounds that triable issues of material fact exist as to coverage under the Argonaut policy, including whether Lopez was an employee of Scotts and whether the vehicle involved in the accident was a vehicle covered by Argonaut’s policy. They asserted that Argonaut was required to offer to defend Lopez because there was at least a “potential” for coverage under its policy.

The trial court granted summary judgment in Argonaut’s favor on the grounds that the vehicle driven by Lopez was not a covered automobile under its policy and that Argonaut had no duty to defend Lopez because it had no actual or constructive knowledge that Lopez tendered his defense to Argonaut.

DISCUSSION

Standard of Review

We apply a de novo standard of review to an order granting summary judgment when, on undisputed facts, the order is based on the interpretation or application of the terms of an insurance policy. ( TRB Investments, Inc. v. Fireman’s Fund Ins. Co. (2006) 40 Cal.4th 19, 30-31.)

Interpretation of an insurance contract is a question of law and follows the general rules of contract interpretation. The fundamental rules of contract interpretation are based on the premise that the interpretation of a contract must give effect to the mutual intention of the parties at the time the contract is formed. (Civ.Code, § 1636.) Such intent is to be inferred, if possible, solely from the written provisions of the contract. (Id., § 1639.) The clear and explicit meaning of these provisions, interpreted in their ordinary and popular sense, controls judicial interpretation unless there is indication that the parties intended the provisions to have a special or technical meaning. A policy provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable. But language in a contract must be interpreted as a whole, within the circumstances of the case, and cannot be found to be ambiguous in the abstract. ( TRB Investments, Inc. v. Fireman’s Fund Ins. Co., supra, 40 Cal.4th at p. 27.)

While insurance contracts will be construed broadly in favor of the insured, where the terms of a policy are plain and explicit, the courts will not indulge in a forced construction so as to fasten a liability on the insurance company which it has not assumed. ( New York Life Ins. Co. v. Hollender (1951) 38 Cal.2d 73, 81; see also Continental Cas. Co. v. Phoenix Const. Co. (1956) 46 Cal.2d 423, 432 [“insurance company has the right to limit coverage of a policy issued by it and when it has done so, the plain language of the limitation must be respected”].)

Argonaut’s Policy Does Not Cover Lopez or

the Vehicle Involved in the Accident

The facts are undisputed that, at the time of the accident, Lopez was employed by Carpio driving a truck owned by Carpio and insured by Sutter.  Nonetheless, Keller and Vanover contend that Lopez also was an employee of Scotts and the truck he was driving was a hired automobile covered under the Argonaut policy.

The jury found that Lopez was an employee of Carpio.

We agree with the trial court that Argonaut’s policy does not base coverage on an employment relationship between Scotts and Lopez. Rather, it is a “commercial auto policy” that “extends coverage to a defined ‘insured’ for a ‘covered “auto” ’ that Scotts ‘own[s], hire[s] or borrow[s].’ ”

The relevant language of the Argonaut policy states: “We will pay all sums an ‘insured’ legally must pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a covered ‘auto.’ ”  It defines “ ‘insured’ ” as: “… You for any covered ‘auto [ ]’ … [and] … [a]nyone else while using with your permission a covered ‘auto’ you own, hire, or borrow except … [t]he owner or anyone else from whom you hire or borrow a covered ‘auto.’ ”

Appellants’ assertion that the trial court erred in relying on the insurance policy because it was not authenticated and was incomplete is not well taken. They submitted the policy to the court as an exhibit to their second amended complaint. At no time during the trial court proceedings did they assert the policy was not authenticated or incomplete. They cannot raise the objection for the first time on appeal. ( People v. Sims (1993) 5 Cal.4th. 405, 448.)

The Argonaut policy does not define the term “hire.” (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 hired automobile as “automobile used under contract in behalf of, or loaned to, the name insured”].) The absence of a definition does not make the term inherently ambiguous. ( Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868.) In the absence of a definition in the policy, the words used are given their “ ‘… common, ordinary and customary meaning.’ [Citation.]” ( Home Indem. Co. v. King (1983) 34 Cal.3d 803, 813.)

Absent a contrary definition, there is a “distinction between hiring a company that provides transportation and hiring a truck. ‘For 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….’ [Citations.]” ( Toops v. Gulf Coast Marine, Inc. (5th Cir.1996) 72 F.3d 483, 487; see also Transportation Indem. Co. v. Liberty Mut. Ins. Co. (9th Cir.1980) 620 F.2d 1368 [agreement to share automobile expenses as part of a joint venture was not a contract of hire so as to bring automobile within the hired automobile coverage of insurance policy]; Earth Tech v. U.S. Fire Ins. Co. (E.D.Va.2006) 407 F.Supp.2d 763 [tractor-trailer not hired automobile because it was not specifically hired by named insured but was simply the means by which transportation services were performed].)

“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., supra, 72 F.3d at p. 487; see also Home Indem. Co. v. King, supra, 34 Cal.3d 803 [exercise of dominion and control over a truck is indispensable to a finding that the truck was “borrowed”]; City of Los Angeles v. Allianz Ins. Co. (2004) 125 Cal.App.4th 287 [vehicle was not borrowed by named insured because insured did not exercise dominion or control over vehicle].)

