In an automobile coverage dispute, after exhaustion of the policy deemed “primary” under Insurance Code section 11580.9(d), all policies covering the negligent driver must exhaust before any policies covering the driver’s vicariously liable employer are implicated. ( GuideOne Mutual Insurance Company v. Utica National Insurance Group (2013) — Cal.App.4th —-, 2013 WL 765651)
Facts
Christian Evangelical Assembly (CEA) is a religious organization that oversees various churches, including Crosswinds Community Church (Crosswinds). CEA employed Gary West (West) to serve as pastor of Crosswinds.
While West was driving his own car in the course of his employment, he caused an auto accident which resulted in catastrophic injuries to Robert Jester (Jester). Subsequently, Jester filed a personal injury action against West, Crosswinds and CEA.
At the time of the accident, West was the named insured on a $100,000 personal auto policy issued by State Farm Mutual Automobile Insurance Company (State Farm). In addition, Crosswinds was the named insured and West was an additional insured on a $1 million commercial general liability policy with non-owned auto coverage and a $1 million commercial umbrella liability policy, both of which were issued by GuideOne Mutual Insurance Company (GuideOne). Last, CEA was the named insured on a $1 million commercial auto liability policy and a $5 million commercial umbrella liability policy, both of which were issued by Utica National Insurance Group (Utica).
Jester settled his personal injury lawsuit against West, Crosswinds and CEA for a total of $4.5 million. Of that amount, State Farm paid its $100,000 limit; GuideOne paid its $2 million limits ($1 million from its general liability policy and $1 million from its umbrella policy); and Utica paid $2.4 million ($1 million from its auto policy and $1.4 million from its umbrella policy). GuideOne and Utica reserved their rights to seek contribution from each other.
GuideOne later filed a contribution action against Utica seeking to recover alleged overpayments by GuideOne toward the $4.5 million underlying settlement. The trial court ruled that the priority of coverage for the underlying settlement was as follows: (1) State Farm’s $100,000 policy; (2) GuideOne’s $1 million general liability policy and Utica’s $1 million auto policy; and (3) $400,000 from GuideOne’s $1 million umbrella policy and $2 million from Utica’s $5 million umbrella policy (representing the ratio that the limits of the two umbrella policies bore to each other). The trial court thus ruled that GuideOne was entitled to recover $600,000 from Utica. Utica appealed.
Holding
The Court of Appeal reversed, holding that GuideOne was not entitled to any contribution from Utica.
The appellate court noted that the State Farm personal auto policy “described or rated” the car that West had been driving at the time of the accident. Thus, under Insurance Code section 11580.9(d), the State Farm policy was conclusively presumed to be “primary,” and the two GuideOne policies and the two Utica policies were conclusively presumed to be “excess.” The problem was how to prioritize the four policies that were deemed “excess,” a problem not dealt with by section 11580.9(d).
The appellate court resolved this problem by focusing on the fact that CEA, who was only a vicariously liable employer, had a common law right to indemnity from West, the negligent employee. West, in turn, was an insured under the GuideOne general liability and umbrella policies. However, West was not an insured on the Utica commercial auto and umbrella policies for this particular loss. Rather, only CEA was an insured under the Utica policies. The appellate court concluded that under such circumstances, the GuideOne general liability and umbrella policies covering West (the negligent employee) had to exhaust before the Utica commercial auto and umbrella policies covering CEA (the vicariously liable employer) were ever implicated. Therefore, GuideOne was not entitled to contribution from Utica in this case.
Comment
While Insurance Code section 11580.9(d) established that the State Farm policy was “primary,” the statute did not establish how coverage should be allocated amongst the four GuideOne and Utica policies that were deemed to be “excess.” The appellate court resolved the problem by focusing on which insured was primarily liable, and then requiring the exhaustion of all policies covering that insured before any policies covering an insured who was only vicariously liable.