(See Travelers Indem. Co. v. Swearinger (1985) 169 Cal.App.3d 779, 786 [“In the [policy’s] definition of insured the terms ‘borrow’ and ‘hire’ are juxtaposed. This is so, we think, because they have a natural affinity. Borrow has a venerable usage in which it is distinguished from hire only by the absence of remuneration …”].)

The cases also commonly hold that where an insured hires an independent contractor to do hauling, the truck owned and operated by the independent contractor is not covered by the “hired” provision in a policy issued to the insured. (See, e.g., Chicago Ins. Co. v. Farm Bureau Mut. Ins. Co. (8th Cir.1991) 929 F.2d 372 [ trucking company’s truck used to haul grain for named insured not hired automobile where truck company was acting as an independent contractor]; Gore v. State Farm Mut. Ins. Co. (2nd Cir.1995) 649 So.2d 162 [subcontractor’s truck not hired automobile because he was an independent contractor and term applied only to vehicles which the named insured leased or hired for his own use].)

The contract between Carpio and Scotts provides, in relevant part: “Carrier is authorized to transport freight by motor vehicles as a Highway Contract Carrier. [¶] … [¶] Carrier shall perform all services hereunder as an independent contractor. [¶] … [¶] Carrier agrees that it will at all times hold itself ready and able to perform the services hereunder subject to the availability and limitations of its equipment. [¶] Carrier has the right to utilize such motor vehicle equipment, as in its discretion is necessary to comply with the terms and provisions of this agreement with reference to the transportation of the Shipper’s commodities. [¶] … [¶] Carrier agrees that no authority has been conferred upon it by Shipper to hire any persons on behalf of Shipper and agrees to assume full responsibility for selecting, engaging and discharging its employees, agents or servants and for otherwise directing and controlling their services. It is understood that for all intents and purposes of this agreement, Carrier is an independent contractor….” The contract also requires Carpio to provide its own liability insurance.

The contract between Carpio and Scotts does not specify a particular vehicle or a particular driver. Rather, it expressly delegates exclusive authority to select the vehicle and driver to Carpio. Under the contract, Carpio, not Scotts, has exclusive dominion and control over the drivers and trucks used to haul Scotts’ product. There is no evidence that Scotts exercised dominion or control over Carpio’s vehicle in any way. As stated by the trial court: “The plaintiffs’ claim that Evelyn Sprinkel of The Scotts Company did or would have asked Carpio Transportation Inc. for permission, for a Carpio driver to operate a Carpio truck, is strained and was not established by the evidence. The plaintiffs also failed to establish the existence of a ‘triable issue’ as to whether Scotts’ dispatcher Ms. Sprinkel gave ‘implied permission,’ since she is specific in her declaration that she did not give permission for Lopez to drive this truck and she was not asked to give permission….” (See, e.g., U.S. Fidelity & Guaranty Co. v. Heritage Mut. Ins. Co. (7th Cir.2000) 230 F.3d 331 [truck driven by independent contractor not hired automobile because named insured did not maintain truck, pay for gas, pay the drivers, dictate routes traveled or maintain exclusive control over it]; American Cas. Co. of Reading, Pa. v. Denmark Foods (4th Cir.1955) 224 F.2d 461 [truck used to transport cucumbers for named insured was not hired automobile when truck owner paid his own driver who was not supervised by the insured]; Holmes v. The Brethren Mut. Ins. Co. (D.C.App.2005) 868 A.2d 155 [van hired to carry passengers to bingo parlor not a hired automobile because named insured had no control over choice of van, who would drive it or what routes the driver would follow].)

Moreover, Argonaut’s policy expressly excludes from coverage the owner of a hired automobile covered by the policy. A similar exclusion was contained in an insurance policy in Continental Casualty Co. v. Phoenix Construction Co., supra, 46 Cal.2d 423, where the policy at issue excluded the owner or any employee of the owner of a hired automobile. The court “noted that even if respondents were successful in their contention that ‘hired automobile’ includes the … truck here involved, nevertheless it appears that [the] exception … would deny coverage to … the admitted employee of [the truck owner].” (Id., at p. 432, fn. 6; see also Marshall v. Providence Washington Ins. Co. (N.M.App.1997) 951 P.2d 76, 80 [owner of hired automobile is generally excluded from coverage as an insured because the owner normally is expected to carry his own insurance on the vehicle].)

For the reasons stated above, Lopez was not an insured under Argonaut’s policy. Therefore, Argonaut had no duty to defend him in the underlying lawsuit; it did not breach the covenant of good faith and fair dealing; and Insurance Code section 11580 is not applicable here. (See Horace Mann Ins. Co. v. Barbara B. (1993) 4 Cal.4th 1076, 1084 [in the absence of potential coverage, insured has no duty to defend].)

DISPOSITION

The judgment is affirmed. Respondent shall recover costs.

NOT TO BE PUBLISHED.

PERREN, J.

We concur:

GILBERT, P.J.

COFFEE, J.